Inequality: From Wall Street to Your Street

This blog post appeared as a commentary in the Huffington Post on July, 9, 2013. You can access the original article here.

Income inequality, for years the great unmentionable in political discourse, is suddenly on everyone’s lips. Thanks to the Great Recession, Occupy Wall Street, and the ensuing focus on the “one percent,” the gulf between the richest and the rest is now not only acknowledged, it is being cited by people across the political spectrum as an impediment to economic recovery.

 While income inequality is enjoying its moment in the sun, other forms of inequality are getting far less attention. Just as we rely too heavily on economic metrics like Gross Domestic Product to gauge human progress, so too are we taking an overly narrow view of inequality. Mutually reinforcing inequalities in health, environment, education, and wealth have created a large and growing opportunity divide that wages alone cannot bridge. These inequalities have a particularly pernicious impact on disadvantaged children, limiting their life chances long before they cash their first paycheck. Ignoring the ways in which these non-income inequalities take root and multiply is a costly mistake for society. Here are some examples.

 Let’s start at the most basic level: being alive. Our research shows that a baby born today in southwest Louisiana can expect to outlive a baby born in parts of New Orleans by seven-and-a-half years. At the national level, Asian Americans can expect to outlive African Americans by a dozen years. Lifespan disparities like these are less about access to doctors and medicine—the focus of our national health care debate—than about the conditions of people’s daily lives. Improving conditions in poor neighborhoods such that families have ready access to full-service grocery stores and parks where children can safely play and exercise can go a long way towards laying the foundation for long and healthy lives. Vigorous public health campaigns to raise awareness of the “fatal four” health risks of smoking, poor diet, physical inactivity, and excessive drinking have great potential for reducing both premature death and health care costs. And policies that increase job security can mitigate the health-eroding chronic stress that Americans living paycheck-to-paycheck experience. Communities where preventive efforts are strong boast some of the world’s longest life expectancies. By contrast, other groups of Americans have life spans on par with those that prevailed five decades ago.

 The environments in which different groups of Americans live, right down to the air they breathe, is another sphere of stark inequality. New York City offers an illustrative example. Manhattan, with less than a fifth of New York City’s population, produces over half of its garbage. But when it comes to waste disposal, Manhattan is spared consumption’s downsides. The Bronx has nineteen facilities where garbage and recycling are trucked, sorted, and shipped out; Manhattan has none. With these large-scale garbage facilities come diesel truck pollution, vermin, and cockroaches, all known asthma triggers, making it no surprise that the South Bronx has one of the region’s highest rates of asthma hospitalization. Asthma is a common childhood condition, but it plays out differently depending upon where you live. In some communities, a frantic trip to the emergency room with a life-threatening asthma attack is a mercifully rare occurrence; in others, like the Bronx neighborhoods of Tremont and Melrose, such a trip is all too common. No community welcomes garbage facilities. But the pattern, found across the country, of making poor communities society’s dumping ground is unjust and demands a solution.

 Our country has historically placed faith in education as the great leveler, the answer to inequality. Today, that faith is largely misplaced; on the whole, our educational system is doing more to widen than to narrow inequality. In our work in California, we found that the Los Angeles Unified School District (LAUSD) has high schools with top-notch facilities, well-stocked libraries, and advanced coursework options for most students. But LAUSD also has schools with severe overcrowding, outdated facilities, and few advanced courses. These latter schools also typically serve students facing the greatest out-of-school challenges—low English-language proficiency, poverty, gang recruitment, and more. These variations yield strikingly different results. Graduation rates range from above 97 percent in some LAUSD schools to only 56 percent in others. Within the Los Angeles system, and in districts across the nation, schools whose students have the greatest needs tend to get the fewest resources. In an age when the pie is not growing, greater equity in how it is sliced matters more than ever; our current approach of giving the biggest pieces to those who already have a lot makes little sense. Also critical is getting it right from the start. Robust evidence shows that high-quality preschool for disadvantaged children has benefits that last well into adulthood, with less grade repetition, less need for special education, and a lower dropout rate during the school years as well as less incarceration, higher earnings, and higher rates of homeownership later on.

While income inequalities are large and growing, inequalities in wealth—or net worth—are even larger, and arguably more consequential. For example, while African American young people are 43% more likely to get an MBA than their white counterparts, they are  one-third as likely to become business owners. Why? A key reason is that the typical white household has twenty times the median wealth of the typical black household. This means that African Americans have fewer savings to invest directly in business and, without collateral, are far less successful securing business loans. While other factors, including discrimination, also shape the fortunes of these young people, greater racial equity in wealth would be a game changer. Unfortunately, while incentives for wealthy families to save and invest abound (think mortgage interest deductions and lower tax rates on capital gains), programs for low-income families are few and far between. Developing such mechanisms (including automatic savings accounts for every child at birth, the option to deposit state tax refunds directly into college savings plans, greater support for homeownership, and others) would go a long way toward reducing the huge wealth inequalities that dampen mobility, stifle entrepreneurship, and limit the horizons of too many young Americans.

Fortunately, the leading causes of premature death are largely preventable, environmental equity can become a priority, educational opportunities can be more fairly distributed, and proven programs to increase asset-building and reduce wealth disparities can be brought to scale. Greater recognition of how inequalities in these four areas interact and reinforce one another is the first step, and concrete action in the form of strong policy measures must follow. Income inequality matters, but it’s just one piece of the puzzle; addressing non-income inequalities as well is key to creating an infrastructure of opportunity that serves the next generation of Americans.