In a speech to a Boston conference on economic opportunity, Yellen said this problem is of great concern to her and she pointed to increased education and ownership of small businesses as two ways to deal with the problem.
“It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority,” Yellen said in her remarks to a conference on economic opportunity sponsored by the Federal Reserve Bank of Boston.
“Society faces difficult questions of how best to fairly and justly promote equal opportunity,” Yellen said. But she said she did not plan to offer solutions to these “contentious questions” but instead used her remarks to describe the landscape of inequality as it exists today.
She did talk about such factors as early childhood education, affordable higher education, business ownership and inheritances as “building blocks” that could be used by Americans to boost wealth.
“In focusing on these four building blocks, I do not mean to suggest that they account for all economic opportunity, but I do believe they are all significant sources opportunity for individuals and their families to improve their economic circumstances,” Yellen said.
In her Boston speech, Yellen made no comments on the current state of the economy or on the future course of interest rates.
The Fed next meets on Oct. 28-29 and many economists believe the recent financial market turbulence and downgrades to economic prospects around the globe increase the likelihood that the central bank will not start raising its key short-term interest rate until next summer. That rate has been at a record low near zero since December 2008.
There are some things that are constant, no matter where on the economic ladder people find themselves. And it can be telling to look at the differences, and the commonalities.
Two stories on WSHU recently have looked at very different experiences in youth sports.First, we visited the YMCA in the wealthy town of New Canaan, Connecticut, to see middle school and high school girls compete in one of the top teams in the country in… synchronized swimming.
Synchro, as they call it, is certainly not your usual after school sport. And that’s part of why these girls love it so much.
Here’s Craig LeMoult’s story on the team.
You can see video and a photo slideshow of the synchro team here.
One reason you don’t see a synchronized swimming team in every town might be the expense. One coach estimated the cost could average $10,000 to $12,000 a year, including coaching fees, a lot of travel, and of course glittery bathing suits. And those bathing suits don’t just glitter themselves. Parent involvement is key – one swimmer said her mother spent hours applying that glitter. One family moved to Connecticut from Pennsylvania so that their daughter could train on the New Canaan team.On the other end of the spectrum, we checked out a gym in the Dixwell neighborhood of New Haven, where former Golden Gloves champ Devonne Canady is teaching kids between the ages of 8 and 12 to box. The gym is named the Elephant in the Room Boxing Club. To Canady, the “elephant in the room” is gun violence. She’s teaching boxing to keep these kids off the streets where they can be hurt, and to keep them focused on something positive so they don’t go down the wrong path. Here’s Craig’s story:
You can see video and a photo slideshow of the boxers here.
“I grew up right here,” Canady said. “And unfortunately, the children in this neighborhood, this particular neighborhood, there isn’t a lot for them. There isn’t a rec center. There’s barely parks. If there’s parks, there’s no swings. There’s not a soccer field.”
Canady charges $20 a month to train a kid in the gym, and she’s willing to be flexible if that’s too difficult for families.
Of course, there’s a lot that’s different about the Y synchro team and the Elephant in the Room Boxing Club. First of all, there’s the background the kids are coming from. It’s the difference between providing a sport that will look good on a college application and coaching one to prevent kids from being shot. And it’s the difference between $12,000 a year and $240 a year.
And sure, there are plenty of other differences. But despite all that, it’s the similarities that are the most striking. Both sports require a significant time commitment and hard physical work from the kids. All that time and work is aimed at improving an ability that’s equal parts strength and style. Both sports teach kids the importance of discipline and focus. Both are coached by passionate women who are driven to see the kids perform their best.
And, hopefully, both will lead to kids who grow up stronger, smarter and more ready to succeed – whether it’s in a ring, in a pool, or anywhere else.
(WSHU’s Craig LeMoult reported the two stories mentioned, and wrote this post. He’s the founder of State of Disparity)
As we’ve been reporting here at State of Disparity, Connecticut continues to have one of the widest gaps in the country between its wealthy and poor residents.
This past weekend, an art show by students and graduates of Stamford’s public schools explored the question “what is inequality?”
Craig LeMoult spoke with some of the artists.
New U.S. Census data out Thursday says Connecticut continues to be among the most unequal places in the country – behind just Washington, D.C. and New York.
Inequality is measured on a scale called the Gini Index. In the scale, a score of 0 would indicate a community is perfectly equal, meaning there’s a completely proportional distribution of income. A one one the Gini Index would mean a community is totally unequal – so one house would have all the income and everyone else would have nothing.
