The COVID19 pandemic is a threat to social mobility, as children in disadvantaged families will face more challenges in adulthood

The COVID19 pandemic will threaten social mobility. I examine three ways in which this is likely to happen in my presentation to the ZEW Seminar on COVID19 and inequality held on June 19th, 2020. This post summarizes the major messages.

Drawing on past research I see three aspects of inequality in the lower part of the income distribution that will be exacerbated and threaten the upward mobility of children raised in challenging circumstances.

But I begin by stressing that the United States has lower social mobility than many other rich countries in part because of a more vicious intergenerational cycle of low income, and this in turn has something important to do with race and a legacy of disadvantage among African-Americans.

The obvious challenge for public policy directed to enhancing equality of opportunity is to address the barriers that divide many from the mainstream, and to promote social inclusion of all.

1. Family is central to social mobility

But more specifically, COVID19 is likely to have exacerbated the challenges of parenting, family stress has likely gone up among some families, and in the extreme abusive relationships are more threatening and harder to leave. Separation and divorce may rise. From the perspective of the adult prospects of children, this will lead to delayed partnership formation, and more unstable relationships, even if it does not impact directly on their earning prospects.

2. Progressive public investment matters and should be supported

Social mobility is promoted by progressive public investment, particularly in health care and schooling. Many have already pointed out that the pandemic has exacerbated differences in schooling outcomes in the short term, as children in lower socio-economic families have gained much less from online learning than their counterparts. This is equivalent to the well documented loss in learning that occurs during summer months as well-to-do families enrich the child’s experiences in ways not available to others.

But in the longer run it will be very important to not cut back, indeed to increase, investment in high quality public schooling. An era of austerity in the aftermath of the 2008 Great Recession led to cuts in public investments that should be avoided this time around.

3. Job loss and income falls echo into the next generation

Finally, if temporary layoffs morph into permanent job loss, and if public income support is inadequate this will imply a long-lasting decline in family income that will have long run consequences for children. The adult earnings of children raised in families where the main breadwinner permanently lost a high seniority job in mid career suffered. The parental income loss echoed into the child’s adulthood, the children experiencing lower income and greater reliance on public income support as adults.

For more detail, download my presentation and use the links to useful resources to learn more: “Inequality from the Child’s Perspective: Social mobility in Pandemic Times”

The Canada Emergency Response Benefit, what now? Government policy as the economy re-opens should be rules-based

We have learned from past experience that public policy proceeds through two phases during major crises: first, as one influential economist has said, “whatever it takes”; then, “Oh my God, what have we done!”

The Canada Emergency Response Benefit represents the best of whatever-it-takes policy. The speed, the depth, and the sheer uncertainty of the duration and aftermath of the COVID19 crisis called for maximum flexibility in the making of public policy, and full discretion for leaders to respond quickly. This is equally the “In it altogether” phase. It motivates significant, widely available, and easy to get income support intended to avert a liquidity crisis and ensure the survival of many asset-poor households.

The CERB is a generous payment, minimally targeted, with an on-off eligibility rule that would normally create a significant work disincentive, a program totally appropriate for times when the standard rules of economic policy are flipped upside down. The work disincentives of this program are a feature, not a bug. For many there is no work to be had, while for others work should be avoided to maximize the physical distancing necessary to reduce the reproduction rate of the virus, and flatten the curve. Survival, not stimulus, is the watchword for policy.

But re-opening the economy in stages, according to risks of re-infection and flare-ups, makes clear that we are in-it-together only until we are not. And yet uncertainty continues to prevail: will the recovery be V, U, W, or L-shaped? At what point do temporary layoffs morph into permanent layoffs that lengthen spells of unemployment, and further depress consumer confidence?

In the “OMG, what have we done” phase, giving maximum flexibility and discretion to government may even add to uncertainty.

Continue reading “The Canada Emergency Response Benefit, what now? Government policy as the economy re-opens should be rules-based”

COVID-19 is not the great leveller, it’s the great revealer

Source: https://twitter.com/stphnmaher/status/1249767849352101890?s=20

In a medical sense, COVID-19, as highly contagious as it is, can be thought of as the great leveller. No one has immunity, and we face the health risk of this virus with a sense of our common humanity.

But in a socio-economic sense, it is not as contagious. The jobs some of us hold give us an economic immunity, and we face the economic risk of this virus with a very different sense of our interconnectedness.

Continue reading “COVID-19 is not the great leveller, it’s the great revealer”

Big government, just in time

Big government road into town just in time, but alas when he jumped off his bronco and reached for his six-gun it became clear he wasn’t just-in-time government.

What is clear from the COVID-19 crisis is that we should always choose our leaders with one thing in mind: character.

Character determines how they will stand up to the unexpected. That’s what matters, and whether it is Legault or Ford, Kenney or Horgan, whether Nenshi or Tory, and yes of course whether it is Trudeau, Canadians feel they are all passing the test.

Opinion polling shows that strong majorities see their leaders as doing a good job responding to COVID-19. And it’s impressive, their sensibility to consult, their conviction to act. Now, when we need them, they’ve all shown up, just in time.

