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Monday, November 02, 2009

"Five Myths About Our Land of Opportunity"

Five myths about social mobility from Isabel V. Sawhill and Ron Haskins of Brookings:
Five Myths About Our Land of Opportunity, by Isabel V. Sawhill and Ron Haskins, Brookings: Americans have always believed that their country is unique in providing the opportunity to get ahead. ... But rising unemployment and financial turmoil are puncturing that self-image. The reality of this "land of opportunity" is considerably more complex than the myths would suggest:
1. Americans enjoy more economic opportunity than people in other countries.
Actually, some other advanced economies offer more opportunity than ours does. For example, recent research shows that in the Nordic countries and in the United Kingdom, children born into a lower-income family have a greater chance than those in the United States of forming a substantially higher-income family by the time they're adults.
If you are born into a middle-class family in the United States, you have a roughly even chance of moving up or down the ladder by the time you are an adult. But the story for low-income Americans is quite different; going from rags to riches in a generation is rare. ...
2. In the United States, each generation does better than the past one.
As a result of economic growth, each generation can usually count on having a higher income, in inflation-adjusted dollars, than the previous one. ... But that kind of steady progress appears to have stalled. Today, men in their 30s earn 12 percent less than the previous generation did at the same age.
The main reason today's families have modestly higher overall income than prior generations is simple:... Women have joined the labor force in a big way, and their earnings have increased as well. But with so many families now having two earners, continued progress along this path will be difficult unless wages for both men and women rise more quickly.
3. Immigrant workers and the offshoring of jobs drive poverty and inequality in the United States.
Although immigration and trade are often blamed, a more important reason for our lack of progress against poverty and our growing inequality is a dramatic change in American family life. Almost 30 percent of children now live in single-parent families, up from 12 percent in 1968. Since poverty rates in single-parent households are roughly five times as high as in two-parent households, this shift has helped keep the poverty rate up... Among women under age 30, more than half of all births now occur outside marriage...
In addition, we have seen a growing tendency among well-educated men and women to marry each other, exacerbating income disparities. If we add to these family changes the fact that wages for low-skilled workers have stagnated or declined in recent decades, we can explain most of the increase in poverty and much of the increase in the income gap as well.
4. If we want to increase opportunities for children, we should give their families more income.
Of course money is a factor in upward mobility, but it isn't the only one; it may not even be the most important. Our research shows that if you want to avoid poverty and join the middle class in the United States, you need to complete high school (at a minimum), work full time and marry before you have children. If you do all three, your chances of being poor fall from 12 percent to 2 percent, and your chances of joining the middle class or above rise from 56 to 74 percent. ...
Many American families need supplements to their incomes in the form of food stamps, affordable housing and welfare payments. But such aid should not be given unconditionally. First, the public is concerned that unconditional assistance will end up supporting those who are not trying to help themselves. Second, new research ... has shown that individuals frequently behave in ways that undermine their long-term welfare and can benefit from a government nudge in the right direction.
And third, policies with strings attached have had considerable success. ...[S]ocial policies will be more successful if they encourage people to do things that bring longer-term success.
5. We can fund new programs to boost opportunity by cutting waste and abuse in the federal budget.
Can we cut enough ineffective programs or impose enough new taxes to put better teachers in classrooms, expand child-care assistance for working families and provide more financial aid to disadvantaged students while reducing projected deficits? The answer is a resounding no. ... Just three rapidly growing programs - Medicare, Social Security and Medicaid - along with interest on the debt threaten to crowd out all other spending in a few decades.
So we also need to revise the contract between the generations in a way that gradually reallocates resources from the more affluent elderly to struggling younger families and their children. Such a shift would not only help create more opportunity, it would improve the productivity of the next generation, making its members better able to contribute to the costs of retirement - including their own.

The idea that the poverty problem would be much smaller if people would get married seems to me to avoid the important question of what factors are driving the change in the marriage trend. To the extent that these factors are economic and hence that poverty is also a cause of the falling marriage rate (if it is), then it's more complicated than suggested above.

Also, with respect to the last sentence, retirement funds -- Social Security funding -- is not the long-run budget problem we should be worried about, this can be handled relatively easily with a few minor changes. It's health care costs that are the problem. The argument that we should help people in poverty so that they can help pay for Social Security is far down the list of reasons I'd put forth for helping.

Update: See Mathew Yglesias on single parents and poverty.

    Posted by on Monday, November 2, 2009 at 10:54 AM in Economics, Social Insurance | Permalink  TrackBack (0)  Comments (65)


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