In an article that appeared this weekend in the Washington Post, a few economics fellows of the Brookings Institution present five myths about U.S. opportunity. I found some of their conclusions pretty surprising -- not from an economics standpoint, but more because scholars from Brookings were making them. Their tone appears to be unusually conservative for a think tank that tends be characterized as left-leaning. The piece makes a lot of sense, and its recommendations are worth noting. Let's consider each myth.
Americans Have The Best Economic Opportunity
First, they explain that Americans born into a low-income class don't have the best prospects of opportunity in the world, noting some Nordic nations and the U.K. have the U.S. beat. This is the only problem that they don't really present any solution to, probably because they can't think of much the government can really do to help. After all, there are already numerous programs in place to assist low-income families. But some of their subsequent myths seem to speak to this issue, so let's move on for now.
Subsequent Generations Of Americans Do Better
This is an odd one and easily their least compelling argument. Here's their basis for the claim that this generation is doing worse than the last:
Today, men in their 30s earn 12 percent less than the previous generation did at the same age.
Why is that? Well, they blame more women in the workforce. But this is an odd criticism. In fact, what I think would be more interesting would be total household income for 30-somethings generation-over-generation. Clearly, women have taken some pay share from men as income equality has gotten better -- you can't pay men as much if you're paying women more. And that's okay, because this outcome is fair. So I'd only be alarmed if women's income hasn't increased by a percentage that makes up for the decline in men's salaries. The economists don't provide this precise figure, but do admit that households overall are doing better now. So this data point doesn't convince me that subsequent generations are doing worse.
Immigrant Workers And Offshoring Jobs Cause Poverty And Inequality
This is a really common myth. Here's their alternative explanation for why we have worse inequality these days:
Although immigration and trade are often blamed, a more important reason for our lack of progress against poverty and our growing inequality is a dramatic change in American family life. Almost 30 percent of children now live in single-parent families, up from 12 percent in 1968. Since poverty rates in single-parent households are roughly five times as high as in two-parent households, this shift has helped keep the poverty rate up; it climbed to 13.2 percent last year. If we had the same fraction of single-parent families today as we had in 1970, the child poverty rate would probably be about 30 percent lower than it is today.
Again, this is the Brookings Institution, not the Heritage Foundation. I applaud its brave stance on this one. It's utterly obvious that children are better off in a two-parent household from an economic standpoint -- two incomes are better than one. It's almost trivial. But the argument is not a very popular one to make these days. The authors go on to lament the fact that more than half of births occur out of wedlock.
More Money For Families Results In Better Opportunities For Children
Here's an interesting finding -- money doesn't matter as much as other factors:
Our research shows that if you want to avoid poverty and join the middle class in the United States, you need to complete high school (at a minimum), work full time and marry before you have children. If you do all three, your chances of being poor fall from 12 percent to 2 percent, and your chances of joining the middle class or above rise from 56 to 74 percent.
Again, marrying before you have children? What is this, the 1950s? The economists throw cold, hard facts in the face of what appears to be a new social paradigm. Old-fashioned personal responsibility and hard work result in only a 2% chance of being poor. Astounding! They go on to champion the 1996 welfare reform law, which they say "dramatically increased employment and lowered overall child poverty."
It's Important To Cut Waste And Abuse In The Federal Budget
Here's another important one. If you want to cut spending substantially then forget waste and abuse -- you'd better attack entitlements. They say:
Medicare, Social Security and Medicaid - along with interest on the debt threaten to crowd out all other spending in a few decades.
The only way to cut spending significantly is to reform those programs. Otherwise, other social programs will suffer and taxes inevitably must rise, a lot.