The Price of Inequality: How Today's Divided Society Endangers Our Future (47 page)

63.
That GDP gives a misleading impression of the economy’s health is the main message of the Commission on the Measurement of Economic Performance and Social Progress. Jean-Paul Fitoussi, Amartya Sen, and Joseph E. Stiglitz, with J. Fitoussi and A. Sen,
Mismeasuring Our Lives: Why GDP Doesn’t Add Up
(New York: New Press, 2010), also available at
http://www.stiglitz-sen-fitoussi.fr/en/index.htm
(accessed March 1, 2012).

64.
America’s prison population is about 2.27 million, according to the Department of Justice. See “Correctional Population in the United States, 2010,” U.S. Department of Justice, Bureau of Justice Statistics, December 2011, NCJ 236319, available at
http://bjs.ojp.usdoj.gov/content/pub/pdf/cpus10.pdf
(accessed March 1, 2012). If that population, which is not employed, was added to the January 2012 civilian labor force of 154.40 million and to those 12.76 million currently counted as unemployed, it would increase the unemployment rate from 8.3 percent to 9.5 percent. Unemployment figures are from the Bureau of Labor Statistics’ “Unemployment Situation Report—January 2012, available at
http://www.bls.gov/news.release/pdf/empsit.pdf
(accessed March 1, 2012). One study, written in 1999, when the prison population was somewhat lower, showed that the unemployment rate might be as much as 2 percent higher if prison populations were included in the count. See, e.g., Bruce Western and Katherine Beckett, “How Unregulated Is the U.S. Labor Market? The Penal System as a Labor Market Institution,”
American Journal of Sociology
104, no. 4 (January 1999): 1030–60. Incarceration itself, however, may contribute to higher unemployment rates among the nonimprisoned population, because, as we note in chapter 3, those who have been incarcerated have much poorer job prospects, and this is especially true for African Americans.

65.
Federal poverty
thresholds
were developed in the mid-1960s by Mollie Orshansky at the Social Security Administration. On the basis of survey work that indicated that households at the time spent roughly a third of their income on food, the poverty line was calculated as three times the cost of the USDA’s economy food plan. The thresholds are used by the Census Bureau and are annually updated for inflation. The federal poverty
guidelines
are an administrative tool (issued by the Department of Health and Human Services) and have been institutionalized in a variety of important welfare programs. The measures obviously have problems (as Orshansky herself has noted), notably that the cost of food relative to, e.g., housing and health care has changed dramatically. In 2011 the poverty level for a family of four was $22,350. The U.S. Department of Health and Human Services Poverty Guidelines, available at
http://aspe.hhs.gov/poverty/11poverty.shtml
.

66.
H. Luke Shaefer and Kathryn Edin, “Extreme Poverty in the United States, 1996 to 2011,” National Poverty Center Policy Brief no. 28, February 2012, available at
http://npc.umich.edu/publications/policy_briefs/brief28/policybrief28.pdf
(accessed March 1, 2012). The numbers increased from 636,000 to 1.46 million. Families spent at least one month in the year in extreme poverty. The study includes only cash income, and thus does not include in-kind benefits. Still, only one in five received rent vouchers or lived in public housing. Even if the household spent nothing on food or medical care, just obtaining housing for a family of three at $180 a month—and having nothing left over for anything else—is a near-impossibility.

67.
See OECD Factbook 2011–2012: Economic, Environmental and Social Statistics, available online at
http://www.oecd-ilibrary.org
/ (accessed March 5, 2012).

68.
Some 46.3 million are on food stamps as of fall 2011, yet 14.5 percent of Americans still face food insecurity. See “Supplemental Nutrition Assistance Program: Number of Persons Participating,” data provided by the U.S. Department of Agriculture, available at
http://www.fns.usda.gov/pd/29snapcurrpp.htm
(accessed March 1, 2012), and “Food Security in the United States: Key Statistics and Graphics,” U.S. Department of Agriculture, available at
http://www.ers.usda.gov/briefing/foodsecurity/stats_graphs.htm
(accessed March 1, 2012). Food insecurity is measured as follows: “At times during the year, these households were uncertain of having, or unable to acquire, enough food to meet the needs of all their members because they had insufficient money or other resources for food.”

