Social Democratic America (6 page)

Parenting traits and behaviors have long differed according to parents' education and income, but this difference has increased with the advent of our modern intensive-parenting culture.
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Low-income parents aren't able to spend as much on goods and services aimed at enriching their children, such as music lessons,
travel, and summer camp. They read less to their children and provide less help with schoolwork. They are less likely to set and enforce clear rules and routines. And they are less likely to encourage their children to aspire to high achievement in school and at work.

Differences in out-of-home care also have widened. A generation ago, most preschool-aged children stayed at home with their mothers. Now, many are enrolled in some sort of childcare program. Children of affluent parents attend high-quality, education-oriented preschools, while kids of poorer parents are left with a neighborhood babysitter who plops them in front of the television.

Elementary and secondary schools help equalize opportunity. And in one respect they have become more effective at doing so: funding for public K-12 schools used to vary sharply across school districts, but this has diminished. Even so, there is a large difference in the quality of education between the best and the worst schools, and the poorest neighborhoods often have the weakest schools.

According to data compiled by Sean Reardon, the gap in average test scores between elementary- and secondary-school children from high-income families and low-income families has risen steadily.
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Among children born in 1970, those from high-income homes scored, on average, about three-quarters of a standard deviation higher on math and reading tests than those from low-income homes. For children born in 2000, the gap has grown to one-and-a-quarter standard deviations. That is much larger than the gap between white and black children.

Partly because they lag behind at the end of high school, and partly because college is so expensive, children from poor backgrounds are less likely than others to enter and complete college.
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In the past generation this gap has widened.
Figure 2.4
shows college completion by parents' income for children growing up in the 1960s and 1970s (birth years 1961–64) and children growing up in the 1980s and 1990s (birth years 1979–82). Among children of high-income parents, defined as those with an income in the top quarter of all families, there was a marked increase in the share completing college, from 36 percent of the first cohort to 54 percent of the second. For those from low-income families, the increase was much smaller, from 5 percent to 9 percent.

FIGURE
2.4 College completion among persons from low-income and high-income families

College completion: four or more years of college. Low-income family: the person's family income during childhood was on the lowest quarter of the income ladder. High-income family: income during childhood was on the highest quarter.
Data source
: Martha Bailey and Susan Dynarski, “Gains and Gaps: A Historical Perspective on Inequality in College Entry and Completion,” in
Whither Opportunity? Rising Inequality, Schools, and Children's Life Chances
, edited by Greg J. Duncan and Richard J. Murnane, Russell Sage Foundation, 2011, figure 6.3, using National Longitudinal Survey of Youth data.

When it comes time to get a job, the story is no better. Low-income parents tend to have fewer valuable connections to help their children find good jobs. Some people from poor homes are further hampered by a lack of English language skills. Another disadvantage for the lower-income population is that in the 1970s and 1980s, the United States began incarcerating more young men, many for minor offenses. Having a criminal record makes it more difficult to get a stable job with decent pay.
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A number of developments, including technological advances, globalization, a loss of manufacturing employment, and the decline of unions, have reduced the number of jobs that require limited skills but
pay a middle-class wage—the kind of jobs that once lifted poorer Americans into the middle class.
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Finally, changes in partner selection have widened the opportunity gap. Not only do those from better-off families tend to end up with more schooling and higher-paying jobs. They also increasingly marry (or cohabit with) others like themselves.
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Do we have conclusive evidence of rising inequality of opportunity in earnings and income? Not yet.
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Existing panel data sets are too young to give us a clear signal. But given the large increases in inequality of test scores and college completion between children from low-income families and those from high-income families, it is very likely that the same will be true, and perhaps already is true, for their earnings and incomes when they reach adulthood.

As a society gets richer, the living standards of its households should rise.
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The poorest needn't benefit the most; equal rates of improvement may be good enough. We might not even mind if the wealthiest benefit a bit more than others; a little increase in income inequality is hardly catastrophic. But in a good society, those in the middle and at the bottom ought to benefit significantly from economic growth. When the country prospers, everyone should prosper.

