I have pointed out in a recent post that, not only is the U.S. the world’s most competitive large economy, but also that our per-capita GDP is growing faster than for our nearest rivals.
A particularly vivid example of this dynamism is ecommerce where both the adjusted (gains minus losses) size of the workforce and the average wage are increasing rapidly.
We also know that incomes in the U.S. are rising faster at the high end rather than further down (see chart below). What to do about this has become a major political issue.
Here are my ideas (in rough order of importance):
Economic growth is too slow, averaging just 2% per year since the end of the Great Recession in June 2009. It is reasonable to expect that the regulatory reform already underway and the tax reform under consideration in Congress can increase growth to 2.5% per year. Together with our low unemployment rate of 4.2%, this is already leading to more and better paying jobs.
Improve educational opportunities by, for example, making early childhood education widely available to low-income families and attracting the best teachers to the poorest performing schools with targeted bonus pay.
Better vocational and retraining programs to prepare the unemployed and underemployed for the millions of skilled jobs now going begging for a lack of qualified applicants.
Attempt to address the social inequality associated with income inequality, see here. Marriage rates, civic involvement and public trust have all declined significantly in recent years for the lower class. A very difficult problem to solve!
Conclusion. In a free society like the U.S., providing self-help opportunities for advancement is the natural and preferred way of lifting up people who need assistance. The U.S. does a okay job in this respect but there is plenty of room for improvement.
In two recent posts, here and here, I have established that:
Rapid increases in federal student aid in recent years have led to tuition increases at both public and private educational institutions and for both undergraduate and graduate students.
American higher education is increasing the divide between the haves and the have-nots in the sense that college degree attainment is increasing much faster for those students from higher income families.
Furthermore, students at private, nonprofit (most prestigious) institutions have higher graduation rates and lower debt levels compared to students from public institutions who, in turn, have both higher graduation rates and lower debt levels than students at for-profit colleges (least prestigious).
As if this isn’t bad enough, it gets even worse! The Federal Reserve Bank of St. Louis has just reported, “Why Didn’t Higher Education Protect Hispanic and Black Wealth?” that “White and Asian college grads do much better than their counterparts without college, while college-grad Hispanics and blacks do much worse proportionately.” (see above chart).
In short, the federal government is spending more and more money on higher education, which, in turn, is making colleges and universities more and more expensive. Whites and Asians from higher-income families are graduating in much higher numbers and with minimal debt, while college-grad blacks and Hispanics are mired in huge levels of debt.
How should society address this severe inequality in higher education?
Federal student loans should be limited to $30,000 for undergraduates and $60,000 for graduate students, the average amounts borrowed today for each category of student. Beyond these limits, students could still borrow from the private market, but with no subsidies or loan guarantees provided by the government. This single action alone will help to hold down college costs.
All students, and especially those from low-income families, should be encouraged to avoid excessive college debt. There are many high quality, low-cost educational institutions all around the country (e.g. UNOmaha where I teach) to meet their needs. It should be strongly emphasized that an expensive, prestigious institution is not needed to obtain a good education.
Nebraska is a progressive state in many respects. Last fall we raised our state minimum wage. The Nebraska Legislature is now on the verge of eliminating the death penalty. Seven years ago the Legislature established the Learning Community in metro Omaha, whose purpose is to eliminate the academic achievement gap between children from the middle class and those living in low-income families. I am an elected member of the Learning Community Coordinating Council which oversees the work of the LC. As such I give a lot of thought to the plight of the low-income black community in north Omaha. My own answer to the question in the title is yes, of course, there is more we can do but it needs to be carefully directed. I have written several previous posts on this topic. Here and here.
For example, the Hamilton Project has an excellent program, ”Policies to Address Poverty in America,” which calls for a highly focused effort along the lines of:
Promoting Early Childhood Development
Supporting Disadvantaged Youth
Improving the Safety Net and Work Support
Mr. Robert Balfanz, the Director of the Everyone Graduates Center at John Hopkins University in Baltimore, suggests focusing on the toughest 660 out of 12,600 high schools in the U.S. which fully one-half of non-graduating students attend. More specifically:
Refocus these high poverty high schools in order to identify by the middle of the ninth grade the students most likely to drop out.
Set up early warning systems so that adults can step in at the first sign that a student is in trouble.
Employ additional adults to support students who need daily nagging to succeed, especially during the key transitional years in the sixth and ninth grades.
These two programs have lots of similarities and are focused on at-risk inner-city youth. Massive black underachievement is a huge social problem, and ultimately a huge drain on our entire economy as well. More than just good intentions are necessary for effective intervention. An intelligent and focused approach as described here would be a good way to proceed.