“We’re the richest economy in the history of the world. For the majority of Americans not to get the benefits of this extraordinarily prosperous economy, you know, there’s something fundamentally wrong.” -Former Labor Secretary Robert Reich
In an excellent report released by the public policy organization Demos, policy analysts Miles Rapoport and Jennifer Wheary examine the interconnectedness of the economic wellbeing of the middle class and the poor in America. As you have probably heard in the news, economic inequality has reach unprecedented levels in our country (surpassing Depression-era levels) and the gap between the super-rich and the rest of us continues to grow. According to former Clinton administration Labor Secretary Robert Reich, the growing economic inequality hurts everyone. Since the economic recovery began in 2009, the richest 1% have benefited from an astounding 95% of the economic gains, while the remaining 99% shared just 5% of gains. The median household income, adjusted for inflation, is decreasing.
“Of all developed nations, the United States has the most unequal distribution of income, and we’re surging towards every greater inequality.” –Robert Reich
America has less upward mobility than any other developed nation: the poor stay poor, and for those in the lower middle class, according to Reich, “the cards are stacked against you. You probably won’t get anywhere.” Among children born to lower class parents, 70% will never even make it to the middle class. Current economic policies are designed so that the privileged few benefit greatly, while the majority of Americans are harmed by the regressive hard right policies and the unprecedented amounts of wealth and power concentrated at the very top. Today, the richest 400 Americans have more wealth than half of the entire U.S. population.
According to policy analysts at Demos, economic policies designed to address the widening inequality in our country are vital to the future of our middle and lower classes. From the article:
Anyone who wishes to address poverty and strengthen economic opportunity needs to connect the dots between the needs of the working poor and those of the middle class.
Stagnant social mobility, increasing inequality, and the rise of low wage jobs without benefits are affecting both groups. For the working poor, these trends mean that the ability to move forward and upward economically is not only stunted, it is often cut off. For the middle class, these trends mean an ongoing susceptibility to financial shocks like job loss, unexpected medical expenses and predatory mortgages and an inability to adequately prepare for the future.
In this environment, no amount of individual effort, self-improvement, or thrift can guarantee a secure middle-class lifestyle. If current circumstances continue, even those who are able to move from poverty to the middle class on paper (in terms of education, job title, or income level) may never know long-term financial stability.
Public policy has a vital role to play to enable poor Americans to have a chance to move into the middle class and to ensure greater security for those already there. The good news is that these goals are compatible ones. Many of the same policies that can help the working poor climb into the middle class – investments in education, in the creation of good jobs, and in asset building, for example – can also strengthen middle-class financial security.
Since the Johnson era, anti-poverty policy has relied on income programs to see families through tough times, human capital investments to help individuals obtain employable skills, and an equitable, growing economy that offers good jobs to those who obtain those skills.2 This three-prong approach is still valid, but it needs substantial recommitment and reinvigoration.
The difference between now and the past era is that the threat of economic insecurity is no longer a persistent problem of just the poor. Economic insecurity has become the ongoing condition of far too many U.S. households. In 2010, less than one in three American households (32%) reported having sufficient emergency funds, down from 38% in 2007. In the 2007 Survey of Consumer Finances, 19 percent of working-age households reported having no assets or negative wealth. By 2010 that figure had risen to 33 percent, the highest percentage since 1989, the first year for which consistent data is available.3
The widespread and increasing nature of American financial insecurity adds significantly to the urgency for effective policy action. Fortunately it also adds to the ability to find broad support for such policies among American households across the class spectrum.
Public opinion about the causes and consequences of poverty has historically communicated negative stereotypes of the poor and a distrust of government welfare programs. As persistent financial insecurity has become more widespread, these attitudes are starting to shift. In 2008 Gallup found that 69 percent of Americans were dissatisfied with the nation’s efforts to deal with poverty. In June 2013 that percentage rose to 80 percent. 4
At first read this might suggest a growing frustration with governmental antipoverty programs as inefficient and with the poor too reliant on entitlements. But other data suggests an acknowledgment of the hard work and obstacles faced by those living in poverty. In 1994 less than half (49 percent) of Americans believed that most of the poor worked, as opposed to relying on government handouts. Well prior to the current recession that figure had grown to 60 percent. 5
The majority of Americans now believe that the middle class has less opportunity to get ahead than in previous decades (52 percent), less job and financial security (65 percent), and less expendable income after covering basic expenses (60 percent). 6 The majority (54 percent) also now name financial insecurity as the top concern of the middle class. As the majority of Americans experience these concerns it has become easier for a larger group to identify and empathize with the ongoing financial instability that is a daily fact of life for those in poverty.
Increasing evidence from scientific studies conducted in countries around the world indicates that economic inequality is a significant determinant of health outcomes ranging from life expectancy and premature death to infant mortality and obesity. A recent study released by the Harvard University School of Public Health found that income inequality is associated with depression, particularly among women. Even modest increases in income inequality are associated with more than double the cumulative risk of death over a 12-year period. These effects are not limited to the poorest Americans: high levels of economic inequality affect the health of everyone, not just the poor.
Economic inequality is also associated with higher health care spending, particularly in the later years of life. The good news? According to a 2011 study published by the Federal Reserve Board, many of the provisions of the Affordable Care Act (ACA) will reduce the impact of economic inequality on health outcomes and health care spending. One of the most encouraging findings was that, for the 90-99% of Americans who do not benefit from economic inequality, the preventive care and minimum coverage standards under the ACA are associated with increased life expectancy and no net increases in health care spending. Though we need additional policies to address the overwhelming inequality in our country, the ACA is an incredibly important and effective policy with beneficial effects on the economic wellbeing, health status, and quality of life for all Americans. Now that is good policy.
Be Well, my friends!