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Advice To The Next President: Income Inequality And Social Mobility

This article is more than 10 years old.


From 1946 to 1973, the U.S. economy doubled — as did family income across all economic classes.

Since then, economic growth has slowed while income and wealth inequality (by class and by race) have increased. Over the same period, social mobility has not increased enough to offset that growing inequality (so the rich tend to stay rich and the poor tend to stay poor longer term).

With a growing body of evidence to support that economic inequality suppresses growth and creates instability, what should the next president do to reverse this long standing trend?

Northeastern University's Barry Bluestone and Boston Federal Reserve Bank economist Katharine Bradbury offer their thoughts.

Barry Bluestone is a professor of public policy and urban affairs at Northeastern University.

In our quest to understand rising U.S. inequality since the early 1970s, many economists are eager to blame “skilled biased technological change” – the idea that a modern economy rewards those with the best skills and punishes those with the least skills.

But the truth is there are many culprits and all of them contributed to the growing inequality and the subsequent damage to America’s middle class.

These include deindustrialization of our manufacturing base, de-unionization, the failure to boost the minimum wage, free trade, capital flight, a lessening in the progressivity of the tax system, and a “winner-take-all” approach to the economy where a few at the top get most of the productivity gains in the economy.

Since there are many factors, the president must attack inequality on many fronts. He must rebuild our industrial base — making it safe once again to join a union, he must raise the minimum wage, advocate for “fair trade,” and use the tax system to redress inequality if the private market does not.

It is a broad agenda, but if we do not attend to it, inequality will continue to increase and we will all eventually pay an enormous price.

Katharine Bradbury is a senior economist and policy adviser at the Federal Reserve Bank of Boston. The views expressed here are her own, and not those of the Federal Reserve Bank of Boston or the Federal Reserve System.

Much of the increase in income inequality over the past three-plus decades and absence of economic mobility increases to offset it can be attributed to "pre-tax" influences on income, such as changes in U.S. institutions, including the declining unionization Prof. Bluestone discusses.

Nonetheless, we can mitigate some problems associated with inequality, including the concentrations of money and power that currently reinforce advantage, by using direct redistribution to make the post-tax, post-transfer distribution of family incomes more equal—increasing the progressivity of the tax system and strengthening the safety net. In addition, using stimulative fiscal and monetary policy to help bring the economy closer to full employment would help to reduce inequality. Council of Economic Advisers’ Chairman Alan Krueger mentioned both these remedies, among others, in a January speech.

To address the issue of limited intergenerational mobility — the strong correlation in the United States between the incomes of parents and their children — we should aim to loosen the strong link between parental income and children’s educational performance and attainment, unleashing the potential of all children.

The next president can make worthwhile investments to ensure low-income children access to high quality schooling via action on three fronts: (1) channeling additional funding into the pre-school years, (2) working to raise the quality of the lowest performing public schools, (3) making college more affordable via expanded grants and loans. In addition, a fourth front can broaden access to good jobs among young and older adults, namely expanding job training programs, in part via collaboration between community colleges and employers.

Related content:

  • WATCH video of these lectures — plus a Q & A with Bluestone and Bradbury — here.

This program aired on October 10, 2012. The audio for this program is not available.


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