The Canadian federal government should enhance the human and financial capital of children in less wealthy families, enhance market incomes of lower paid workers, and enhance the security of working incomes by adapting three existing programs to new realities: widening their scope, making them more flexible, and making them easier to obtain.
The changing world of work is also a changing world of pay, a world that will likely lean toward greater wage rate inequalities, lower or stagnating incomes for the bottom 40 percent, and greater income insecurity for the broad majority.
I suggest three changes to current public policies that take incremental, but important, steps toward fostering capital accumulation among children from less wealthy families, increasing market incomes earned from that capital for the working poor, and finally enhancing income security for the broad majority.
These policies lean toward encouraging inclusive growth, in which the benefits of the new world of work and pay are broadly shared.
In this post I discuss the first policy proposal, which is:
Enhance human and financial capital by making community colleges tuition-free, and making the Canada Learning Bond more flexible
Continue reading “The changing nature of work calls for enhancing the human and financial capital of children in less wealthy families” →
I am in Washington DC at the Brookings Institution participating in a conference based on the papers that will appear in the next issue of the Brookings Papers on Economic Activity, and specifically to discuss a paper called “Income Inequality, Social Mobility, and the Decision to Drop Out of High School.”
The authors, Melissa Kearney and Phillip Levine, say in the abstract of their paper:
we posit that greater levels of income inequality could lead low-income youth to perceive a lower return to investment in their own human capital. Such an effect would offset any potential “aspirational” effect coming from higher educational wage premiums. The data are consistent with this prediction: low-income youth are more likely to drop out of school if they live in a place with a greater gap between the bottom and middle of the income distribution. This finding is robust to a number of specification checks and tests for confounding factors. This analysis offers an explanation for how income inequality might lead to a perpetuation of economic disadvantage and has implications for the types of interventions and programs that would effectively promote upward mobility among low-SES youth.
You can learn more and download the paper from the Brookings Papers on Economic Activity web site for the 2016 Spring conference.
The slides for my discussion of the paper are here.
My comments revolve around three questions raised by this nicely crafted paper:
- Inequality of what?
- the authors focus our attention on the degree of inequality in the lower half of the income distribution
- but they also use a measure of inequality based upon all sources of income, including benefits from government transfers
- so policy makers might wonder about the scope and design for government transfers to lower inequality in the lower half, and in particular of expanding the EITC to include men
- Social Mobility for whom?
- state-level inequality raises the chances that boys from low status backgrounds will drop out of high school, there is no statistically significant influence for girls
- but these patterns also depend upon the abilities that these boys have when they start high school
- I show that these abilities are actually correlated with the abilities children have when they were kindergarten age, so we might also wonder about whether policy should be directed to individuals and high schools, or to families and young children
- Whither Dropping Out?
- the trend in dropping out of high school has actually been on the decline since about 2000, yet inequality has not changed that much during this period
- but this paper helps us to think more constructively about trends, it may be that the degree of disenchantment about future prospects have changed
The summer issue of the Journal of Economic Perspectives will feature a collection of articles on inequality and the top 1%, some of which are now being circulated by the authors.
The paper by Tony Atkinson and his coauthors, “The top 1 percent in international and historical perspective,” is available in this post, and “The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes,” by Josh Bivens and Lawerence Mishel, is available on the Economic Policy Institute website.
Greg Mankiw has also posted a copy of his paper, “Defending the One Percent“, on his blog.
My contribution to the collection is based on the notion that the inequality literature has paid little attention to the intergenerational consequences of increasing top income shares, and it can be read as a counterpoint to Mankiw’s piece, or at least to his claim that inequality of opportunity is not a reason to worry about the top 1%.
Here is the final draft: Income Inequality, Equality of Opportunity, and Intergenerational Mobility. But if you just want a quick read, an excerpt from the conclusion follows. Either way, feedback is—as always—welcomed.
[NOTE added December 10, 2013: the published version of this paper is available from the American Economics Association website for the Summer 2013 issue of the Journal of Economic Perspectives, as is the table of contents for the entire issue.]
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The Universal Declaration on Human Rights, which we celebrate every December 10th, offers both a powerful and beautiful statement of what it means to be human and the goals we should pursue as a society. But the Declaration is an incomplete guide to designing the programs to meet these goals: it offers inspiration to advocates, but not a guidebook for pragmatists.
Pragmatists and policy makers need to read the Universal Declaration through the lens of economists, rather than don the robes of lawyers.
Continue reading “The right way to think about social and economic rights” →
The American education system is of relatively more advantage to the relatively advantaged. As a result it does less than it could to promote opportunity.
In response to my July 10th testimony to the Senate Committee on Finance hearing on “Helping Young People Achieve the American Dream” I received some homework, a series of questions asking me for a good deal more detail. You can review all of the questions on my November 11th post, but a couple of questions posed by the Committee Chairman, Senator Max Baucus of Montana, speak to probably the most important driver of social mobility, and raise particularly important issues for public policies.
Continue reading “The US Senate wonders about tax policy for the American Dream: why are schools failing to promote social mobility?” →
Is the American Dream harder to achieve now than a generation ago?
In response to my July 10th testimony to the Senate Committee on Finance hearing on “Helping Young People Achieve the American Dream” I received some homework, a series of questions asking me for a good deal more detail. You can review all of the questions on my November 11th post, but this one posed by the Committee Chairman, Senator Max Baucus of Montana, is particularly relevant.
Compared to many other countries the United States is both more unequal, and more of this inequality is passed on to the next generation.
Knowing where Americans stand compared to other countries is interesting because it helps us to begin to understand the underlying causes, and hence how public policy might influence outcomes.
But for the same reasons it is just as interesting, if not more so, to compare the United States not just to other countries, but to itself in a previous time.
Continue reading “The US Senate wonders about tax policy for the American Dream: Senator Baucus asks if things are getting worse” →