Poverty Breeds More Poverty
October 15, 2013
Oct 15, 2013
5 Min read time
Thinking harder about how inequality is growing
Last week, I was fortunate to be in the audience when about 20 experts came together to report on new research on and new ideas about American economic inequality. The occasion for the conclave was to celebrate the roughly 40-year anniversary of the path-breaking book, Inequality: A Reassessment of the Effect of Family and Schooling in America and celebrate as well the career of its lead author, Christopher “Sandy” Jencks. The arguments and evidence of the 1972 Inequality are, of course, dated. But its questions and analyses set an agenda for the following four decades, including much of the work presented at the conference.
This post briefly reports a few of the findings and insights some of the speakers provided. They make us think harder about how inequality is growing, the various (often non-obvious) dynamics involved, and the ways inequality is itself fueling further inequality. (An earlier update on inequality research is here.)
Bruce Western (Harvard) reminded the audience of the facts: that the gap in incomes and wealth between better-off and worse-off Americans has widened dramatically in the 40 years since Inequality was published. Notably, the gap between the middle class and the poor opened up during roughly the first half of that period, but more recently the top few percent of the population have run away from the rest of us. And, while the overall poverty rate has been stable, the proportion of children living in extreme poverty has grown.
Matthew Desmond (Harvard) pointed out an especially wrenching feature of twenty-first-century poverty: the cost of rent has risen so rapidly that many poor families must now devote a lion’s share of their low incomes to rent. At the same time, federal housing help for the poor has shrunk. More poor families are only one financial setback—a theft, an unexpected medication cost—from eviction for nonpayment and the painful fallout from that eviction, such as being shut out from renting a new place.
Many reinforcing factors account for the escalation of inequality. Sean Reardon (Stanford) has been working on the role of education. In an earlier post on his work, I described his finding that the gap in school achievement test scores between children of low-income parents and children of high-income parents had widened in the last few decades (even as the black-white gap had narrowed). In his conference presentation, Reardon examined explanations of that widening. The broader test-score gap could simply reflect the broader money gap between the top ten percent of families and the bottom ten percent. But he reported finding that the key change in recent decades has been that parents’ incomes have become more powerfully consequential for childrens’ test scores – money seems to matter more. In turn, the connection between parental income and school success could have tightened for a few reasons. One, simply, is that parents who can “buy” academic success for their kids are increasingly choosing to spend their money that way—say, by buying more expensive homes in better neighborhoods with better schools, or by signing their children up for after-school programs.
Jennifer Jennings (New York University) presented a study pointing to one such spending decision. In a creative use of data from pharmacies, she showed evidence for what many middle class parents believe on anecdote: that much of the diagnoses of attention deficit disorders and the prescribing of stimulant medication for them just serve the purpose of improving children’s school performance. She and her collaborators found that the rates of picking up the medications drop at the beginning of the summer when school ends and rise again when school resumes. This “summer holiday” from Adderall and its like is more common among private-paying families than among medicaid families, suggesting that doping is one of the ways that advantaged parents are trying to advantage their children.
Eldar Shafir (Princeton) pointed to a more subtle way that poverty breeds more poverty. He reported on a set of studies showing that financial insecurity is such a psychological burden that it actually undermines people’s abilities to make effective decisions. Being distracted and anxious about money is a “psychological tax” that impairs deliberation, lowers resistance to inducements like advertising, and leads to worse choices.
Several of the discussions in the conference pointed to the ways that inequality, having taken off on the 1970s, is reinforcing itself. The schooling processes Reardon discussed can operate that way: As inequality widens, middle class parents become yet more anxious about their children’s fates, invest yet more in school achievement, and the children of the poor fall yet farther behind the children of the affluent. There are other ways as well.
A few of the speakers pointed to politics. They argued that as the well off accumulate ever more money compared to average Americans, they can further fund political efforts to protect and extend their advantages (say, tax cuts and corporate deregulation), which in turn further widens inequality. A few of the scholars pointed to family dynamics. The growing insecurity of Americans without a high school degree (and many with only a high school degree) undermines family stability. More children grow up in “fragile families” and fall further behind (Sara McLanahan, Princeton, and Laura Tuch, Cornell), exacerbating the inequality gap.
Although there was some disagreement on the question (Scott Winship, Manhattan Institute, being the key dissenter), most experts in the room seemed convinced that as economic inequality was growing, economic opportunity was shrinking. That is, the chances that children born to poverty can get out of poverty have been dwindling. Increasingly, the social class of children repeats the social class of their parents, pointing toward an America with not only less equality of outcome but also less equality of opportunity.
Despite the celebratory occasion of the conference, much of the news was, for those who would reduce American inequality and American poverty, dismal. Yet, I think most in the room would agree that growing inequality is not some natural force beyond the control of policymakers. Many speakers offered both familiar and novel ideas, both small and large. If we as a nation had the political will, there are ways to change direction (see also here).
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October 15, 2013
5 Min read time