Published in The Huffington Post: Huffpost Politics 04/12/2016
Vijay K. Mathur , Professor of Economics, Emeritus at Cleveland State University
Income inequality in the U.S. has increased since 1979. According to the Center on Budget and Policy Priorities, October 26, 2015, real after-tax income gains of the top 1 percent of households were 200 percent, while the bottom 20 percent and mid 60 percent gained only 48 percent from 1979 to 2010. Other measures of income inequality tell the same story.
It is also well known that inequality in the US is greater than in European countries. The question then is why are conservative Americans in general, and Republicans in particular averse to the issue of redistribution programs despite such inequalities in the U.S.? I am referring to all kinds of redistribution programs, such as Supplemental Nutrition Assistance Program (SNAP), Medicaid, healthcare under ACA, Earned Income Tax Credit (EIT). Even programs such as Medicare and Social Security are redistribution programs, since a significant number of people collect more benefits over their lifetime than they contribute to the programs.
Let me briefly enumerate the findings of some academic studies that provide useful information to most conservative Americans and politicians in Congress. They challenge their views on redistribution policies and economic opportunities available to the poor.
The central result of the paper “Preferences for Redistribution in the Land of Opportunity“, by Alberto Alesina and Eliana La Ferrara (Harvard Institute of Economic Research), November 2001, is that those who believe that opportunities are equally available to the poor as well as to the rich see social and income mobility as a substitute for redistribution. People who expect to be in the upper income brackets or are wealthy are afraid to lose with redistribution and hence are opposed to redistribution schemes. However, Blacks, women and those who suffered unemployment shocks support redistribution. High income and wealthier people in general vote for Republican and conservative politicians. Pew Research Center data, December 12, 2013 show, that whites were almost 13 times wealthier than Blacks in 2013.
The above findings are consistent with the results in another study by Alberto Alesina and George-Marios Angeletos, American Economic Review, September 2005. Most Americans, as opposed to Europeans, believe that poverty is due to bad choices or lack of effort. This view reflects cultural differences between U.S. and countries such as Denmark, Sweden and Norway, where people are willing to pay more taxes to help poor and low-income people, because they do not consider the poor lazy.
These findings on attitudes of richer Americans about the poor are at odds with studies that have investigated opportunity issue, work profile and income mobility of the poor, and the remedial effect of redistribution on poverty.
The paper, “Rags, Riches, And Race“, by Tom Herts, published in Unequal Chances (2005), editors Samuel Bowes et al., found that a rich child, born in the top decile (top 10 percent of the income distribution), has 26.7 percent chance of remaining in the same decile, while a child born in the bottom decile has only 0.5 percent chance of ending up in the top decile. In the paper, “Land of Opportunity“, for the Federal Reserve Bank of Richmond, 2002 Annual Report, Kartik Athreya and Jessie Romero report that 43 percent of taxpayers in the bottom quintile (20 percent of the income distribution) were still in the same quintile after 20 years. Similarly, 46 percent of taxpayers in the top quintile were still in the same quintile. Hence, poverty and low-income status persist in a large fraction of families throughout generations.
What about the claim that poor are lazy? A study by Deborah et al., “The Working Poor Families Project 2014-2015“, using Census data, found that 32 percent of working families were below 200 percent of the official poverty threshold in 2013. The percentages for Hispanic and Blacks are almost double (48 to 49 percent) the percentage for white working families.
Two recent studies by researchers Raj Chetty et al., and Hilary Haynes et al., in The American Economic Review, April 2016, tend to dispel the myth that redistribution programs do not help the poor. Chetty et al., found that the housing voucher program, enabling children before the age of 13 to move from high poverty areas to low poverty areas, increased their college attendance, earnings and reduced single parenthood.
Hilary Hoynes et al., focused on the effect of the food stamp program (FSP), now called SNAP, on the general well being of a sample of adults born between 1956 and 1981 and their mothers. The estimates show that FSP significantly reduced “metabolic syndrome” (conditions such as obesity, high blood pressure, heart disease and diabetes) and promoted good health among adults. The FSP also significantly increased economic self-sufficiency among mothers.
Evidence shows that programs promoting better neighborhoods, schools, sufficient food supply, health care and education in the lives of poor children, have the best chance to ameliorate poverty in the long run. By now conservatives must realize that trickle-down model is flawed and is not the solution for generational poverty. They must work with progressives to implement the most efficient redistribution programs that enable the poor to get out of the poverty trap, hence minimizing waste of human resources.
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.