Education and the Growth of Poverty in United States-Becker

Inequality in the US has grown substantially since 1980. As a result, “poverty”, often defined as the fraction of families with incomes less than half the average income, has increased greatly. Similarly, “near poverty”, defined say as families with incomes between a half and three quarters of average income, has also grown by a lot. It is no surprise that greater income and wealth inequality has a big effect on the degree of poverty since it is a property of all distributions that more variability especially raises the fraction of observations at the tails of the distribution. In the income and wealth case, this means particularly rapid increases in the fractions of the poor and very wealthy as inequality increases.

The main causes of the growth in US earnings inequality are in order of importance: the large increase in returns to education and other skills, the rapid growth in households headed by unmarried mothers, the financial crisis and the resulting large expansion of unemployment, especially of lower income workers, and the big growth in some income maintenance programs that have induced some workers to leave the labor force.

Previous discussions on our blog and elsewhere have documented the rapid growth during past 40 years in the returns to college education, and to a lesser extent to high school graduation. The large expansion in the fraction of children living in households headed by a single parent increased to about 28% due to the boom in divorce rates and in the tendency of women to have children without being married. The recession that accompanied the financial crisis raised unemployment rates of high school dropouts from 7% in 2007 to more than 13% at its peak. This is still at a highly elevated rate. Finally, the recession lowered eligibility requirements for food stamps, Medicaid, mortgage reduction, and other welfare programs. This led to a decline in labor force participation among lower income workers in order to increase their prospects of qualifying for these benefits (see the evidence and discussion in Casey Mulligan’s “The Redistribution Recession”).

Many separate approaches are available to attack each of these causes of greater poverty rates, but improved education would significantly reduce the incidence of each one. The crucial education improvement would be in much lower dropout rates from high school and from four-year college programs. Lower dropout rates starting soon would take years to affect a large fraction of labor force, but the benefits would be enormous. First of all, the fraction of persons with very low incomes would decline greatly since high school dropouts and some high school graduates make up the bulk of the low-income population, although a boost in the fraction of the labor force who graduated high school and finished college would also lower the returns to education.

Educated persons have more stable marriages and are less likely to have children out of wedlock or out of stable non-married relations. This means that reducing high school and college dropouts would also reduce the incidence of the family structures that lead to low household incomes. Greater education may not reduce the incidence of serious recessions, but it would reduce the vulnerability of the labor force to these recessions. Finally, a more educated population would be less tempted to leave the labor force to take advantage of food stamps and other welfare programs because they would then have to give up too much in the way of earnings.

There is no magic way to improve the education of younger persons, especially given the vicious cycle between less educated and low-income parents, broken households, and low education and other poor performance of children. However, as argued in more detail in earlier blogs (see for example Sept. 2012 on “Good and Bad Teachers”), more charter schools and a greater use of school vouchers, teacher evaluations based on objective measures of their performance, much better pay for good teachers (such as teachers whose students perform better), and weaker tenure for bad teachers would go a considerable way toward reducing school dropouts and improving the overall education performance of American students.

Comments

[Proximaldevelopment.wordpress.com]

I agree with you about the social benefits of a more educated population, but I disagree with you on your prescription. Choice and teacher accountability through testing measures haven't been shown to be effective and they seem to be more likely to lead to scandals and corruption. Choosing instead to focus on childhood poverty and the opportunity gap would lead to more socially beneficial outcomes.

[Don Harris]

Having read this blog for a number of years, it seems to me that Posner has migrated to the left. His more recent writings show an greater concern with the effects of policy on people of modest means and a willingness to question the aims of conservative economic and legal doctrines. Becker has softened as well, but only just a little, and mostly under the prodding of Posner's analyses.

Now if Posner would just let go of his obsession with IQ as a fixed trait in spite of the evidence which suggests a considerable plasticity in human intelligence throughout the life course.

In any event, there is often something to learn from reading this blog. Thank you, Gentlemen!

