 I'm Susan Collins, the Joan and Sanford Wildein of the Gerald R. Ford School of Public Policy, and today I have the great pleasure of welcoming back to Ann Arbor my distinguished predecessor and friend, currently Chancellor of the University of Wisconsin-Madison, Rebecca Blank. Today's lecture is the keynote for a conference entitled Poverty, Policy, and People, 25 Years of Research and Training at the University of Michigan, and that conference is taking place both today and tomorrow here in Rackham. Before I introduce Rebecca Blank, more fully I'd like to acknowledge another friend and colleague, Sheldon Danziger, in whose honor we are hosting this very, very special conference. Sheldon joined the Ford School in 1988 when he came to Michigan, and since then he has helped to nurture a generation of poverty researchers and they are truly a more brilliant, collaborative, caring and diverse group because of his absolutely tireless commitment. A number of those really impressive researchers are in our audience today. Some of them are alumni of Sheldon's postdoctoral fellowship program, others affiliated with the National Poverty Center that Sheldon established here together with Becky in 2002. And again, we are just simply thrilled to have all of you with us for this very special set of events. Well, I know that one of the reasons that Becky is able to join us here today is as a tribute to Sheldon and their long-standing partnership. She of course is a prominent poverty researcher in her own right. She previously taught at MIT Princeton and Northwestern before joining the University of Michigan. They recruited her here as Dean of the School of Public Policy in 1999. As dean, she led the Ford School through a period of really tremendous growth, expanding our faculty, our school was named for President Ford. We gained a wonderful new home while Hall. She also revamped our interdisciplinary doctoral program and launched a new undergraduate program. In fact, her visit today would not be possible without one of what I believe was one of her earliest initiatives as Ford School Dean. This lecture is a part of our City Foundation lecture series, which began with a gift from the City Foundation. While Becky stepped down as Dean in 2007 and headed to the Brookings Institution in Washington, it was not very long before she answered a call for public service, having previously served in President Clinton's Council of Economic Advisors. Becky joined the U.S. Department of Commerce as Undersecretary for Economic Affairs overseeing the U.S. Census Bureau and, of course, leading the 22nd Decennial U.S. Census in 2010. In March 2012, President Obama nominated her to serve as Deputy Secretary of Commerce, and soon she was called on to serve as Acting Secretary of Commerce while still occupying the Deputy Secretary position. So if not the most powerful woman in Washington, I think arguably she might have been the busiest. In March 2013, she announced her departure from the Obama administration to become Chancellor of the University of Wisconsin-Madison, one of the country's premier research universities. And one week ago, the University of Antwerp awarded her an honorary degree, citing her research around issues of poverty and social policy. I'm sure that you, like me, are very eager to hear her remarks today. Before we begin, I'd like to remind our audience that if you have a question, please write it on one of the cards that was passed out as you entered the auditorium. Ford School volunteers will begin collecting those cards at around 4.40 p.m. If you're watching online, please submit your questions via Twitter, and you can use the hashtag policy talks. We have Ford School students, Shanara Pierce and Lou Corner, and with assistance from faculty member John Chamberlain, they will select and read your questions during the Q&A session at the end of our event today. And now, please join me in welcoming Chancellor Rebecca Blank to the podium. Thank you very much, Susan. There is few things that I would rather do than come to an event that honors Sheldon, Danziger and Sandy for all of the things that they have done both here at the University of Michigan, as well as at the University of Wisconsin before that. And I am privileged to be here. I'm also quite honored by this crowd. I think when I said yes to this, I didn't realize that they were going to invite all of my friends. And I know you're all here for a two-day symposium in honor of Sheldon, but I'm going to be citing a number of the work that some of you here in the audience have done, so I'm delighted you're all here. With these lights, I cannot see a soul out there, so I just warn you, don't expect that I know who you are at the moment. Now, I've been to a number of city group lectures. As Susan said, I actually helped raise the money for this. I'm sure there's some conflict of interest in having me give this at this point, but I have continued to read and stay active and debate, as well as occasionally put some data together on some of the issues that I care a great deal about, and one of the most important of those is the issue of inequality. So I want to talk about inequality, and as you'll see, I'm going to talk about it in a relatively broad perspective. I'm going to start a ways back. I think to understand how America views inequality, you do have to go back in history and talk about American exceptionalism, the so-called theory that the US has a relatively unique social and economic history, and there are a variety of aspects of that history that shape this country's current views of inequality, and I've got some partial list here. This is a country with an enormous amount of open land for expansion. For decades and decades, there was always a frontier, there was always a new start, there was always someplace to go. In that frontier, there was also enormous wealth, mineral wealth, soil wealth. We had not only more recently high standards of living, but there's some research that's pre-revolutionary research, putting together the data available, saying the US standard of living in the colonies was actually higher than that of the home country in Britain in the 1850s and 1860s, largely because we had a slightly more egalitarian distribution system, and we had very wealth, very rich agricultural lands, and that was before we opened up the Midwest. Of course, we all have a history of immigration pretty much in this country. Those histories are different. There are a small number of people without that history, the Native Americans, but that immigrant history is important. This is a question I've asked at times of how many people sitting in this room, either they are an immigrant, their parent is an immigrant, one of their grandparents was an immigrant, or you can tell me a story about your family's immigration, where they came from, the voyage over, what happened when they got here. Raise your hand. I can promise you, the vast majority of hands in this room will go up. We have that shared history and that sense, again, of the new start, a new opportunity, come to America and it will be different, is important. Of course, all of this melds with political history, obviously widespread public voice to citizens we had a middle class and a more active, politically active middle class before many other countries. That goes along with the demand for limited government, perhaps coming out of the revolution itself, and a suspicion particularly of centralized government, and a demand that things be placed at a local level, if at all possible. And then, of course, despite all of this, there's an ongoing set of social, economic, and political exclusions of some groups. African Americans with the very troubled history of the U.S. and slavery, and of course the equally troubled history of our treatment of Native Americans, has created an economic underclass in many cities and at many points in time, and that's not irrelevant either to how we think about inequality and senses of deserving and undeserving mess. And then, finally, lastly, the ocean to ocean geography really matters. It's not easy to attack this country and the two obvious ways, which is from the north or from the south, have been quiescent for a very long period of time. Canada last attacked us in the 1750s and we fought a war with Mexico in the 1840s and 50s, but that lack of foreign invasions and that sense of almost impregnability, up until I would say 911 and the terrorist attacks, gave us very strong sense of domestic security and isolation, and that also I think is important. People are not willing to look elsewhere for stories or for policy ideas. In fact, there's an active resistance when you say, well, we should look at what's happening over in Europe or over in Japan or over in China and people say, of course not, we're the United States, and that sense of isolation matters. So what's the result of this? The result of all of this is that the U.S. has experienced periods of very high economic growth