Liberals and socialists might not like the arguments presented in the University of Chicago economist Casey Mulligans’s recent book, The Redistribution Recession.
In his book, he argues that increases in the benefits available to unemployed workers explains to some extent the depth of the recession that began in 2007 followed by the slow recovery in the labor market. One may think that while the number of Americans below the poverty line is so high, hitting 48 million in 2011 compared to 17 million in 1989, the government has no other way to alleviate poverty than to spend a good portion of the taxes received on welfare programs. In fact, the federal spending to reduce poverty has always been increasing. But maybe the government should reconsider its income redistribution efforts.
These welfare programs include food stamps, Medicaid, cash welfare, housing assistance, and tax credits. Although it’s true that without these programs the poverty rate would be much worse, those attempts are not meant to directly close the so-called “achievement gap,” which is the educational disparity between the performance of different groups of students. The gap has become a focal point of education reform efforts and is now 30%-40% wider than it was a quarter of a century ago based on a study by Stanford University, which used standardized test results.
And why is this crucial? Because educational inequality and income inequality feed off each other. Horace Mann famously said “education then, beyond all other devices of human origin, is a great equalizer of the conditions of men ... the balance wheel of the social machinery.”
The Bureau of Labor Statistics recently reported how educational attainment is correlated with income level and unemployment rate. According to their data, a median employee with a bachelor’s degree receives a weekly salary of $1,053 and faces an unemployment rate of 4.9% while a high school dropout or illiterate person receives only $451 and faces a 14.1% unemployment rate.
The increase in jobs that require advanced skills has given college graduates the advantage over those who can’t afford higher education. According to a study by Georgetown University, the number of jobs that require only high school degrees fell by 5.8 million since the recession started while 2.2 million more jobs were created that need a college degree. The U.S. is gradually migrating away from a low-skill, low-knowledge economy to an economy where not everybody is skilled enough to participate in.
In 2011, the federal government spent a record of $506 billion on its five major poverty-reduction programs, which have tripled since 1989, adjusted for inflation. While expenditure per pupil in public elementary and secondary schools has risen from $7,933 in 1990-91 school year to only $10,694 in 2008-2009 school year, adjusted for inflation.
On the other hand, over the past 10 years, tuition at public universities has increased an average of 5.2% per year beyond inflation and over the same period average student debt has increased 64% (For more information watch Reuters video here). College degrees seem less attainable for someone coming from the lower portion of the income distribution.
The idea of accessible, affordable, and more homogenous primary, secondary, and tertiary education may not sound heretical, but different welfare programs are only reactive to the poverty issue while equal educational opportunities are preventive. Cutting government-funded education will be self-defeating and it cripples progresses to alleviate inequality. Inequality starts at earlier ages.