[jim kirby]

What an exercise in false dichotomy!

Becker has never worked as a farmer. If he had, he would recognize that you don't improve results much by expenditures on fattening inferior cattle or fertilizing genetically inferior corn.

The answer is to control the breeding of both cattle and corn. It you put in place a policy of discouraging the better breeds while encouraging the inferior ones, you get the problem we have in the USSA.

We all read that professional women aren't marrying, much less breeding, and we have put in place policies, like foodstamps, medicaid, CHIP--ad nauseam--to encourage the worst educated, youngest, least prepared, hopeless, dependent, immature and uneducated women to breed the most.

Stop the wanton breeding! That's the solution.

[Morethoughtslesswords.wordpress.com]

I agree with Becker that lowering dropout rates would be helpful, and that programs like school vouchers and rewarding successful teachers would help lower dropout rates. The effects of these programs, however, may not be strongly felt by those most likely to drop out of high school or college and fall under poverty line. Getting these people to graduate high school (instead of joining local gang, for example) may require a holistic approach, improving the economic environment, institutions and social norms at the same time. Perhaps coming up with such a solution involves prohibitive costs because it would require combining expertise in several different fields.

As for the 'breeding' comment above, I've talked to several highly educated women about their decision to 'breed' or not. The main concern seems to be whether they will be able to maintain their career once they have children. The natural solution, according to them, is affordable and reliable child care institutions, which America insufficiently provides. Communist states (at least in their early stages) provided excellent child care to all their working women; there's no reason why American cannot do the same. I'm sure with some ingenuity, a good market solution can be found.

[jim kirby]

Right, the Commies provide all sorts of "equalizing" social measures. The effect has not been to bring the needy up to the level of the well-off, but to make the well-off also needy.

Need I cite Russia, Cuba, North Korea?

And MoreThoughts: why do you think we need to encourage more breeding, with the $10,000 plus for expended perinatal care and the $150,000 plus for bad education of EACH child, only to end up with an indolent teen-ager or an unemployed lawyer, when there are loads of bi-lingual potty-trained young adults ready to immigrate and "work like a Mexican"?

[Terry Bennett]

Regarding Don Harris' post,

Perhaps IQ is not the right measure. It's not my field - I don't have a field - well I do but it's 7 feet high in corn about now - but my understanding is that early psychologists making ordinary observations postulated that there was a fixed component to intelligence, apart from any variable component, and IQ was an attempt to isolate it. This makes some sort of street-level sense. In my life, I don't see smart people getting dumber or vice versa in any big way, and I think this same informal sentiment is coming through in Judge Posner's posts.

One computer can have a really fast processor, and another can be loaded with a lot of useful software and data, and maybe the second will be more effective in its intended domain, but the first machine can be given the software and ultimately outperform, in any domain. The search for IQ is for the processor, the fixed part. Maybe you can vary this a little bit with diet or good timing in exposure to creative ideas during the nurturing years or some new drug out of Flowers For Algernon, but if it turns out to be variable that doesn't necessarily prove there is no fixed component. It may prove that the tests have not been perfected to correctly isolate the fixed component. Perhaps the label "IQ" is long in the tooth and the consideration is ripe for a new, more precise term.

[Mattnotda]

I believe you have cause and effect mixed up a bit when you conclude that education leads to more stable marriages and fewer out of wedlock births. Kids who have kids of their own are not typically the kids that will pursue a higher education, or make for long term marriage partners.
As for the need for more affordable child care, one would assume that if both parents are working in good careers, they should be able to afford child care, which would give career women the opportunity to have more children. Unfortunately there is this thing called a progressive income tax. If both husband and wife are working, that extra income from the second salary is taxed at a much higher rate than the first income, especially when you consider the tax breaks 'used up' on the first salary. This isn't the only additional expense, and loss of efficiency on a 2 wage earner household, but it is a big one.