and rapid economic development. Now, there were a few recessions and some of those were pretty deep, but by and large we've had some pretty steady economic expansion in this country, and that shapes an American story that we tell about ourselves. Geographic, population, and economic expansion all produce a sense of self-identity even for new immigrants, where progress of all sorts is taken for granted as deserved and even expected if you're an American. So what are the myths, stories we tell about ourselves? There's always opportunity for a new start. There's always optimism that things will be different in the future. Hard work is rewarded. If you work hard, you will succeed in this country, and in fact, if you don't succeed it must be because you didn't work very hard. And that means, of course, that anyone can accomplish anything to put it in the classic statement that's often made, the symbol of this, anyone can be president. Now, if you're female, or I would have recently said African American, you might doubt that, but the myth that anyone can grow up to be very successful, the Horatio Alger story, you can be president, you can be CEO, and if you yourself, as a relatively new immigrant, or because you're down on your luck, can't do it what your children can. And in this story, I should say inequality is simply not something to worry about. And in fact, the fact that all of these new immigrants are coming and these land on the frontier and people are pushing out means they're always people starting over. Inequality is actually expected in many ways. Everyone's going to start poor, but because there's unlimited opportunity, anyone can become a rich American if they stay here and work hard. And we shouldn't worry about inequality. It's in some ways a manifestation of the opportunity that exists in the country. That is, I think, a deeply held belief among many Americans. You see it in plays, you see it in movies, you see it in books, you see it in the political speeches that people give, and we'll come back and talk about how accurate that is. But I think that large picture start is not unimportant if you're going to talk about inequality in America. So let's turn to inequality. Economic inequality has risen very sharply, no news to anyone in this room. Now, there's an argument that our current levels of inequality are not at all outside of historical norms. In fact, increasingly some number of people are arguing that the period from 1930 to say the late 1970s was the exception and higher inequality is actually the norm. And we just lived through the wrong era, so we look at inequality and think it's new. Certainly the 1930s and 40s saw, of course, enormous wealth destruction, first with a very deep recession, followed by a very destructive war that basically destroyed the manufacturing capacity of all of the developed world except the United States. And that had a real impact on the U.S. It destroyed wealth, but then coming out of that war, we were the only country left standing with substantial manufacturing capacity, and therefore we had monopoly control over a whole set of markets. But over time, things changed. Since the mid-1970s, you see the world becoming increasingly competitive. First, you see increased competition with other developed countries. As Europe roars back with some very big and effective multinational firms, Japan becomes extremely competitive. In fact, you go through a whole period where we worry that Japan's going to eat our lunch. We haven't worried about that for about 20 years now, but that was a very dominant theme in the 80s. As the developed world reaches a point of high degrees of competition, you then start seeing all of the developed world, including the United States, threatened with increasing competition from developing countries. And as all of you know, the rise of China in particular, given its breadth, its scope, the rapidity with which the middle class and large international businesses there have developed, have clearly had an impact on U.S. inequality because the impact of all this competition is particularly from the developing world to create competition with lower-skilled labor. While at the same time, it enhances the role of high-skilled labor because if you can stay at the front end of innovation, if you can actually manage a big multinational company, your skills will be multiplied a thousandfold as opposed to if you were just managing a regional company and competing regionally. So this internationalization has had an impact on inequality and the rising inequality between more and less skilled. At the same time, technological changes have sped up and we can name all of the things that have changed in the last 30 years from, you know, handheld computers and phones and GPS systems, communication systems, and that has also been skill enhancing so that that has at least so far displaced lower-skilled workers with machinery and enhanced the contributions that higher-skilled workers can make. The result has been a decline in labor share, an erosion of unions and declines in wages among the less skilled and those who have more routine jobs and as again many of you know there's an argument this is not just the low skilled but actually increasingly it's hitting the middle skilled in routine jobs and in fact the lower skilled who are in the service sector, those jobs aren't as easily exportable or as easily competed against so this rising inequality is not just about the very bottom it's about both the middle and the bottom relative to the top. And more skilled workers have particularly benefited and when I say more skilled I mean a very small share of the extremely wealthy population. So let me show you a few graphs. This shows you male wages from 1979 through 2013. The green line are people with college degrees or more. The red line in the middle are people with a high it actually should say high school or some college that's mislabeled. They're high school degrees or they have less than a four-year college degree so that's not just high school graduates and then the blue line are people with less than high school and for men the only ones who've really gained over the last whatever period this is in almost 30 years are those who have some college degrees or more. The people even with some college are pretty much stalled out and people with less than high school are unambiguously worse off. If we turn to women again you can see very large gains in fact higher percentage gains among more skilled women as discrimination barriers over the last several years have broken down and more and more women are in high paying jobs that they just didn't have access to in the 50s 60s. Some college and high school grads among women have shown some gains those have moderated in the last two years but they're still above where they were and less than high school's pretty much been flat and I know I've said this in some other things that I've written that if you are a woman without a high school degree you know the jobs that are open to you are essentially the same jobs that your mother or grandmother did by large. You know that world has not changed very much maybe the nature of the industry you work in has changed but the jobs you do haven't and then the argument that a lot of this inequality is at the very top these are some statistics from the world top incomes database that Thomas Piketty and various people have put together out of tax records. What I'm showing you here is the top one percent of the U.S. okay and those who are between 99 and 99.5 percent are the green line 99.5 to 99.9 are the red line and people who are at the top 0.01 percent of the income distribution in the U.S. are the blue line and you really see this very top pulling away story by looking just at this very top one percent and even the top 0.01 of one percent right and you know it's a really interesting question which I think is not fully explained as to why this has been so concentrated in this group right and you can tell some of the stories about what's happened in finance and you see that big plunge in you know 2009 and 10 and that's some of the financial sector but that alone does not seem to fully explain this so if you're looking for some interesting research this is one of them but I'm going to argue that economic inequality while it has some substantial issues associated with it is probably not the primary or I wouldn't even argue the most important manifestation of inequality economic inequality produces some other effects and those other effects I think in some ways are more destructive than simple inequality in incomes per se and so the economic inequality translates into a variety of other social sectors and this is all very synergistic it's not like there's a linear causality here from economic inequality to some of other things I'm talking about the two feedback and forth and many of you have actually written about that in some of these areas so that's the statement that I