Combat income inequality by promoting upward mobility with expanded economic opportunity

The Opportunity Washington:  Priorities for Shared Prosperity has made expanding opportunity and shared prosperity the centerpiece of our policy agenda.

Our framework is organized around three guiding priorities:

1. ACHIEVE: Provide a high-caliber education and workforce development system geared to the demands of the 21st century.

2. CONNECT: Create an efficient, multimodal transportation system that links Washington’s communities to each other and the world.

3. EMPLOY: Pursue policies that encourage innovation, entrepreneurship, and job creation.

These priorities for shared prosperity focus on the fundamentals — the foundation upon which our state’s economy has been built, and from which we can extend opportunities to today’s Washingtonians and the generations that follow.

Our priorities were based on conversations with a cross-section of Washingtonians throughout the state and a careful analysis of a wealth of policy research. It’s an optimistic vision of mobility and aspiration.

And, it’s one widely shared. The American Interest recently wrote of some fascinating research by the Brookings Institution. TAI cites these quotes from the analysis by Richard V. Reeves and Nathan Joo.

Americans across the ideological spectrum want to see people born at the bottom to rise up the income ladder to a much greater extent than they do…

But when asked about ideal rates of downward mobility from the top quintile, a very different answer emerges. Americans are against people being stuck in poverty, but are much less worried about the persistence of relative affluence. In fact, the ideal rate of stickiness at the top closely mirrors the real data.

In other words, the preferred strategy to combat poverty and reduce inequality involves improving the life and career prospects of those currently “stuck in poverty.” It’s an opportunity agenda, not a redistributionist agenda.

TAI writes ,

Still, the findings might not be surprising given America’s history. The authors of the original study note that “the idea of upward social mobility is part of the American ethos,” and any comparable emphasis on downward social mobility has been “notably absent.”

The inequality debate has taken hold across the country this year, including in our state. As the issue has gained traction, it has generated a lot of research and commentary, including this recent Economics 21 article examining the demographics of inequality (we recommend reading the whole thing for useful perspective). 

Many experts agree that natural demographic changes and lifetime income cycles distort common income inequality measurements in the United States. In short, there are a lot more middle-aged and old people now than there used to be, and older people by-in-large have more money than their younger counterparts because they have been earning money longer. And therein lies the main reason why income inequality appears to be exploding. Old people are certainly to blame, while they are paradoxically not at fault.

Economists Ingvild Almas and Magne Mogstad have established a method to adjust mainstream income inequality measurements for age differences and associated variables like education. They found that after these adjustments are made, the Gini-coefficient—a measure which underlies most contemporary academic work on income inequality—is grossly exaggerated.

Still, wages and opportunities play a critical role, as noted in this Associated Press story.

Many of the poorest households still earn just a fraction of what they made before the Great Recession began in late 2007. Even as the recovery gained momentum in 2014 with otherwise robust job growth, incomes for the bottom 20 percent slid in New York City, New Orleans, Cincinnati, Washington and St. Louis, according to an analysis of Census data released Thursday by the Brookings Institution, a Washington think tank.

“It’s really about the poor losing ground rather than these upper-class households pulling away,” said Alan Berube, a senior fellow at Brookings and deputy director of its metropolitan policy program.

Again, that analysis supports expanded opportunity is the key to reducing poverty and advancing shared prosperity. (We previously addressed the issue here.) Perhaps surprisingly, the Brooking analysis finds,

Seattle and San Diego actually exhibit lower-than-average inequality, also owing to their relatively better-off low-income households.

The politics of inequality can be, as we’ve seen, divisive and fraught with unintended consequences. It’s encouraging to see that most Americans favor the more unifying and optimistic policy roadmaps that focus on stimulating upward mobility and expanded opportunities. That’s the roadmap set out in our priorities for prosperity: education (Achieve), transportation (Connect) and Employ (economic vitality).