Total Inequality
Researchers know that it’s expensive to be poor. But they are only beginning to understand the sum of the financial, psychological, and cultural disadvantages that come with poverty.
Two years ago this month, Thomas Piketty published his massive tome on inequality, Capital in the 21st Century. Embedded in the 696 pages of tables and analysis was a fairly simple idea: In rich countries, the distribution of wealth is more unequal than the distribution of income; wealth will continue to grow faster than income (r>g); and, therefore, a small elite will inherit the wealth of the world with little left over for the many poor.
His thesis had its share of nitpickers and weighty detractors, but it succeeded in moving the U.S. debate about the rich and poor from a discussion of income, which is annual, to a discussion of wealth, which is cumulative. This was important. Piketty wasn’t just shining a spotlight on inequality in 2014, but rather turning the lights up on the history of wealth accumulation among the richest sliver of society and showing where things might be headed. In a way, one might say it broadened the popular discussion of inequality by adding a critical dimension: time.
The world has its thesis on wealth inequality. But it lacks a comprehensive way to talk about something larger—the myriad forces that exacerbate inequality that go beyond “capital.”
Let’s call it Total Inequality.
Total Inequality is not merely income inequality (although it matters) nor merely wealth inequality (although that matters, too). Total Inequality would refer to the sum of the financial, psychological, and cultural disadvantages that come with poverty. Researchers cannot easily count up these disadvantages, and journalists cannot easily graph them. But they might be the most important stories about why poverty persists across time and generations.
It’s expensive to be poor—in ways that are often quantitatively invisible. Research on the psychology of poverty suggests that not having enough money changes the way people think about time. It’s hard to prepare for the next decade when you’re worried about making it to next Monday. The tens of millions of Americans without bank accounts can spend as much as 10 percent of their income on pawn shops, check-cashing services, and payday loans that charge punishing fees.
So, if a single mother gets a job (or a government benefit) and a bank account that rescues her from the psychological crush of poverty, how much is that new income worth? More than the number printed on the check. Its total value might include (a) the fact that she might be able to save some of that money and build a little wealth; and (b) the fact that she’ll never have to visit another usurious payday lender in her life.
Total inequality is a cultural force, insinuating itself into family life and classrooms and replicating across generations. Consider the story of marriage and inequality. Marriage used to be a union between opposites. He worked in an office, and she worked at home. Marriage today is more likely to be a relationship between two similar people with similar ambitions. “Assortative mating” is the officious term, and it means people are more likely to marry and have kids with somebody from their (or, really, their parents’) income bracket. Rich marry rich; poor marry poor.
But at the bottom of this big sort, people have turned away from marriage. Economic insecurity for men led to a collapse in marriage rates among less-educated couples. These households earn less early on, but the demise of marriage does not show its true costs in today’s income tables. It will take years to see the damage. Marriage inequality in one generation creates economic inequality in the next generation, according to a new paper from researchers at Washington University in St. Louis and University of California, Santa Barbara. Children of low-income, non-married couples are more likely to grow up without both parents, more likely to experience family instability, less likely to go to college, less likely to earn above-median wages, and less likely to send their own children to college.
Or consider the story of geography and inequality. In the big picture, affordability and work are moving to different parts of the country. The cities where households bringing in median wages can afford the highest share of homes are also the cities that researchers have flagged as being bad for poorer kids to work their way into the middle class. Meanwhile America’s best cities for intergenerational mobility are its most expensive metros. The separation of affordable houses from jobs is even happening within metropolitan areas: Between 2000 and 2012, the number of jobs within the typical commute distance of a given city fell by 7 percent, as poor and minority residents moved to the suburbs, further and further from the job centers.
Economists have suspected for a while that the neighborhood where a child grows up shapes her future. But the last few years have shown that these “neighborhood effects” are alarmingly strong. Children stuck in public housing grow up to earn lower wages and find less full-time work than similar kids in other homes. In fact, getting kicked out of public housing by sheer luck could add $45,000 to a child's lifetime earnings, according to new research on the demolition of the Chicago projects.
Finally, consider the story of education and inequality. As long as education is funded at the local level, richer families will have the opportunity to pay more to move their children into districts with superior public-education systems. But the pernicious effect of inequality on student achievement might be even subtler. Research by David Card, an economist at the University of California, Berkeley, found that poor children are less likely to be pushed by their teachers to achieve at a high level in classes and less likely to be referred to gifted/high-achiever programs. “Lots of low-income and minority families only have one parent who’s really busy and has little time or no knowledge of the system to push their child into the gifted program,” he said in an interview. “But among high-income two-parent families, you can pay for an outside counselor to work with your child until he passes the test.”
In sum, poor children aren’t merely more likely to grow up in bad neighborhoods and unstable home environments. Those very factors also put them at a disadvantage in the one arena that is thought to be the best place to turn the tide against inequality: public education.
Piketty’s opus added the dimension of wealth. But these stories add the dimensions of psychology and culture. The lives of poor children are fundamentally different than their richer peers in ways that cannot be captured by income alone, nor by the growth rate of savings. They are set back from an early age—by their family structure, by a poverty of experiences and books and even spoken words, by their teachers’ expectations, and by the spiky geography of opportunity.
The tragic news is that many of these circumstances are cumulative, catching children in a whirlpool of poverty and preventing them from escaping to the middle class when they grow up (and then catching their own children in the same cycle). The silver lining is that the logic of Total Inequality suggests that interventions should be cumulative, as well. For example, when a man finishes college, he triples the chances that his child will finish college. So, the value of a college degree is greater than the college premium for one person; its total value might be closer to the college premium for two.
Income redistribution is the beginning of an answer to income inequality. But it’s not a total solution to the problem I’m talking about here, the problem of Total Inequality. Income redistribution doesn’t tear down the projects. Income redistribution doesn’t build new apartments closer to job centers. Income redistribution doesn’t revive work in areas obliterated by offshoring or change the so-called soft bigotry of low expectations among teachers and peers.
A broader solution begins by seeing this fuller picture of Total Inequality. There are inequities that one cannot account for with income tables no matter how far back they go. There are biases and disadvantages that are so deeply embedded in the culture that some people cannot even see them until they show up in the next generation’s income. Culture is harder to measure than money. That’s why it might be even more important to study.