According to the new American Community Survey data, the level of inequality in Connecticut may have slightly increased, with the Gini Index going from .492 in 2012 to .499 in 2013. But the increase is within the margin of error, so it’s not statistically significant. This data map from the Connecticut State Data Center compares levels of inequality around the country, and the chart at the bottom compares them to inequality around the world.
A map of inequality rates from 2012 is online here.
The new data show the percentage of people living in poverty in Connecticut remained steady from 2012 through last year, mirroring national statistics. 10.7 percent of Connecticut residents are living in poverty.
Nationally, 48.8 million people, about 16 percent, lived in poverty last year. A family of four is considered to be living in poverty if it brings in less than $23,830 in a year. For an individual, the number is less than $11,890.
In Connecticut, the median household income edged down slightly in 2013, to about $67,000 from $68,000 the year before. That’s still significantly higher than the national median amount – which was about $52,000 last year.
Connecticut’s rising income disparity is causing the state’s revenue from taxes to grow more slowly and to become more volatile. That’s according to a report from the credit rating agency Standard & Poor’s.
“Connecticut has the unenviable position shared by only three other states in the nation where it is in the top 10 of the most unequal in terms of income distribution, and in the top 10 most volatile in terms of revenue performance,” said Gabe Petek, a credit analyst with S&P.
Petek says those two things are related. Because of Connecticut’s increasing reliance on tax revenues from people at the top of the economic spectrum, the state budget winds up fluctuating with the markets.
Standard & Poor’s is looking into this issue out of an interest in states’ abilities to pay their debts. Since 2003, the S&P bond rating of Connecticut has remained at double-A, indicating a very strong capacity to meet financial commitments.
“If the state budget makers agree on a budget and then revenue comes in 5 or 10 percent below what they assumed when they set the budget, they have a real crisis on their hands, and we saw that during the great recession,” said Petek.
In addition to increasing volatility, Connecticut has seen the growth of its tax revenue slowing down. It hit a high of 10.8 percent in the 1980s and since 2009 has gone down to 7.3 percent.
Petek says New York is among the states with the greatest inequality, but it doesn’t have as much tax volatility as Connecticut.
He says that’s because New York has a broader income base with a higher share of revenue coming from wages and salaries, compared to Connecticut, which relies more heavily on capital gains taxes. S&P boosted New York’s bond rating to double-A plus in July – slightly higher than Connecticut and the highest the state has been rated since 1972.
Hacker also spoke with WSHU about economic disparity in Connecticut. He said wealth from Connecticut’s finance industry explains much of the inequality in the state.
The following slides are courtesy of Jacob Hacker and Yale ISPS. Click for a closer look.
In his address, President Obama said:
“Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by – let alone get ahead. And too many still aren’t working at all. Our job is to reverse these trends. It won’t happen right away, and we won’t agree on everything. But what I offer tonight is a set of concrete, practical proposals to speed up growth, strengthen the middle class, and build new ladders of opportunity into the middle class.”
Those proposals included most notably an increase in the minimum wage. “Americans understand that some people will earn more than others,” he said. “And we don’t resent those who, by virtue of their efforts, achieve incredible success. But Americans overwhelmingly agree that no one who works full time should ever have to raise a family in poverty.”
The President also called for expanded pre-K and broadband access, among other proposals.
You can read a full transcript of the speech here, watch video of it here and listen to Mara Liasson’s report on NPR’s Morning Edition here:
In the official Republican response Congresswoman Cathy McMorris Rodgers of Washington addressed the issue directly.
“The President talks a lot about income inequality,” she said. “But the real gap we face today is one of opportunity inequality. And with this Administration’s policies, that gap has become far too wide.”
McMorris described families who can’t find full-time work, can’t afford college educations, and who are out-living their life savings.
“Last month, more Americans stopped looking for a job than found one. Too many people are falling further and further behind because, right now, the President’s policies are making people’s lives harder.”
She described, in general terms, Republican plans to grow jobs, improve education, and reform immigration. You can watch her response here.
In his response for the Tea Party, Sen. Mike Lee of Utah tackled inequality – and the President’s position on the issue – more directly.
“We are facing an inequality crisis – one to which the President has paid lip-service, but seems uninterested in truly confronting or correcting,” said Lee. He said the inequality crisis present itself in three forms:
“Immobility among the poor, who are being trapped in poverty by big-government programs; insecurity in the middle class, where families are struggling just to get by and can’t seem to get ahead; and cronyist privilege at the top, where political and economic insiders twist the immense power of the federal government to profit at the expense of everyone else.”
