The Canada Child Benefit offers a policy option that the United States should consider in pursuing a goal to reduce child poverty by half.
The commitment to address child poverty has waxed and waned in Canada since an all-party resolution was passed in the House of Commons in late 1989 committing the federal government to “seek to eliminate child poverty by the year 2000.”
Poverty and social policy are now high on the agenda of the current federal government, which intends—over the course of the next six months—to articulate a poverty reduction strategy, but which has already taken a major step toward this goal by introducing the “Canada Child Benefit” in its first budget. This program came into effect in July 2016, and represents a major revamping of cash support to families with children.
The Canada Child Benefit represents an important improvement in the incomes of families with children, the government forecasting that by the end of its first full year of operation in 2017 the program would almost halve the number of children in poverty from the level prevailing in 2013. This innovation merits attention from policy makers in the United States and other countries.
It was based on a background report I prepared for the committee, which you can also download: Text-Corak-National-Academy-Sciences-Engineering-Medicine-Child-Poverty. The report details the nature of the program, compares it to the programs it replaced, and offers links to additional resources helpful in simulating the impact a similar design could have in other countries.
A common way to think about social mobility is in terms of “rags to riches” movement, a type of mobility that is central to the great defining metaphor of the United States, “The American Dream.” Indeed, policy makers often frame their discussion of social mobility in these terms, as for example in a May 2016 speech by the Chairman of the Council of Economic Advisers.
Upward movement is a natural way to think about social mobility, and Americans should have more of it. But this won’t happen without lowering the chances of intergenerational cycles of poverty, and promoting inclusive economic growth.
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.”
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.
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
Canadians should be thumping their chests, after all many others are patting us on the back. When it comes to social mobility we are among the world leaders. Even U.S. President Obama acknowledged that a poor child is more likely to move up in life in Canada than in the United States.
This kind of mobility, the capacity for children to become all that they can be without regard to their starting point in life, is the bedrock of fairness.
For sure this distinct Canadian accomplishment of making the American Dream more of a reality north of the border was never without its imperfections, ringing rather hollow for many native communities, some immigrant groups, and certain visible minorities. Great accomplishments on average never reveal the full diversity of experience.
But just as importantly winning the social mobility sweepstakes is something for the record books, not a guarantee for the future. The foundations of fairness are shifting; luck will matter more, meritocracy will be perverted by growing inequality, and our public policies haven’t really changed to prepare for the new reality that is already pressing on young people.
Here are the slides for the presentation “Too many children left behind: The U.S. Achievement Gap in Comparative Perspective”, which I gave to the conference “Causes and Consequences of Inequality and Social Mobility: What Can Be Done?”
My meeting with senior Treasury officials began with the nonchalantly stated advice “In the event of an earthquake we like to get under the tables and hold on to the legs so that they don’t get away from us.”
As a Canadian, albeit one who has visited New Zealand three times in the past decade, I naively took this as a metaphor for the earth-shattering ideas the public service expects from its consultations with outside experts.
I assure you that the dozen or more participants gathered to discuss how the government might contribute to building “a more inclusive New Zealand” offered advice that was far from ground breaking.