TATIANA BAILEY, PH.D. 2020-12-31 22:22:34
If there is one thing that Americans can agree upon it is that the divisions between us have only grown during the past four years and even more so during the COVID-19 pandemic. I have written about the role of media, how artificial intelligence feeds us what we’ve searched and spent the most screen time on and how that reinforces our biases. Many educators and economists have addressed the generational aspects of poverty and how young children from disadvantaged neighborhoods have the odds stacked against them with less per-pupil funding and less home support. COVID has put a painfully glaring spotlight on these and other trends that have exacerbated many of America’s worst structural problems. My anticipation and enthusiasm for the other side of this pandemic is tempered because I know these structural problems will be worse than they were pre-COVID and will not be going away when the pandemic is behind us. As an economist, I plainly see that at the heart of the structural problems is income inequality. The bifurcated economy largely explains why we have the highest homicide rate in the developed world and high crime rates in general. It explains why our educational outcomes are subpar and deteriorating. It explains why our country is increasingly and angrily divided politically. It explains why opioid and other drug use is prolific among the primarily unskilled or lowskilled swaths of our nation. It is simply not sustainable to have the extremes we do in terms of income and wealth. Yet to some, making this statement elicits a “socialist” labeling when, ironically, capitalism is built upon the premise of incentives. It’s a statement of fact that thriving economies and safe societies have not equal income, but a range of income that enables the lower-income quartiles to have basic needs met while having true opportunity for social mobility. When bottom earners work and pay taxes, can afford to be active consumers, and don’t pull from social assistance, capitalism—and society as a whole— functions better. ADDRESSING INCOME INEQUALITY But this is not where we are. The top 1% of U.S. earners account for about 20% of the country’s total annual income while the lowest earning 25% account for only 3.7% of total U.S. annual income. The top 1% have an average annual income of $1.3 million while the remaining 99% have an average annual income of $50,107. If you do the math, the top 1% make 26.3 times what the bottom 99% make. In the meanwhile, the federal poverty level (FPL) for an individual, which is the threshold for receiving Medicaid and other federal assistance is currently $12,760. If someone works full time at the $7.25 minimum wage, they make $15,080 a year, but often those jobs do not offer health benefits whereas being under the FPL ensures health benefits. It’s not surprising that many people who do not have access to higher education and higher earning potential choose not to work given this trade-off between full-time, low-pay work and receiving social assistance. Likewise, it’s not surprising that many females choose not to work because of the high cost of childcare. Furthermore, higher education is increasingly out of reach with even middle-income families finding it difficult to afford higher education for their children. Many college degrees do not always ensure a living wage anymore, so more individuals are questioning the return on investment of higher education especially with high student-debt load. The incentive structure just isn’t so clear anymore. Yet, the outrageous expenditures on programs like Medicaid make for big headlines and lots of skepticism. But wouldn’t it be cheaper to address the root causes of poverty and make systemic investments in eradicating poverty than it would be to pay all these transfer payments to poorer households? Over time, we might even reduce the proportion of people who are financially struggling in the U.S. and lower overall costs in the long run. But now we are in a situation where 160,000 businesses have shuttered in the U.S. and 35% of adults are not current on rent or mortgage where eviction or foreclosure in the next two months is likely. Thirteen percent of U.S. households have not had enough to eat in the last seven days. As an American, I wonder how we got here. NEW DEAL 2.0 But maybe we could use this crisis and the need for fiscal stimulus to do a New Deal 2.0. Initiatives like infrastructure spending put people to work, but how about a national training campaign? This is a longterm stimulant to the economy that yields economic benefit long after a recession or depression because people hold onto what they’ve learned. The top job openings in the U.S. are chronically open (nurses, many health-care tech positions, computer administrators, truck drivers, etc.). We have had an acute skills gap in the U.S. as technology has rapidly changed and the requisite skills have simultaneously changed. Do you want people to work? Teach them the skills they need to work. It also helps businesses that chronically complain they can’t find workers with the skills they need. Use federal funds to pay for the training of willing participants. It will be cheaper than chronically paying unemployment insurance, paying for Medicaid and food stamps, and high incarceration rates. Women have left the workforce in droves during this pandemic and if we want them to return, how about subsidizing quality childcare, early education and better teacher pay? These programs essentially pay for themselves in the medium and long run because workers feed back into the system by paying taxes. Such initiatives are politically neutral because no one argues with putting people to work. And while we are at it, audit the top job openings in the U.S. and work with K-12 and higher education to train youth for the jobs of today. All of this will also increase our global competitiveness. WORKING COLLECTIVELY I think it’s thoroughly American to think about and work towards helping other Americans regardless of anyone’s political affiliation. I think it’s thoroughly American to realize how great we are, but how hard we must collectively work to maintain or regain our greatness. As an example, experts said a pandemic was coming (and no one believed them). Climate experts are saying we are reaching the point of no return in terms of irreversible and incredibly expensive, catastrophic impacts from carbon emissions. I know public health and economics and not the science of climate, but I trust good Americans and world citizens who are climate experts. Environmental challenges are the next pandemic. I think it’s thoroughly American to innovate so why not be a world leader in massive investments in green technologies? Even if you think climate change is a hoax, it’s a great way to create jobs. These are investments in long-term, sustainable economic growth that are also investments in Americans. If we raise everyone up, we are truly one nation under God, indivisible as any strong nation must be. Editor’s note: This article is a summation of a conversation with Morton Seja, economic growth adviser and SolveCast podcaster. Listen to the full podcast on SolveCast.com. Income data from Economic Policy Institute.
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