Finding relief from the rising tide of income inequality

Finding relief from the rising tide of income inequality
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The news cycle at the end of last week highlighted the persistent “rising tide” of inequality cast over the U.S. economy. The Financial Times posted charts from a Deutsche Bank report documenting the growth of income and wealth inequality.

A report from the San Francisco Federal Reserve concluded that current levels of wealth inequality will compound at rates faster than previously estimated. Even good economic news had a grey lining. Department of Labor figures released Friday indicated unemployment rates remain low, but average wage growth continues to occur at a sluggish rate of about 2 percent annually — barely keeping pace with inflation.

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Conclusions drawn from these findings resemble language more commonly used to describe sea level rise and climate change: The forces of income inequality are becoming stronger with more intense and extreme consequences.

 

More than just providing powerful imagery to convey the scope of the problem, there are useful parallels between inequality and climate change when it comes to building broad national support for policy solutions.

Each problem affects the well-being and opportunities for many millions of Americans directly each day, but large portions of the population at the same time do not see the immediate relevance to their daily life. Many of us remain uncertain about how each problem will affect our future.

Moreover, like climate change, the problem of inequality also is daunting in its scale and the global complexity of its causes. Even the most concerned citizens lack a deep understanding of the causes of inequality and do not have a clear sense of which policy levers to pull as a result.

Similar to climate change, current federal policy provides no relief. In fact, recent developments in Congress will widen the gap between the very rich and everyone else. Harried and hurried Republican tax reform will benefit the wealthy disproportionately and lead to increased inequality.

GOP-led changes to health insurance through the elimination of the individual mandate, proposed cuts to Medicaid, and failure to extend Children’s Health Insurance Program (CHIP) funding will have immediate negative effects on the health status of workers and job-seekers.

But, as often is the case with innovative climate policy action, we need to look to states and local communities for promising solutions to rising inequality in the coming years. Like coastal communities across the country grappling with the effects of climate change, high-growth metropolitan regions and their corresponding state governments are confronting the daily consequences of income and wealth inequality that such growth produces.

State and local leaders are seeking and testing ideas to strengthen their bulkheads against the rising detrimental educational, health and housing consequences of persistent economic inequality.

First, we can better fund efforts to increase access to affordable higher education and enhance the skill development of job-seekers. Even though we are nearly a decade into economic recovery, state funding for public universities and colleges is lower today than prior to the Great Recession in all but five states.

Budget cuts have pushed a college education out of reach for many lower- and middle-income Americans, despite the earnings premium that comes with completing a college degree. States and school districts should be working to improve admissions and financial aid processes to improve rates of college persistence and completion.

At the same time, we need to pursue initiatives that create better vocational training and community college pathways for those seeking access to better paying careers outside four-year degree programs.

Second, we should be aggressively testing, improving and scaling innovative state and local policies that carry the promise of reducing inequality. For example, as more states and cities adopt higher minimum wage rates, there is need for high-quality objective research to uncover whether such policies meaningfully improve work earnings and reduce inequality.

Alongside these wage laws, cities are beginning to experiment with paid sick leave and secure scheduling initiatives intended to reduce the instability and unpredictability of work arrangements in many low-wage jobs.

Understanding that educational inequality perpetuates income inequality, we should follow carefully the assessments of state and local efforts to provide greater access to early childhood education opportunities. In addition, there is room to expand and invest in home visiting programs intended to promote greater well-being among our most vulnerable families.

Equally important is using existing data resources to evaluate state and local efforts to create more affordable housing options, so workers in lower-paying jobs and their families can more readily benefit from opportunities created by regional economic growth.

In the end, we cannot tackle inequality (or climate change) successfully without scaling subnational innovation to the national level at some point. We should reject rhetoric that federal policies to address inequality will only slow economic growth — reducing inequality and pursuit of economic growth are not zero-sum choices.

It is unrealistic to expect innovations in a handful of states or affluent metro areas will build national resilience against a rising tide of economic inequality hitting communities across the country.

To spur greater federal action, we must hold congressional policymakers accountable for decisions that actively exacerbate problems of inequality in the near term and insist on adoption of new policy solutions that address the problem in the long term.

Scott W. Allard is a professor at the Evans School of Public Policy and Governance at the University of Washington. He is also is a nonresident senior fellow at the Brookings Institution’s Metropolitan Policy Program.