just made let me look at some of these social sectors where we also see rising inequality closely linked with the rising economic inequality so for one residential segregation has gone up and here I'm showing you the percent of the population living in low-income middle-income and high-income neighborhoods from 70 90 and 2007 so the share of people living in low-income neighborhoods is now about a quarter and those are largely low-income people living next to each other that's gone up the share of people in high-income neighborhoods high-income people living next to each other has gone up while the share of middle-income neighborhoods has gone down people are more sorted by income residentially and that trend has been consistent now for the last five censuses and that has a lot of implications because as all of you well know there are a whole variety of social and demographic outcomes that are strongly affected by residents right and by neighborhood so anything that's affiliated with neighborhood if neighborhood is showing increasing economic segregation you're going to see increasing inequality and segregation in those other outcomes probably no outcome is in the united states more closely associated with neighborhood than education and education inequality has indeed grown there are clear differences across neighborhood schools and their resources even as we've poured more and more money into the most disadvantaged schools the top school districts have continued to pull ahead so this is data from Sean Reardon and it shows reading skill reading levels reading scores by income level and the red line are families at the 90th percentile of the income distribution and this goes from 1970 to 2010 the blue line are people at the mean and the green line are people at the 10th percentage and you know the good news here is that the bottom is actually going up you know this is not widening inequality with the bottom is falling we're doing some things right in terms of education but the top is going up much faster this is the same graph for math scores and again the bottom is going up that is good news but the top is going up substantially faster it's not just education that in terms of what happens inside school of course that matters for long-term children's outcomes and educate and even schooling outcomes and there's been some really interesting work done by John Wong Focal who I know is sitting down there somewhere together with a variety of other co-authors looking at family investments in children and I believe this is data from Jane that shows you what's happening to what are called enrichment expenditures on children so this is summer camp and music lessons and tutoring and you're giving your kids opportunities beyond whatever the public schools give them right and so your first data point there is the early 1970s the early 80s mid 90s and then the mid 2000s and we're looking at the bottom income quintile the bottom 20% and the amount of money they're investing in kids through these extra expenditures and the top income quintile and the the difference here is just enormous and you know my guess and this is you know I hope this is a really fruitful research area that others are going to follow up on that this growth in other forms of expenditures on children has more of an impact on rising inequality and cross-generational stability of incomes that then then probably what's happening inside schools in many ways you know so high-income families supplement the schools their kids get good schooling but then they get all this other stuff right and you know the change in these is just amazingly striking in addition to this and again a number of people here in this room have worked on this one you also see rising inequality in what's happening in marriage and family composition okay marriage is everyone in this room pretty much knows a number of you've written these papers have risen among higher income groups over the last two decades and declined among lower income groups and that means that what's happening to kids has changed in those two groups so the probability if you're a child of growing up with both of your biological parents has actually somewhat increased over time among higher income groups as divorce rates have fallen while the probability of that happening among low income groups has fallen both as people have more children outside of marriage and as marriages are less stable and I'll show you at least one graph on this this is the percentage of women with a permanent separation or divorce 10 years after marriage so I'm not looking at non-marital childbearing I could look at that as well and that has diverged while higher income women are having more children out of wedlock the growth is much bigger among low-income children this is looking at married people and the three the four lines over there on the left are people who have less than a high school degree then high school or some college in the middle and people have a college degree or more and I'm showing you four time periods the blue line is people who got married in the early 60s so it's saying were you separated divorced by the early 70s the red line is people got married in the early 70s the green line is people who got married in the early 80s and the purple line is people who got married in the early 90s so the data runs through the mid 2000s but you know it's the the marriage point is in the early 90s and what you see here is ongoing levels of divorce increases in divorce levels among the least educated some ongoing rises among the middle educated and you see divorce rates peak among those who married in the 70s but then they start to fall and by the time you hit people who get married in the 90s by the mid 2000s on the divorce rate you know 16% only 16% of the women have separated 10 years later and I actually think that these differences in what's happening inside families and therefore what the experience of children are and the stability that they have in their families and their connections to parents are potentially more important than almost any one of the other inequalities that I'm going to point to I could talk about other things I'm not going to health is quite important but the story there is a little bit more mixed we've made progress in some areas but things like smoking certain chronic diseases have actually seen rising inequality you know life expectancy is actually inequality has grown and that a little by income level I could talk about political participation inequality thereby income was rising until what presidential election 2008 and then 2012 where you see a huge spike in participation particularly among african-american lower income voters and we'll see whether that continues or not I could talk about criminal victimization and there's at least some evidence our data here isn't very good but there's some you know criminal victimization occurs in neighborhoods so if neighborhoods are becoming more income segregated you know it's consistent with at least some evidence we have that the probability of being a victim of a crime has becoming more dispersed depending on your income level in part because of the neighborhood that you live in so what's the effect of all of this well the US is simply not a high mobility country no news to many of the people in this room here I'm showing you data from Marcus Yanti who I understand was supposed to come to the conference but isn't here and what this shows these are essentially correlations across generations between women and their parents and men and their parents and the blue is women the red is men and I'm showing you Denmark Finland Norway Sweden Britain and the United States and high numbers mean that children's income levels are much more highly correlated with parents income level so a high number means low levels of income mobility and what you see here is the US particularly among men has strikingly much lower levels of income mobility than some of the comparative countries that we could look at a couple of things to be said about this you know this is not just these are the countries that I could easily pull off my understanding is that if you look at Canada you look at Germany you look at Britain which is up here this is not just the Nordic and Scandinavian countries where the US looks bad the US looks worse than any than other countries that you might think slightly more comparable to us in general when you look at income persistence across generations across countries in almost all countries the greatest degree of income persistence is at the top if you're born into a rich family you're more likely yourself to end up as a relatively rich individual okay or high wealth individual in the US there is a lot of persistence at the top but the US is unique in that there is much greater persistence at the bottom and much greater there's more persistence at the bottom in the US than there is at the top and that really looks different so persistence in the US is 