He went on to say the Obama administration “continues to leave poor and middle-class families further behind, while he and his allies insist that the real problem is ‘inequality’ itself.” Lee criticized Obama on a range of issues he said leads to inequality, and specifically targeted the Affordable Care Act (Obamacare), calling it an “inequality Godzilla that has robbed working families of their insurance, their doctors, their wages and their jobs.”
Watch Sen. Lee’s full Tea Party response to the State of the Union here.
What do you think of the fact that inequality has become the focus of national leaders on both sides of the political spectrum? Is the issue more about income or opportunity? Did anything President Obama, Rep. McMorris or Sen. Lee resonate as a potential solution to the problem? Or is inequality actually a problem in the U.S.? Let us know what you think!
A report out this week by researchers at Harvard and U.C. Berkeley examines the ability of people to move up the economic ladder in metro areas around the country. They found striking differences in upward mobility based on where in the country people live. This map from the study illustrates the regional differences. The red spots are where it’s hardest to move up, and the lighter areas are where that kind of mobility is easier.
There’s a New York Times interactive map and article on the study here.
Interestingly, although Connecticut has one of the greatest economic disparities in the country, as you can see on that map, it’s not one of the hardest places to move up the economic ladder. The study found that in the Bridgeport area (the one area of Connecticut included in the study) the chance that someone in the bottom fifth of the economic ladder could rise to the top fifth is about eight percent. Compare that to Atlanta, which is just four percent. The study says Bridgeport kids who grow up in the first percentile in income, just $2,000 a year, will end up, on average, in the 35th percentile.
Coming up shortly on WSHU’s State of Disparity, we’ll take a look at efforts to help young people who are having trouble even reaching the bottom rung of the economic ladder.
In a commentary on the New York Times’ fascinating online series on inequality, “The Great Divide,” Stanford professor Sean Reardon argues that much of the educational achievement gap in the U.S. comes not simply from a difference between the quality of rich and poor schools. He says the biggest difference is how much rich families are spending on the academic development of their kids.
Reardon says test scores for the poorest students aren’t dropping. Test scores for the richest students have risen dramatically. “Before 1980,” he writes, “affluent students had little advantage over middle-class students in academic performance; most of the socioeconomic disparity in academics was between the middle class and the poor. But the rich now outperform the middle class by as much as the middle class outperform the poor.”
He says it boils down to this: “The academic gap is widening because rich students are increasingly entering kindergarten much better prepared to succeed in school than middle-class students. This difference in preparation persists through elementary and high school.”
And he says it’s not just that the rich have more money than they used to. It’s how they use it:
“High-income families are increasingly focusing their resources — their money, time and knowledge of what it takes to be successful in school — on their children’s cognitive development and educational success. They are doing this because educational success is much more important than it used to be, even for the rich.”
In several earlier stories, we’ve focused on arguments educators are making on what schools can do to close the achievement gap, like this story on early childhood literacy, this one on Brookside Elementary School in Norwalk and this one on half-day kindergarten. Reardon argues here that “improving the quality of our parenting and of four children’s earliest environments may be even more important.” And he points to programs and policies like maternity and paternity leave that he says could lead to that goal.
Read Reardon’s full story here.
In a recent article in the New York Times, Adam Davidson the creator of NPR and This American Life’s “Planet Money” podcast and blog, described the economic diversity in Greenwich. While the town is mostly known for it’s remarkable wealth, it also has a sizable population of working class people. Nearly 4 percent live below the federal poverty line. Although it’s a town with expensive housing, the draw for many is the schools. And, Davidson writes, studies have shown that low income students ido better in wealthy schools than in poor ones. He writes about Greenwich High School:
“Around 13 percent of the school’s students receive free or discounted lunches, a commonly used proxy for low income. And more than three-quarters of those students scored at or above proficiency on the most recent statewide 10th-grade performance tests. At nearby Stamford High School, where nearly 70 percent of students are on the lunch program, almost half the students failed to meet proficiency levels.”
Davidson spoke with Richard Kahlenberg, a senior fellow at the Century Foundation, who says about 10 percent of all students in the country are in districts that have some kind of economic-integration policy.
“The remarkable thing about economic integration, Kahlenberg says, is that it seems to improve outcomes for the poor without diminishing educational attainment among the rich. Christopher Winters, headmaster of Greenwich High School, says that the greater diversity of the population makes for a better educational experience for all students. The low-income population has nearly doubled in the past seven years at Greenwich High, and no parent, he said, has complained.”