Source: Angus Reid, March 26, 2020, http://angusreid.org/covid-19-healthcare-confidence/

“Think Big” has become the guidepost for these abnormal times, but we can’t be governed by character alone. Good governance needs an infrastructure that can deliver, and thank goodness Canadians can also count on a professional public service. But at the same time we fear its muscles can’t flex in real time.

The biggest stumble of the past week was the Trudeau/Morneau over-reach in the first draft of Bill C-13, an attempt to skirt parliamentary oversight and seize control over taxing and spending for two years. Not immediately tasteful, not in character, and certainly not contributing to the we-are-in-it-together spirit that is crucial for good governance and success.

This over-reach was probably driven more by insecurity than by partisanship, springing from having to look through the veil of uncertainty that has fallen over Ottawa. Staring into the mirror and seeing no reassuring reflection, the Minister of Finance wished for a pot of gold, just in case, you never know, down the road, we may need it.

Insecurity about a fluid situation, and insecurity about how quickly programs can be delivered, flows out of clogged government plumbing, a hard constraint on Big Think: for years we’ve neglected, cut, denigrated, and now the public service has a tough time doing just-in-time.

Employment Insurance, that grand social insurance scheme born from the disaster of the Great Depression, intended to offer income support to all in need, to insure against the great social risks we collectively face, risks that would bankrupt private insurers in no time, how is it performing during a collective crisis of the very kind it was intended to address?

It is straining, with computer code written in the 1980s running its servers, processing power and devoted personnel stretched to the limit, overcrowded service centers that are now shut down. The public service is doing the best it can with old plumbing.

Ottawa mandarins often muse about an “all of government approach,” a busting across the silos of different ministries to address all aspects of a policy challenge. But the biggest silos of all have never been breached, those between policy development and service delivery. And now the delivery plumbing is conditioning the choices that Big Thinkers can make.

What is also clear from the COVID-19 crisis is that we should always be investing and innovating in public service delivery, something easy to ignore in normal times.

There is no doubt that the income support programs the federal government moved quickly out of the drawing room and into legislation last week were designed with an eye, not simply to whether they were big enough, but how they would be delivered. The cheques won’t be in the mail for weeks. In times of Corona, that’s a lifetime.

Our governments have to think big, but they can only implement incrementally, a couple of quick steps forward, another back. Events are moving too fast, capacity is too limited, for Canadians to expect otherwise, even if what they really need is both big and just-in-time government.

Source:https://twitter.com/CanRevAgency/status/1244278188651528194?s=20

When Trudeau’s team first came to power they were enamoured with the idea of governing with data. Measure outcomes, set targets, recalibrate in the face of results, and move forward with a “there’s more to do” attitude. But lags in information and delivery make all that fall short.

There is always a big gap between intention and result, never mind in times of crisis, and that gap has to be filled with the trust that character instils in partners and citizens.

Trust gives us the assurance that the cheque is indeed in the mail, and character, now more than ever, needs to deliver. It can’t stumble too many times, before trust rides away.

[ A version of this post was published in The Globe and Mail on March 30,2020 under the title “Ottawa is struggling to be a just-in-time government.” ]

A letter to the Canadian Prime Minister, with two suggestions for next steps in dealing with #COVID19

Prime Minister,

I certainly hope you and yours are well.

I was in New York City up until last weekend. Earlier in the previous week the university where I work announced that it was moving all courses online, and closing the campus. There was really no further need for me to stay in the City, but my initial thought was to wait it out, and decide later on when to return to Canada.

I started to have second thoughts when a student emailed me for advice just after President Trump announced that travel from Europe to the United States would be banned. He’s from Mexico, and said that he trusted the Mexican health care system more than the American, and wanted my advice on whether he should return home.

If that wasn’t enough to give me pause, when I saw the twitter feed of the Minister of Foreign Affairs  on Saturday evening recommending “that Canadian travellers return to Canada via commercial means while they remain availableI immediately bought myself a ticket for a next day flight to Canada. I arrived last Sunday evening, and have been in self-isolation since. I’m glad to be home given the events of the last week.

It is certainly time for government to step up, and history will judge the fall out of this pandemic in terms of how well societies govern themselves: professionally and efficiently, scientifically and socially, and with a sense of reciprocity and trust that strengthens community. I hope you and your cabinet take to heart a message that one of my colleagues has written in an article called “The Real Pandemic Danger Is Social Collapse.”

… the main (perhaps even the sole) objective of economic policy today should be to prevent social breakdown. Advanced societies must not allow economics, particularly the fortunes of financial markets, to blind them to the fact that the most important role economic policy can play now is to keep social bonds strong under this extraordinary pressure.

Good governance, not just a good health care system, is one of the reasons I’m glad to be home. I have been watching your daily press briefings with a good deal of admiration. And I am also impressed with both the design and speed with which the government has been able to roll out the package of reforms earlier this week, an effort that has no doubt been supported by legions of professional public servants working around the clock.

You promised that these reforms are just the first step in a fast moving and dynamic situation. I can’t pretend to understand the complete situation, hardly have full information, and can’t offer wide-ranging suggestions on what the next steps might be. But here are two suggestions that come from my limited areas of expertise. Continue reading “A letter to the Canadian Prime Minister, with two suggestions for next steps in dealing with #COVID19”