50 percent than in Britain at the lowest quintile but it's only 20 percent higher than Britain at the highest quintile so clearly there are things going on in the bottom end in terms of populations and and all of these economic and social factors that make mobility much more persistent among the poor which is of course I might note exactly the opposite of that story of all the immigrants can come here and in turn get rich I would also note that another correlation with high degrees of income inequality is high of income persistence intergenerational earnings persistence is high rates of return to schooling the higher the rate of your return to schooling to more and more schooling the more persistent is income for those who have greater schooling and and there's less mobility and the US we tend to have very high rates of return to schooling college grads earn about 70 percent more than high school graduates in the United States in Germany and France college graduates only only earn about 40 percent more than high school graduates and that also seems to be highly correlated with this immobility lots of interesting questions here and I think we sort of just given the data issues of needing long-term longitudinal data just begun to scratch the surface of some of the interesting research questions so if rising you know if we if the changes that have happened in the United States have ended up with lower mobility in this country that means that where I started that American story about itself may no longer be true that new starts may be hard if not impossible opportunity particularly for those at the very bottom may be limited hard work may not lead to economic advancement and it turns out not everyone can be president or CEO or you know that's the glib way of saying class differences economic differences have become more hardened okay and that's potentially a very real concern and behind I think all of the public discussion that we hear about rising inequality now let me put on a few caveats that I think are not said often enough many of the causes of rising inequality are not clearly negative and in fact not just the people in this room but many lower and middle income families as well have benefited enormously from the very forces that also cause some of this rise in inequality so for instance there have been amazing opportunities for wealth creation with the emergence of whole new industries but the emergence of those new industries brought with them products that are broadly used in the population so new and emerging technology softwares computer communications iPhones those of you who work in the development field know that you know the rise of iPhones has enormous potential in places like Africa to provide people with access to knowledge and access to communication and access to banking so while on the one hand this created enormous wealth and led to rising inequality it's also created all sorts of other opportunities and products that that may be democratizing in some certain situations there are industries that have been completely revised and changed such as health care and the growing global economy may feel threatening to certain U.S. workers but has had enormous advantages to low skilled workers in other parts of the world and you know the world decline in poverty again a statistic many people in this room know has been enormous largely because of declines in poverty in China you know we've made real progress against poverty at a world scale and there's some real optimism about further declines in other areas of the world but you know that has come along with rising inequality in the more developed world and then another issue one that is almost never discussed when people talk about rising inequality so at least in the U.S. and I've not seen this research in other countries huge changes in the role of women and it turns out that the widening opportunities of women to get into higher earning jobs have widened inequality in this country about a fourth a fourth of the rising inequality in the United States can be directly correlated with the increase in marital sorting so it used to be if you go back to the 60s and 70s the women who work the least were the women who are married to high income men right so the women actually increased equality in society because women married to low income men tended to work women married to high income men didn't and that actually had equalizing effects if you fast forward several decades to the 2000s high income women tend to be married to high income men and the effect of marital sorting has been disequalizing rather than equalizing and as I say a quarter of the rise in U.S. inequality is due to this change in marital sorting and there are a couple of different pretty good research papers that that talk about that and quantify it using somewhat different methods so you know what should we do I think one of the answers that comes out of that is you know you don't want to reverse these trends I mean I don't want to get through all our phones away and get rid of GPS systems and you know get rid of all of these new communication and technologies that have created a lot of new wealth I certainly don't want to reduce the opportunities available to women so marital sorting becomes more equalizing you know and the one way to say this is if you're going to talk about what do we do about inequality you can't think about this is a linear problem a b and c happened and that led to x so if we want to you know x is inequality so if we want to reduce x let's go back and reverse a b and c right with it's just that's just not you know we couldn't do it if we wanted to and I don't think we want to many of the forces that have led to rising inequality have many real beneficial effects at the same time that they also happen to increase inequality so um you know a way to say this is as you think about what do we do about inequality you need to think not about reverse engineering but about what are the new policies the additional policies the things that reverse the inequality effect even though they may not have any effect at all on those fundamental causes and you know indeed I you know I I think that's the right way to think about this how do you do things that create mobility and opportunity while still allowing all of us to engage in these huge new wealth creating industries that have also raised wealth at the very top some key strategic questions a lot in the u.s context do we want to talk about inequality do we want to talk about poverty and there's a large number of people who'd say I don't care how rich bill gates is I don't care how rich the richer people are what I care about is that they're people in need and what we really want to do is bring the bottom up and once run its course that's that's you know a viable argument um and we could indeed be debating poverty instead of inequality I'm gonna put that aside not because you know we could debate that but I'm gonna focus on inequality second question here is is it inequality or is it mobility the stories that I told you about the United States are largely mobility stories come here as an immigrant go to the frontier work hard and move up right the images mobility so if everyone has an equal chance to move up maybe we shouldn't worry about inequality because the people who moved up are those who worked the hardest right you know and you know the more that you think there's mobility out there in society I would argue the less you worry about inequality and why I particularly worry about U.S. inequality is that it comes along with relatively low levels of mobility and that really potentially has very dangerous social and sort of class hardening type effects um and so you know I actually would say that we're talking about mobility is highly important in all of this and if we think we can't undo the inequality in any direct way then we ought to be focusing on the mobility now we got to focus on poverty as well but I'm saying I'm just going to put that one aside so politically talking about poverty or talking about mobility does are those are two topics that have some political residents in the U.S. political economy discussion inequality historically has not and I think it is a fascinating question whether the current flurry of attention and stories is going to produce any long-term interest in inequality or simply going to die and there have been over the last 30 40 years since we first noticed this rising trend moments where we all noticed inequality and talked about it beyond just the researchers sitting in this room and the conversation then died out because it wasn't obvious what we would do about it there wasn't a policy response and if there's not a policy response at some point you say well you know we talk about this problem but it doesn't go anywhere right um so the question is do we have is there a so what here rising inequality so what what do we do and unless you can articulate um you know viable policy