A Better Way to Fight Inequality
Malefactors of great wealth get a lot of press these days. The poor, not so much. There might be a connection. Concentrating on the super-rich seems to divert attention from the more serious social injustice at the other end of the income scale. If you're born into a poor family in the U.S., you'll find moving up is harder than it would be in many other rich countries. That's a deeply troubling fact, or it would be if more Americans could bring themselves to believe it.
Taxing the rich more heavily might be satisfying for several reasons, but advancing the prospects of people at the bottom isn't one. If pounding the plutocracy won't help the disadvantaged, what will?
One approach is to subsidize the working poor more generously, using the earned income tax credit or similar measures. That's a good idea. Another approach is to improve poor children's chances by helping them do better at school and college. That's a good idea too -- though harder to put into practice.
As my Bloomberg News colleague Victoria Stilwell points out, the discussion about inequality started by Thomas Piketty's book "Capital in the Twenty-First Century" left human capital out of the picture. That's a huge gap, as Piketty has recognized. Inequalities of human capital -- that is, in the skills and other aptitudes necessary to make a living -- are apparent early on and all too often just get worse.
Giving workers with few skills a handout increases, at others' expense, the poor's share of what the economy produces. Helping them to acquire human capital raises their income, too, but by making the economy produce more. If the poor can be helped to do better, everybody can gain.
Stilwell quotes a new briefing paper by Isabel Sawhill and Quentin Karpilow of the Brookings Institution. This includes some arresting numbers. According to the research surveyed in the note, proven interventions to help disadvantaged children raise their lifetime incomes by an amount roughly 10 times greater than the interventions cost. (The authors reckon the total cost per child of the programs they advocate to be about $20,000; the average lifetime gain per beneficiary is about $200,000.)
Because the ones being helped would pay taxes and/or receive less in other benefits, to say nothing of the effects on crime and other social ills, other taxpayers could expect to come out ahead.
There's a catch, though. Sawhill and Karpilow explain that disadvantage tends to persist, and that efforts to overcome it fade quickly unless they're sustained. For instance, a survey of research on universal preschool programs suggests they work well at first: They increase the proportion of poor children with "school-appropriate behavior" and reasonable pre-reading and math skills from 45 percent to 59 percent. But that gain shrinks by two-thirds within a few years and keeps diminishing as the children move through school.
This doesn't mean don't do it. You have to follow good preschool programs with good middle-childhood programs (including efforts to maintain improvements in behavior, and to detect and correct reading difficulties) and later with good adolescent programs (aimed, for instance, at reducing dropout rates). At each stage, well-designed programs can make a difference. But it takes a series of educational interventions, sustained year after year, to substantially affect prospects in early adulthood and beyond.
The costs and benefits quoted earlier are for the full set of policies judged effective by other researchers and discussed by the authors. With no interventions, 43 percent of children born into poor families can expect to reach the middle class (that is, have an income at least three times the poverty level); with the full sequence, this rises to 58 percent. Without interventions, the difference in this "success rate" between poor children and non-poor children is 21 percentage points; with the interventions, the gap is cut to just 6 points.
The paper concludes:
Existing evidence-based programs can provide opportunity-enhancing supports at every life stage, and this need not cost more than what we are spending now, at least as measured over a child's life cycle. While we have yet to find a single intervention that will dramatically improve children's life chances, our research suggests that we don't need to wait for one to be invented in order to begin making real progress.
Unfortunately, we do need to wait for people to start caring about the right questions.
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