69.
Under the new measure, the numbers in poverty increased from from 43.6 million in 2009 to 46.2 million in 2010, and the numbers in poverty under the new measure were actually higher than under the old. The poverty threshold level in 2010 was $17,568 for a single mother with two children. As the discussion earlier in the chapter should have made clear, living in most of our cities, providing child care, food, shelter, and clothing for that amount—leaving a little for the amenities of a modern life—is hard to imagine. Food stamps ease the burden, giving the family a maximum of $526 a month, or $6 per day per person. See U.S. Census, “The Research Supplemental Poverty Measure: 2010,” November 2011. This discussion has not emphasized enough the many dimensions of poverty. When I was chief economist of the World Bank, we conducted a survey of 10,000 people, to assess what aspects of their life most weighed them down. The lack of income was obvious. But repeatedly, they emphasized insecurity and the lack of voice, their inability to shape the decisions that affected their lives. Deepa Narayan et al.,
Can Anyone Hear Us? Voices of the Poor
(New York: Published by Oxford University Press for the World Bank, 2000);
and World Bank
, World Development Report 2000–2001: Attacking Poverty
(New York: Oxford University Press, 2000–01).

70.
Of the 46.2 million people living below the poverty line, only 3.5 million are aged 65 and over, some 7.6 percent of those in poverty. In the general population, people aged 65 and over compose some 13 percent. The reduction in old-age poverty is due mainly to Social Security. According to the Census Bureau, “In 2010, the number of people aged 65 and older in poverty would be higher by almost 14 million if social security payments were excluded from money income, quintupling the number of elderly people in poverty” (p. 22). U.S. Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2010,” issued in September, and U.S. Census, “The Research Supplemental Poverty Measure: 2010,” November 2011.

71.
See U.S. Census 2011, “Child Poverty in the United States 2009 and 2010: Selected Race Groups and Hispanic Origin,” available at
http://www.census.gov/prod/2011pubs/acsbr10-05.pdf
(accessed March 6, 2012). For some groups the rate is much higher: nearly 40 percent of African American children lived in poverty in 2010.

72.
Katharine Bradbury (p. 26) concludes, on the basis of the data from the Panel Study of Income Dynamics, that a “variety of measures indicate that U.S. family income mobility has decreased over the 1969–2006 time span, and especially since the 1980s.” K. Bradbury, “Trends in U.S. Family Income Mobility, 1969–2006,” Federal Reserve Bank of Boston, Working Papers, no. 11-10, 2011, available at
http://www.bos.frb.org/economic/wp/wp2011/wp1110.pdf
.

73.
“Does America Promote Mobility As Well As Other Nations?,” Economic Mobility Project of the Pew Charitable Trusts (November 2011), p.2, available at
http://www.economicmobility.org/assets/pdfs/CRITA_FINAL.pdf
(accessed March 26, 2012).

74.
E.g., Mark Huggett, Gustavo Ventura, and Amir Yaron, “Sources of Lifetime Inequality,”
American Economic Review
101, no. 7 (December 2011): 2923–54, show that “differences in initial conditions account for more of the variation in lifetime earnings, lifetime wealth, and lifetime utility than do differences in shocks received over the working lifetime.” The relationship between parents’ income and that of their children is, in fact, very similar to that between parents’ height and that of their children. Alan Krueger, chairman of President Obama’s Council of Economic Advisers and a distinguished Prince-ton University professor, has pointed out, “The chance of a person who was born to a family in the bottom 10 percent of the income distribution rising to the top 10 percent as an adult is about the same as the chance that a dad who is 5’ 6” tall having a son who grows up to be over 6’ 1” tall. It happens, but not often.” Krueger, “The Rise and Consequences of Inequality.”
The correlation between a child’s height or income and that of his parents is around .5.

75.
Krueger, “The Rise and Consequences of Inequality,” refers to this systematic relationship between inequality and a standard measure of mobility (the intergenerational income elasticity) as the
Great Gatsby Curve.

76.
Jason DeParle, “Harder for Americans to Rise from Lower Rungs,”
New York Times
, January 4, 2012, citing work by Markus Jäntti. In particular, see M. Jäntti, B. Bratsberg, K. Røed, O. Raaum, R. Naylor, E. Österbacka, A. Björklund, and Tor Eriksson, “American Exceptionalism in a New Light: A Comparison of Intergenerational Earnings Mobility in the Nordic Countries, the United Kingdom and the United States,” IZA Discussion Paper no. 1938, 2006, available at
http://users.abo.fi/mjantti/dp1938.pdf
.