options that provide ways to address this I think the discussion that we're having right now in the larger political economy is going to die out again so that sort of leaves a challenge of what what are the policies that you want to articulate what's the response to the so what okay um let me go through a variety of potential policy responses okay um and the first obvious one is let's just attack inequality directly let us put higher tax rates on the wealthy um particularly aimed at those very top wealth holders you know you saw how their income has gone up surely they could pay a little bit more in taxes um you could imagine ways to um raise what was so euphemistically called the death tax um inheritance taxes um that would also presumably increase mobility over time um you could imagine all sorts of ways to increase worker voice worker organization to give more power to unions um you know shrinking to virtually nothing in the private sector economy in the u.s. that you generate more rent sharing that's an option um though I will note that in a highly competitive international environment it's hard to figure out where those rents are I mean that that's an interesting question we could come back to um or you can think about interventions that cap or limit top earnings and some have talked about that now um I will argue that all of these would surely have real effects to reduce inequality in the society and absolutely none of them are even thinkable in the u.s. political context we have never been willing to harm the very wealthy um and you know for a whole variety of reasons some of it coming out of those stories I told earlier that you know these are interesting ideas there may be some other more developed countries that can think about some of these ideas I think a direct attack on inequality through things like higher tax rates and higher inheritance taxes is just you know we could discuss its value we could talk about what its implications would be what effect it would have on inequality but I think it's not within the realm of political possibilities anytime at least in the near future that I see so the second option is to work on opportunity to work on mobility to say okay if we're going to have high inequality let's make sure people can move around people who are born into poorer families lower income families middle income families have a have a shot at doing better and that gets us to a whole set of opportunity related policies and you know educational access whether we're talking about preschool education or whether we're talking about higher education you know it's clearly right in the middle of that and it's not just access it's also quality some people here are far more expert than I in questions of differences in in outcomes and inequalities between you know inner city versus high-end suburban schools one could talk about health access I actually think health is one of the most underappreciated variables in looking particularly at poverty and wealth you know anyone who has spent any time among the real movers and shakers in society know that one of there's you know we could argue about you know there's what are the five habits of highly effective people all sorts of those books none of them say what to me is the most striking feature which is these are people with boundless energy they can work 20 hours a day sleep three hours get up and go back to work again and you know that is fundamentally a health issue right and you know and the other hand and Sheldon has been quite important with this you know the if you look at the bottom end and you look at people who are in poverty long-term you know not in Africa but in the United States people who are long-term poor almost all of them have some form of health issue and you've read Sheldon and all of his co-authors research on this of you know it's either physical disabilities or its substance abuse or its depression or other forms of mental health problems and so the health issue and access to health care and you know you know health insurance I think is quite important here women's integration into the economy yes there is some disequalizing effects here but particularly if you're going to create mobility given the large number of single women and single women who raise children women's integration women's opportunities become very very important to bringing up that bottom and creating opportunities not just for the women but for their kids as well so they don't grow up in complete incomplete poverty and then broader political participation now I will tell you that had I been giving this speech five years ago I would have said you know this is really possible these are the things we need to be working on and these have real resonance in the American political background and so you know we we can make progress on these but if you look at the last four years I admit I become more pessimistic you have you know one group in the United States that's basically developed a movement out of denying health care to low-income families and I would never have believed that was possible you have a large number of groups that are working very hard to narrow political participation you know it this you know it makes these things much more difficult and I'm much more pessimistic about our ability to take these particular agendas on than I would have been even four and five years ago where I'd have said this had a lot of resonance you could really mobilize people around these things because that hasn't worked it is also possible I should say that there's some anti classical anti-poverty things that should be on this list such as further expansions of the earned income tax credit now that's going to focus only on the bottom end but that is also an opportunity related option that will help single mothers might provide better access to you know if you've got more income and low-income families all of these outcomes can become better as well but they say the last few years have demonstrated how hard it is even to get consensus on these issues so where do we go next well there is the macro economy and this is one that I've written about as some others in the room you know strong job growth is incredibly important as an anti-poverty policy it is probably important as a mobility strategy but it may not be important as an anti inequality strategy let me explain that I mean the people who largely tend to be unemployed and who suffer from high unemployment are low skilled and part-time workers okay so if you have rapid job growth in a very tight economy it brings up the bottom does more for poverty than almost any program we could imagine running for that reason alone we have to worry about the macro economy and of course once people get jobs their opportunity to get into another job to build job experience and and raise their wages is very real so it is a mobility strategy but I think it's unclear and I've never seen any work on this maybe some of you know about this whether it is an anti inequality strategy rapid high rates of economic growth often often go along with the sorts of all you know huge wealth increases right new industries new products things that are driving that economic growth may also be driving large wage and wealth gains at the very top of the income distribution and I say that as a hypothesis because I've never seen anyone look at the effects of economic cycles and of strong economic growth on inequality and only know those effects on poverty and and to a lesser extent on mobility so the macro economy is you know we got to worry about those policies they're important and then lastly um this is one we haven't talked much about and there are a good number of people in the room who um have again a finer understanding of the whole issue of cultural and social norms than I do but I think we need to be thinking more about the whole issue of social norms what is it that um creates people's willingness in some ways to share creates people's sense that they are part of the community creates concern about mobility or about poverty so for instance here's some interesting questions some industries have much greater wage inequality than others for instance if you look at manufacturing in the u.s the online manufacturing firms um they tend to have far lower ratios of ceo pay to average worker pay than many of the newer industries finances off the map on that um you know what is it about those industries that generates different levels of inequality and wages secondly um why are some wealthy individuals motivated to give back and very involved in using their wealth in socially beneficial ways while others have very little interest in that so you know when bill gate stands up and says I'm giving a large part of my fortune to fight AIDS and health problems in Africa and raise education in the u.s and then Warren Buffett stands next to him and says yes and I'm joining in on that that has any you know that that's establishing a social norm how do you move those