Unequal States of America

Monday, March 23, 2015

A new report by the Economic Policy Institute examines differences in income inequality by state. While economic growth has been extraordinarily lopsided in every state in recent years--with far greater gains accruing to already-wealthy individuals than to the more economic disadvantaged--some states are even more starkly divided than others. In some states, the top 1% of earners received ALL of the income growth between 1979 and 2007, while the incomes of the bottom 99% actually declined. In more states, well over half of the income growth went to these highest earners, with resulting erosion of the financial well-being and economic mobility prospects of poorer households.

This analysis, which peels back the data on income inequality to look further at geographic distinctions, has significant implications for many areas of U.S. social and economic policy, particularly in light of trends toward devolution in recent decades. At AEDI, we're thinking about these state variations particularly in the context of Children's Savings Account policy. Much of the momentum around CSAs in recent years has been at the state level, with new policies in Nevada, Maine, Connecticut, and Rhode Island, in particular. These are exciting developments, but we aren't convinced that states can ever deliver CSAs as we understand their potential: as universal, progressive, asset-building, lifelong interventions, with the power to transform children's educational and economic trajectories. CSAs offered by states will likely always be constrained by states' limited fiscal capacity and, as underscored here, by the significant variations in states' own measures of inequity, which serve to simultaneously increase the need for CSA interventions in some places, while also making them potentially less politically palatable or financially viable.

Reports like this one remind us why economic mobility investments like CSAs matter so much: to be locked in the bottom rungs of the U.S. economic ladder is, more than ever, to be sentenced to inadequate incomes and denied opportunities for robust wealth creation. And they should point us in the direction of the best policy approaches, too, particularly as the CSA field continues to consider design and implementation of CSAs, including the best way to leverage state policy for national progress.

Because these United States are unequal, maybe even more than we realized.

But it doesn't have to be that way.

New Book Released

Today’s student loan system is in place because of a political compromise, and growing discontent with student debt may signal that this arrangement has run its course. While there are resources and organizations in place to help those struggling with debt, the time has come to consider a new direction for financial aid, William Elliott III and Melinda Lewis argue in “Student Debt: A Reference Handbook.”

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