77.
With full equality of opportunity, only 40 percent of those in the bottom rung would remain in the bottom 40 percent. Numbers from DeParle, “Harder for Americans to Rise from Lower Rungs,” citing work by Markus Jäntti et al., “American Exceptionalism in a New Light.”

78.
Some 62 percent of the children of those in the top quintile wind up in the top 40 percent. DeParle, “Harder for Americans to Rise from Lower Rungs,”
citing J. B. Isaacs, I. V. Sawhill, and R. Haskins, “Getting Ahead or Losing Ground: Economic Mobility in America,”
Brookings/Pew Economic Mobility Project
, February 2008, available at
http://www.economicmobility.org/assets/pdfs/PEW_EMP_GETTING_AHEAD_FULL.pdf
.

79.
Jonathan Chait, “No Such Thing as Equal Opportunity,”
New York
, November 7, 2011, pp. 14–16.

80.
Some 29 percent of low-income students with high eighth-grade test scores complete college, compared with 30 percent of high-income students with low eighth-grade test scores who earn a degree.

81.
Some 19 percent of children born in the lowest income fifth who earn a college degree make it into the highest fifth, whereas 23 percent of children born in highest group who don’t graduate remain in highest bracket.

82.
Based on standardized tests.
OECD Programme for International Student Assessment (PISA)
2009 results, especially the rankings available at
http://www.pisa.oecd.org/dataoecd/54/12/46643496.pdf
(accessed March 2, 2012).

83.
Using different definitions of what makes a “top school,” various studies have provided telling numbers about the lack of economic diversity in elite universities. Research by Anthony P. Carnevale and Stephen J. Rose, cited by Lawrence Mishel, Jared Bernstein, and Heidi Shierholz in
The State of Working America 2008/2009
(Ithaca, NY: ILR Press), showed earlier in the last decade that some 74 percent of top-school freshman hailed from first-quartile families, while only 6 percent and 3 percent were from the bottom third and fourth quartiles, respectively. (It is also striking that there is so little difference between the bottom quarter and the next. This is partly because the colleges have focused their efforts at recruiting the very poor and minorities.) Other studies support this trend; see for instance Alexander Astin and Leticia Osequera, “The Declining ‘Equity’ of Higher Education,” 
Review of Higher Education 
27, no. 3 (2004): 321–41.

84.
Janet Currie provides compelling evidence that “children born to less educated and minority mothers are more likely to be exposed to pollution in utero.” She studied a dataset containing 11 million births across five states between 1989 and 2003, combined with information about the location of Superfund sites and information from EPA Toxic Release Inventory (TRI) facilities. Whereas 61 percent of black mothers live within 2,000 meters of such a site, only 41 percent of white mothers do. Her analysis leads her to conclude (p. 12), “These estimates strongly support the claims of the environmental justice literature that minorities and people of lower socioeconomic status are more likely to be exposed to potentially harmful pollutants for reasons that cannot be explained by their broad geographical distribution, education, or other observable characteristics.” See Currie, “Inequality at Birth: Some Causes and Consequences,”
American Economic Review: Papers and Proceedings
101, no. 3 (2011): 1–22. Earlier, we provided data showing the large fraction of Americans that face insecurity and the large fraction of children in poverty. It is well established that hunger and lack of adequate nutrition impede learning.

85.
See, e.g., Samuel Bowles, Steven N. Durlauf, and Karla Hoff, eds.,
Poverty Traps
(New York: Russell Sage Foundation; Princeton: Princeton University Press, 2006).

86.
Pew Economic Mobility Project, “Economic Mobility and the American Dream: Where Do We Stand in the Wake of the Great Recession?” Washington, DC: Pew Charitable Trusts, 2011, available at http://www.economicmoility.org/poll2011.

87.
“Companies listed on Japan’s stock exchanges paid their chief executives an average of $580,000 in salary and other compensation last fiscal year, PWC estimates, about 16 times more than the typical Japanese worker. Average CEO pay at the 3,000 largest U.S. companies is $3.5 million, including stock options and bonuses, according to the Corporate Library, a research group.” J. Clenfield, “In Japan, Underpaid—and Loving It,”
Bloomberg Businessweek
, 2010, available at
http://www.businessweek.com/magazine/content/10_28/b4186014341924.htm
.