social norms even more to make it more acceptable to think about either voluntary or tax related issues that that that you know increased mobility by increasing the resources available to provide those opportunity based goods um you know our last question here what drives public support for opportunity based programs like education or health care access how do you mobilize more people to understand and support and vote for politicians who support those programs um those sorts of social norms cultural norms political norms are potentially very important in a world where we don't have a lot of direct levers on inequality and you instead are going to have to create a community sense that we're in this together and we're going to share and try to address these issues you know I maybe that's not doable but I think at least a little bit of research on you know where do some of these come from can you shape these have we ever been able to shape them in the past you know can you what's changed social norms over time really interesting set of questions hard to research I understand um final policy comment and in some ways this is obvious but it bears saying explicitly because you hear again and again in the United States people who stand up politicians often who say look the issue isn't inequality it's opportunity I care about opportunity but I don't care at all about inequality let's talk about opportunity instead and I think that's a false choice these two issues are very very closely linked rising inequality makes it much much harder to provide broad spread opportunity in the absence of any form of other redistribution efforts so opportunity requires that we protect certain key social spheres so-called opportunity goods education healthcare access women's access into the economy political participation fairness in the criminal justice system all of those are opportunity goods that are largely publicly funded and you know you want to protect them if you're going to if you're going to make sure that low-income families have access to those goods you've you've got to protect them a little bit from the rising inequality right because if poor are getting poorer you've got to put more money into those opportunity goods in order to provide them to low-income families right so um you can't say that I don't care about inequality I only care about opportunity because if you care about opportunity goods you you know rising inequality makes it more and more expensive and harder and harder to provide these opportunity goods at an adequate level to offset that rising inequality effect at the bottom end okay so the more unequal are resources the harder it is that to have income differentials that don't in some way pollute the provision of these opportunity goods and um you know I you know opportunity and inequality they're just linked people who want to say we care about one or not the other I I just think it wrong all right conclusions um the forces driving rising inequality are not likely to abate in the near future I do not think we have played out the growth of international competition I don't think we've played out the revolution that a lot of these new technologies and changes are providing and we certainly haven't played out the impact of women's access into higher paying jobs and sorting of women into the economy in different ways um perhaps as I said we don't want some of those trends to abate given their other beneficial effects but as incomes become more unequal expect to see ongoing increases in inequality in a whole bunch of other key social realms and that we do care about this will make it harder and harder to provide equal opportunity to those from low-income families unless there is the political will to address this problem political will requires a much stronger sharing impulse on the part of those with greater wealth through either greater taxation payments or through greater voluntary private means and much greater political commitment to investment in those opportunity goods um personally I think when I look at this I'm telling you a pretty pessimistic story um nothing in our toolkit that I have discussed promises to me our ability to offset the effects of rising inequality I think the direct actions are just off the table the opportunity based goods um which I would have said earlier we're you know more possible I am much let more pessimistic about our ability to pull this country behind saying no we really are going to provide health care we're going to provide preschool we're going to provide greater access some of that is an endless argument over budgets some of that is a you know the this hardening of political views um that gets people if he's on that side I'm on the other side and people don't have thoughtful conversations in the middle um anyway nothing in our toolkit that seems within the realm of political possibilities likely have big effects and that's that to me is an incredibly pessimistic statement our ability to make big differences in the near future through say education reform or health reform of the sorts that we are talking about in this country we could have some effects but I think they're pretty small you know from what we know they aren't going to move the needle a whole lot they certainly aren't going to affect you know those big rises in inequality and of social spheres that that I think I showed you now that said one answer is we think a whole lot bigger and how we go about doing this and marshaling the political will is a question I asked you but there are some things we could think about that are bigger might move the needle a little bit more enact child accounts for lower and middle income families that provide resources for them for education and investment at birth substantially increase resources to lower income areas focused on opportunity not just schools but those investments that high-income parents making their kids music lessons child you know summer camps travel opportunities there are ways that we could do that an active farm a national public service that you know basically says you've got to meet people who are different from you despite residential segregation at least at one point in your life and get to understand something and see you know about how other folks live and see what impact that has on long-term inequality that's you know who knows what that effect is vastly expand the resources for higher education to low and middle income families i live that every day i know how little i have in you know a major public institution which is supposed to be all about providing access how little i have to provide scholarships to low and middle income families in wisconsin you could say the same thing about preschool or take active labor market policies more seriously in the u.s. with much more expansive apprenticeship and job training programs for those who at this point in time are not going to be bound into four-year college programs as economic and social inequalities worsen this is going to make it harder and harder for americans to hold on to their self-identity to those wonderful things about america that we all grew up believing in many ways and you know that made us love this country that this is a place of opportunity for all it is a place where you really can get ahead it's a place where things will get better even if it took a long time the civil rights movement came the women's rights movement came the gay rights movement came we are going to make progress and a life is going to be better for our children if not for us how the u.s. responds to this rising inequality and i think it's very direct confrontation with the myths that america's long height tried to tell itself is going to determine if we're going to continue to be optimistic and open towards our future or if we're in the midst of a rather fundamental change in self-identity and i would close by saying it is worth noting that when any country faces the destruction of its myths about itself and starts arguing about whether it really is you know is this the country of opportunity or not that almost always comes along with an enormous amount of internal dissension and political turmoil and that is an equally pessimistic conclusion but i will stop there thank you my name is shanara pierce i am a first year masters of public policy student at the fourth school um first would like to thank you for your wonderful lecture thank you for being here today our first question that we have is why do high returns to education lead to greater immobility if not education as a mechanism as a mechanism for promoting upward mobility than what related to that is giving your position in higher ed what do patterns of inequality and test scores and college enrollment mean for intergenerational mobility and how do we intervene yeah so the question is particularly how access to higher education impacts these inequalities and um anyone who looks at the figures on who goes to college knows that i mean there's