Published blog in Huffington
Post: Politics, January, 13, 2016
Vijay
K. Mathur
In
August 29, 1977, Time published a cover story about impoverished urban Blacks,
labeling them as The American Underclass.
Those were people who were stuck in an environment of “psychological and material destitution
despite 20 years of civil rights gains and 13 years of antipoverty programs” and
robust job recovery after the end of 1973-75 recession. Since 2001 the poverty problem
has worsened, and the severe recession of 2007-08 has accelerated the downward spiral
in income opportunities for many Americans. It is making it more difficult, especially for Blacks and
Hispanics and a significant proportion of Whites, to extricate themselves from
the lower end of the income scale.
There
is greater propensity for an increasing proportion of families and their adult
children to end up in the bottom of the income distribution. American Community Survey, Bureau of Census, September 2013, found
that the poverty rate increased from 12.2percent in 2000 to 15.9 percent in
2012. In addition, the percentage
of people with income below 50 percent of the poverty threshold increased from
5 percent in 2000 to 7 percent in 2012. The rates vary across racial groups, where Blacks and
Hispanic rates are more than twice the poverty rates for Asians and Whites.
The
study by Elizabeth Kneebone (http://www.brookings.edu/research/interactives/2014/concentrated-poverty#/M10420) at the Brookings
Institution, July 31, 2014, found that from 2000 to the peak period 2008-12 of
the great recession poverty is becoming more concentrated. The 100 largest metro areas have 70
percent of the distressed areas with poverty rates of 40 percent or more. The share of poor people in cities
increased from 18.2 percent in 2000 to 23 percent in 2008-12; Suburban share
has increased from 4 percent in 2000 to 6.3 percent in 2008-12. Hence, the poverty problem has worsened over
time despite economic growth during 2003-2006 and 2010-2012, and it has
affected all ethnic groups.
The
increased concentration of poverty is especially worrisome in light of a study’s
finding by Harvard researchers Raj Chetty et
al., August 2015 (http://www.equality-of-opportunity.org/images/mto_paper.p). They found that children
below age 13 in families given housing subsidy vouchers have significantly
higher college attendance rates and earnings in mid-twenties, when they moved
to lower poverty neighborhoods, as opposed to the same age children in families
in the control group (with no housing subsidy vouchers).
One
could argue that high poverty rates may not be of much concern if poor people
have more opportunities for intergenerational income mobility. But the findings of studies that
have rigorously examined the issue are not encouraging. In a book Unequal Chances (2005), edited by Samuel Bowles et al., a study by Tom Hertz found that,
adjusting for household size, a rich child born in a household in the top
income decile (top 10 percent of the income distribution), has 26.7 percent
chance of remaining in that decile.
However, a poor child born in a household in the bottom decile (10
percent) has only 0.5 percent chance of ending up in the top income decile. Hence, a rich child, as opposed to a
poor child, is 53 times more likely to remain rich as an adult. Persistence of poverty is much
more severe for Blacks and Hispanics than for Whites.
Therefore,
the question arises: what can be done about it, given the fact that, to some
extent, parental education, traits and income determine their children’s
educational attainment and incomes.
Another study by Professor Raj Chetty et al., June 2014 (http://www.rajchetty.com/chettyfiles/mobility_geo.pdf) is instructive. They found that children have a high
probability of moving up the income ladder in cities that have less residential
segregation, less income inequality, better primary schools, greater social
capital and family stability. Hence, intergenerational mobility is local.
Although income inequality in the
current period affects intergenerational inequality, families stuck in the
poverty trap cannot change income inequality in the short run. But they can
take the initiative to improve their own skills, better their public schools, demand
pre-kindergarten education, provide family stability, and create an environment
for disciplined growth of children to foster love for education. There is increasing evidence in
psychological and behavioral studies that the interaction of environmental
experiences and personal traits, such as impulse control, determine educational
and economic success of children in adulthood. The Washington Post story of December 20, 2015, on Jennings
School District, MO., points out the success in educating primarily Black
children. In addition to requiring
high academic standards, the Superintendent Tiffany Anderson has recognized and
is dealing with issues related to poverty and fostering a disciplined approach
to academic excellence among poor children.
Changes
in the labor markets due to globalization and emerging new technologies have
created a skills gap. The skills
gap, and therefore poverty, will persist if policy makers and families at the
lower end of the income distribution do not respond by taking deliberate
actions to remedy the problem.
Families facing prospects of sliding down the income ladder must also
recognize the limitations of government income support programs and poverty
policies. Hence, their own initiatives in concert with public policy assistance
will be the path for economic success for themselves, as well as for their
children.
A
nation with persistence poverty over a period of time suffers human capital
loss in perpetuity and other adverse social and cultural consequences. Former Prime Minister of India, Atal
Behari Vajpayee, once remarked, “Poverty is multidimensional. It extends beyond
money incomes to education, health care, political participation and
advancement of one’s own culture and social organization.”
Mathur is former chair and
professor of economics and now professor emeritus, Department of Economics,
Cleveland State University, Cleveland, Ohio. He resides in Ogden, Utah.
No comments:
Post a Comment