WHY ECONOMIC INEQUALITY IS A PROBLEM Part 1

Some conservative commentators and politicians argue that economic inequality isn’t a problem. They claim that as long as there’s opportunity and social mobility, inequality in income and wealth doesn’t matter. They’re wrong, because high levels of economic inequality mean that social mobility is limited and opportunity is far from equal. [1]

One of the conservatives’ arguments is that economic growth provides opportunity and mobility regardless of inequality. However, almost all of the income and wealth generated by economic growth is going to the already well-off. For example, since the economic recovery began in 2009, 95% of income growth has gone to the richest 1% of the population. That doesn’t leave much opportunity or mobility for the other 99%.

There are at least five reasons that high levels of economic inequality are a problem. The first three are directly linked to social mobility and opportunity. I’ll cover those in this post. The other two reasons are that high levels of inequality undermine our economy and democracy. I’ll cover those in my next post. In a third post, I’ll focus on the effects of inequality on children.

Economic inequality is a problem because low income and wealth limit the ability to invest in a better future for oneself and for one’s children (e.g., in education or in living in better housing or a better community). They increase the likelihood of being stuck in a neighborhood that lacks opportunity (e.g., good schools and jobs) and the likelihood of living in an environment that is unhealthy and stressful (which does long-term harm to a young child’s brain development and, therefore, to his or her chances for success in school and in life). [2]

High levels of inequality produce high levels of residential segregation by economic status. Low income communities don’t have the resources to provide the public safety or good schools that high income communities can. Access to jobs and a safe, clean environment are more likely to be found in high income communities. Children growing up in neighborhoods where low income families are concentrated have worse outcomes in school and in life. The reverse is true as well: children from neighborhoods of concentrated wealth do best. The portion of families living in neighborhoods of concentrated wealth or concentrated poverty more than doubled between 1970 and 2009. The portion of families living in middle-income neighborhoods declined from 65% to 42%.

Growing economic inequality leads to growing educational inequality. While the gap in educational outcomes between blacks and whites has closed somewhat in recent years, the gap based on class (i.e., socioeconomic status) has widened. This gap is evident even before children start school: rich children score much higher on tests of school readiness than poor children do. At the other end of the educational spectrum, the high cost of college impedes access to higher education and high levels of post-college debt limit economic opportunities and mobility in adulthood. Children from lower income families are more likely to leave college with high levels of debt that limit their opportunities to save, to buy a home, to invest in further education, or to start a business. Between 1995 and 2013, the bottom half of the population economically (which includes many in the middle class) had college debt more than double relative to their incomes. Meanwhile, the top 5% of the population saw no increase in college debt relative to their incomes and had debt levels that were one-seventh of those of the bottom half.

In my next post, I’ll look at the effects of inequality on our economy and democracy.

[1]       Bernstein, J., & Spielberg, B. (6/5/15). “Inequality matters,” The Atlantic

[2]       Pollak, S., et al. (July 2015). “Association of child poverty, brain development, and academic achievement,” JAMA Pediatrics

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