some really shocking figures out there people who are um in the bottom quintile of sat scores i think i'm going to get this right it's something very close to this in the bottom 25 percent of sat scores but come from high-income families are more likely to go to college than people who are in the top quintile of sat scores but come from low-income families um that income is incredibly determinative if you're likely to go into college and i don't know how that has changed over time i've actually never seen really great cross-sectional data on how excessive on the one hand there you know there's a lot of scholarships available but nothing like the amount that you would need to provide access to large numbers of low and lower middle-income families um you know the you know the result is the big public schools these places like the school that i run are all of the out-state schools that are even more accessible to many people um you know have real difficulty providing subsidies and um you know debt levels go up as all of you know there's certain populations that are very resistant to taking out debt it's hard to recruit african-american students and say part of your package is going to be debt um and um you know that just makes it really hard i mean i happen to think higher education is absolutely fundamental for economic mobility and one of the real losses in this country is that states and the federal government are not making it easier for lower mid lower middle income families to get their kids to college without taking on large debt loads and that only gets worse as state support declines and tuition levels go up so we need more and more scholarships just to stay even hello i'm luke horn i'm a first-year master of public policy student as well and i'd like to thank you for your talk and i certainly agree with that very last statement um this and thank you for all of you who have written questions that um and pass them into us um this question is hasn't there been a role that changes in public policy have played in increasing inequality for example in local school expenditures and less progressive taxes so it actually turns out that we put a lot of additional money into low income schools and alex resh is somewhere in the audience can give these numbers better than i can um you know our investment in low income neighborhood schools is much much higher now than it was 30 or 40 years ago um but it's also true that families investment in their kids from high income families has grown very very rapidly as well so we haven't gained as much out of that as you might have thought that we would um are there policies that have worsened inequality absolutely what we've done to tax rates is the classic example um you know there's a lot of policies that we do that do try to affect mobility and inequality but um some of them have gone the other way and um in my mind the lowering of tax rates both it has it hasn't affected two ways it um obviously increases disposable income inequality because the wealthy keep a higher share of their income but secondly it provides fewer resources to the government to provide those opportunity goods so um you also then have the second effect on providing fewer resources and less access to health and education and other things as you cut tax rates for particularly on wealthier families next question is what is the role of race and racism in the rising inequalities in the u.s. you know i think that is a great question and um i have no immediate answer for that i would throw that in some ways back to some of the people here are researchers who look at that um you know i um one of the things that is very true in the u.s and it sort of goes back to one reason when i started with that very first set of u.s history you know the presence of um very difficult history particularly for african americans in more recent decades for latinos for native americans has always made um some very clear distinctions in policy between who is more versus less deserving and that is the word that gets used in many cases and um the history of race and racial racial inequality in this country is quite central to our unwillingness to provide substantial amounts of support certainly cash support um to low income families in my opinion and i think there's a good amount of evidence to support that um you know the decline in cash assistance to low income families unless they work through the itc is a way to enforce we're only going to help those who are the deserving poor because we're very very suspicious of those who are without a job even when unemployment rates are seven eight nine percent another question is the physical emotional social disconnection of the rich and poor important to tackle on its own separately from differences in material well-being such as health education etc yeah that's one reason i wanted to talk about cultural norms and how do you create a sense that we're in this together that we are a common community one of the reasons why i worry about growing inequality is democracies of the sort that we have in the united states only work when you can come together around a common public conversation so let's say we're going to discuss unemployment insurance social security reform health care access you are in a world right now where you know a good number of people who come into that conversation with higher income backgrounds look at the last 20 to 30 years and you know their incomes have continued to rise yes they worked hard things have gotten better you know they don't understand what the problem is and then you get another group coming into this conversation where things have gotten harder every year they're making less than their fathers and grandfathers were making on on some of these jobs and that makes it almost impossible to hold a common conversation so ways that create opportunities for people to understand the perspectives of others to actually realize we are in a common community but our experiences are different and it's not just a lack of hard work that there are you know that there are people who are really stuck where they are no matter what they do or how they do it is deeply important i don't you know i'm an economist right you should never ask economists to talk about culture and community but i think it's deeply fundamental to the question of how we deal with inequality in this country is can we create the sense that we're all in this together and some of those shared experiences occur it's one reason why you know i put on my list have a national public service that forces kids from all income backgrounds to spend a year with kids from all sorts of other income backgrounds there's you know a lot of reasons to do that to create public goods but one of the main reasons to do it is to create an experience in which people talk across those economic boundaries in ways that they increasingly don't in almost any other sphere of our life have child accounts been used in other countries if so how how have they impacted economic mobility you know i'm not going to answer that because i don't know the answer i know there are probably some people in this room who do because there have been some version of child accounts that a few countries have used but i don't know if you can say much about the mobility questions on that i'll you know i'll let someone else stand up if they want to speak to that thinking about spreading the economic spreading economic security and perhaps wealth is it best to start with early early childhood education with leveling the playing field perhaps focusing most on the disadvantaged first or giving more like changing resources such as the homestead act or the di bill after world war two you know i think it's a great question to say what's your strategy what do you do first given limited resources where do you put them and you know there's quite a bit of social science research that says if you tackle only one part of this problem the other things will just overwhelm it you know all of you know about some of the you know the community initiatives where they actually tried to change a whole bunch of things at once because they learned that if you just go in and change the welfare system or you just go in and create apprenticeship programs you just go in and do something in education the rest of the environment just overwhelms that in some ways i mean i think that was part of the promise of the moving to opportunity initiatives of let's do something really big right and you know we can talk about what those effects were there were some very real effects they weren't as big as some people hoped they would be i actually have come to believe that these marginal changes you know the best you know i will work for a long time on these marginal changes on opportunity goods let's improve preschool let's improve access to higher education let's try to get more people into health care that that's a really important agenda but i've come to be relatively pessimistic