In the period between World War II and the mid-to-late 1970s, economic growth was good for Americans in the middle and below.
Figure 2.5
shows that as GDP per capita increased, so did family income at the fiftieth percentile (the median) and at the twentieth percentile. Indeed, they moved virtually in lockstep. Since then, however, household income has been decoupled from economic growth. As the economy has grown, relatively little of that growth has reached households in the middle and below.

FIGURE
2.5 GDP per capita and the incomes of lower-half families

P50 is the fiftieth percentile (median) of the income ladder; P20 is the twentieth percentile. Each series is displayed as an index set to equal 1 in 1947. The family income data are posttransfer-pretax. Inflation adjustment for each series is via the CPI-U-RS.
Data sources:
Bureau of Economic Analysis, “GDP and the National Income and Product Account Historical Tables,” table 1.1.5; Council of Economic Advisers,
Economic Report of the President
, table B-34; Census Bureau, “Historical Income Tables,” tables F-1 and F-5.

Why has this happened? Rising inequality. Since the 1970s, a larger and larger share of household income growth has gone to Americans at the very top of the ladder—roughly speaking, those in the top 1 percent. The income pie has gotten bigger, and everyone's slice has increased in size, but the slice of the richest has expanded massively while that of the middle and below has gotten only a little bigger.

Figure 2.6
shows average incomes among households in the top 1 percent and in the bottom 60 percent.
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The years 1979 and 2007 are business-cycle peaks, so they make for sensible beginning and ending points. Average income for households in the top 1 percent soared from $350,000 in 1979 to $1.3 million in 2007. For the bottom 60 percent the rise was quite modest, from $30,000 in 1979 to $37,000 in 2007.

This is a disappointing development. But does the trend in lower-half incomes paint an accurate picture of changes in living standards?

FIGURE
2.6 Average income of households in the top 1 percent and bottom 60 percent

Posttransfer-posttax income. The income measure includes earnings, capital gains, government transfers, other sources of cash income, in-kind income (employer-paid health insurance premiums, Medicare and Medicaid benefits, food stamps), employee contributions to 401(k) retirement plans, and employer-paid payroll taxes. Tax payments are subtracted. The incomes are in 2007 dollars; inflation adjustment is via the CPI-U-RS.
Data source
: Congressional Budget Office, “Average Federal Tax Rates and Income, by Income Category, 1979–2007.”

To some, the picture conveyed by
figure 2.5
is too pessimistic. They argue that incomes or broader living standards have grown relatively rapidly, keeping pace with the economy.
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There are eight variants of this view. Let's consider them one by one.

1.
The income data are too thin
. The data for family income shown in
figure 2.5
don't include certain types of government transfers or the value of health insurance contributions from employers or (in the case of Medicare and Medicaid) from government. And they don't subtract taxes. If these sources of income
have risen rapidly for middle-class households, or if taxes have fallen sharply, the story conveyed by
figure 2.5
will understate the true rate of progress.

Happily, we have a good alternative source of information: the data compiled by the CBO used in
figure 2.6
. I didn't use these data in
figure 2.5
because they don't begin until 1979. But if
figure 2.5
is replicated using the CBO data for average income in the middle or lower quintiles of households instead of median or p20 family income, the trends since the 1970s look similar.
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2.
The income data miss upward movement over the life course
. The family income data shown in
figure 2.5
are from the Current Population Survey. Each year a representative sample of American adults is asked what their income was in the previous year. But each year, the sample consists of a new group; the survey doesn't track the same people as they move through the life course.

If we interpret
figure 2.5
as showing what happens to typical American families over the life course, we conclude that they see very little increase in income as they age. But that's incorrect. In any given year, some of those with below-median income are young. Their wages and income are low because they are in the early stages of the work career and/or because they're single. Over time, many will experience a significant income rise, getting pay increases or partnering with someone who also has earnings, or both.
Figure 2.5
misses this income growth over the life course.

Figure 2.7
illustrates this. The lower line shows median income among families with a family “head” aged 25 to 34. The top line shows median income among the same cohort of families twenty years later, when their heads are aged 45 to 54. Consider the year 1979, for instance. The lower line tells us that in 1979 the median income of families with a 25- to 34-year-old head was about $54,000 (in 2010 dollars). The data point for 1979 in the top line looks at the median income of that same group of families in 1999, when they are 45 to 54 years old. This is the peak earning stage for most people, and their median income is now about $85,000.