about the extent to which that alone is going to move the needle on this whole inequality issue and therefore i do want to think about big things and maybe is it a gi bill of what however we define that um or the new homestead act or the numeral act that creates all sorts of access to people to higher education for people who didn't have it i haven't been creative enough to come up with those ideas but i hope there are people in this room who will be that creative and i think this question will speak to for a lot of us what is your preferred way to address student debt so um i can speak for that about with regard to the University of Wisconsin which is what i know best at this point um to come i'm going to make one comment and then i'm going to go and talk from the other side okay first of all um the average debt load at the University of Wisconsin for the average graduating student is about 25 000 a year there is an enormous amount of literature that tries to measure the returns to education and we can argue about is it well done or badly done and which are more believable than others but most of those say that the returns to a four-year college degree on average are somewhere around 750 to 800 thousand okay now if i told you i'm going to give you a 25 000 loan and you're going to invest it and your return is going to be 750 to 800 000 i hope everyone in this room would basically make that investment okay um so on average debt levels are not very high relative to the returns now not everyone gets those returns some people of heart you really have to worry about the people at the very high and we've got kids who graduate from Wisconsin with you know more than a hundred thousand dollars in debt and i'm trying to identify who are those students and their families and how do we get counseling and assistance to them 25 000 on average doesn't bother me a hundred thousand really does so debt by itself isn't per se a problem for you you can like or not like this but we are financing investments through debt you know people put down lower down payments they put for cars they do that for houses we borrow more and one of the things we're borrowing more for and putting down and saving less far is college and that happens across the board in this society now compared to 30 years ago so you know you can't hold colleges accountable for the fact that people are borrowing more and saving less than everything all of that said i really worry about debt levels for certain groups right and um you know there are first of all it makes it very hard for some people to get to college because they look at 25 000 dollars in debt if you come from low-income family you just you're actually i'm never going to get out from under that this is impossible i'm just not going right so you have to have scholarship aid financial aid work study aid packages you can put together not just for poor families but for the lower middle income families i actually serve poor families pretty well at the university of wisconsin because we get Pell grants and we have enough scholarship aid to supplement those Pell grants so that i can attract you know poor students who get into the university of wisconsin i actually give a pretty good deal to um it's the lower middle income families to whom however low you may look at my tuition and say it is it's about ten thousand dollars a year um you know that it's just an enormous amount of money for those families and my scholarship aid is not deep enough to go far enough into the pool for those families i would love to do a much better partnership with the state much less with the federal government but i the state because i'm a state university to um assist more people in wisconsin going to school by asking the state to put more scholarship money up i'm even willing to match that money with private donations but that takes a certain level of partnership and vision on the part of the state legislature and um state legislatures and i'm not talking about wisconsin at all in any individual way here right now we're much more worried about budgets and much more suspicious about higher education than i wish they were and my problems aren't any different than the problems of a chancellor or president in virtually every other big state university um we just don't have the sorts of public investments that we need to assure low income students that they're not going to face unhandled debt loads and that they can't afford to come to school and i can work on solving that problem in part but i do need some public help with that that at least at this moment is not forthcoming do you have any comments about capital in the 21st century by thomas piquetti um i've read the reviews of this book i think it's just out in english it was written in french so uh it took a little bit to get translated i know thomas piquetti i know his work i've read the reviews that i suspect all of you have read he is a superb researcher and everything that i've read suggests to me this is a wonderful book and i'm looking forward to reading it and i recommend it to all of you as well who are interested in this topic he has more data cross-country on any quality issues than any other researcher out there so he's got a lot of fascinating things to say um of comparisons across countries and this will be our last question um from your conclusion that a that a period of political turmoil is a bad thing i wonder if it really is isn't that what gave us i guess the united states the civil rights movement i'm sorry i'm just beginning that you said it again from your your conclusion that a period of political turmoil is a bad thing i wonder if it really is yeah i got it um yes so you know political turmoil has positive and negative effects um i particularly worry about political turmoil that emerges from different economic groups just you know talking having completely different experiences but you are absolutely right it was exactly you know a completely different sense of reality within black america living particularly in the south and jim crow laws you know much less the um much more um you know less avert discrimination going on in the north and white america who thought there were no problems that led to that civil rights movement and you know so the question there is how did more and more people come to see some of enough of the world through the eyes of black americans that they began to support the civil rights movement right um but the civil rights movement i should say had some very clear goals about housing access and voting access and educational access you know it was really clear what the policies were that they were talking about the current discussion that we're having around inequality is so much murkier you've got groups with very different perspectives on the world but there's not a clear set of policies to argue and one of the things that gave power to the civil rights movement was people looked at them and said yeah all americans should have access to voting all americans should have access to you know equal education um we don't quite you know sort of so we don't quite have as well focused a set of policies around inequality and that's the comment that i tried to make if this discussion is going to actually live and result in some changes we have to have an answer to the so what question what should we do tomorrow what are the policies that we can take to middle and upper income america and argue this is really important to bring this country together and to provide opportunity i would have said health insurance for all was a pretty good one but we've never been able to do that in the last 40 years of debate you know this is not unique to the last 10 years i would have thought access to higher education or preschool education might have worked um maybe we'll get there with preschool you know there is a changing discussion but it's slow and um i think we need a much clearer agenda if there's going to be an inequality movement a much clearer policy agenda that seems doable to people and looks like it's going to have an impact that what you say there's a problem with inequality you can then lean forward and say and here's what we need to do and this will make a difference and you can say that confidently and that will then get translated into people all over the country saying that and folks beginning to get behind the movement we don't have that yet and so there's not a movement yet there's just political dissension and that's dangerous so i'll stop there thank you thank you very much for your informative and really thoughtful remarks about such an important topic in our city foundation lecture series i'd also like to thank all of you for joining us for all of the questions this is a topic that is um well suited to continued discussion and conversation and i hope that all of you will join us for a reception in the raccoon lobby just outside of those doors and with that please join me in a final thank you to chancellor rebecca blank