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Report

Creating opportunity for the forgotten Americans

Edward Rodrigue and Isabel V. Sawhill

Summary

The 2016 election revealed that there are a lot of “forgotten Americans” who have been hurt by trade, technology, and deindustrialization, and who voted for a change. With a unified government, we now have an opportunity to address this problem. We need to strengthen families, rethink education, and create more good jobs. This chapter contains a number of ideas for how these goals might be accomplished. One such idea is to empower young people to only have children when they want them. Another idea is to provide more career and technical education and to use charter schools as a source of innovation. A third idea is to lower taxes on repatriated corporate earnings and use the proceeds to fund a new infrastructure program that would simultaneously make America’s public facilities great again and put people back to work. What we must not do is balloon the deficit or shred an already thin safety net in the process.

Editor's Note:

The following brief is part of Brookings Big Ideas for America–an institution-wide initiative in which Brookings scholars have identified the biggest issues facing the country and provide ideas for how to address them.

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The 2016 election was a revolution. Americans voted for change, perhaps big changes, and the new president has promised to deliver, to make America great again. At issue is what kind of change we will have and whether it will satisfy the voters and remain consistent with our basic values of tolerance, inclusion, and respect for civil liberties.

One thing is certain. The era of gridlock is over. The ability to achieve big changes is now possible. It is no longer constrained by divided government. Republicans are firmly in charge in every branch and at every level of government. That could translate into an opportunity to achieve great things. It could also further fragment the country and make many people worse off. The path chosen matters—hugely.

This chapter provides a set of ideas that could turn this new era into one in which real progress is achieved for those who have been left behind—those who our new president calls the forgotten Americans. For too long, we have failed as a nation to expand opportunities for Americans of modest means. This chapter is focused on three key determinants of upward mobility: strong families; a better education and training system; and, most critically, jobs that provide an upward ramp into the middle class for low-income and working-class families.

How do we do that? There have long been three “norms” in American life: get an education, work to support your family, and be a good parent. In our research at Brookings, we have shown that if you graduate from high school, live in a family with at least one full-time worker, and wait to have children until you are married or at least are in a committed partnership with another adult, your chances of being poor drop to about 2 percent and your chance of joining the middle class climbs to over 70 percent.1 (See figure 18.1.) We call this the success sequence.

What the country now needs is a new set of policies that give people a fair chance to succeed in their roles as parents, as students, and as workers in a 21st-century economy. These policies should be designed to reward, not punish, individual initiative and responsibility. But they must also recognize the web of disadvantages and changes in the economy that have made following the success sequence difficult for many Americans. There are no silver bullets. Government cannot do this alone. But government has a role to play along with civic and religious institutions dedicated to making the country whole again.

Marriage or a stable relationship before children: it is achievable

The first prerequisite to forging an opportunity society is establishing stable families. Too many young adults are having children before they have formed enduring ties with another adult and too many are parenting children with more than one partner. Increasingly, it takes two paychecks to join the middle class; those who have children too soon and without a committed partner frequently end up not just with less education and job experience, but also without sufficient means to support a child on their own.2 They end up experiencing less social mobility and more poverty as a result;3 their children have poorer outcomes as well;4 and they are often dependent on government assistance.

Percent of each norm-group in poverty.

 

Most children now being born to unmarried women under the age of 30 are unplanned.5 These women tell us that they either did not want a baby or did not want one (or another one) so soon.6 If we could empower young adults to only have children when they themselves feel ready to become parents, we could reduce unplanned pregnancies and out-of-wedlock births. That alone would reduce poverty and lack of mobility. It would greatly improve the life chances of the children themselves.7

The solutions here are often nongovernmental and involve changing social norms around the importance of responsible, two-person parenthood. Nonprofit and faith-based organizations have a role to play. Some have called for a new generation of government-sponsored marriage programs and for reducing marriage penalties in tax and benefit programs. But these do not appear to be a cost-effective way to bring back the two-parent family. More promising are efforts to make the most effective forms of birth control (IUDs and implants) more widely available at no cost to women. IUDs and implants provide a virtually foolproof way for couples to delay parenthood until they are committed to each other for the long term and feel ready to be parents.8 Efforts to provide women with good counseling and no-cost birth control in Colorado and a few other places have been highly successful and could be encouraged on a wider scale. A recent report from the consulting firm Bridgespan details the kinds of investments that are needed and recommends this approach not only as highly cost effective but also as one of the six “best bets” for improving opportunity in America.9

The Affordable Care Act addressed one of the barriers to responsible parenthood: the high cost of the most effective forms of contraception. If it is repealed and replaced, this cost issue needs to be addressed. Otherwise, we will have not just more poverty and less opportunity, but also higher government costs for Medicaid and other safety net programs and much higher rates of abortion.

Education: time for innovation

High school graduation rates for the country as a whole have improved in recent years and are now over 80 percent.10 In the urban districts of the nation’s 50 largest metropolitan areas, however, only 59 percent of students who started high school in 2005 graduated four years later.11 We can do better. For example, Mayor Bloomberg’s Small High Schools of Choice in New York City12 and a nationwide school model called Career Academies13 have both proven remarkably successful

In addition to scaling up successful programs, we need more innovation via charter schools or school choice. Not all charters have been successful, but the best ones have shown that it is possible to help all children achieve and to close racial and socioeconomic gaps.

Reform of K-12 schools is critical, but some postsecondary education is increasingly vital in today’s economy. There are two pressing needs here. The first is more emphasis on career and technical education linked to good jobs that can enable more people to take pride in their specific skills and to launch—or relaunch—successful careers. The second is more emphasis on merit or student performance (along with need) as one basis for financial aid. American students have fallen behind students in other countries not because they spend too little time in school but because they do not learn enough in the process.14 In most northern European countries (whose high school students routinely outscore U.S. students on international assessments), college attendance is more heavily subsidized than in the United States, but it is also more conditional on a student’s academic performance and college readiness. In a similar vein, student financial assistance in the United States could be based not just on need, but also on performance in school, creating an incentive for middle and high schools and their students to better prepare for both college and career.15

Work is essential

Of the three pillars of opportunity (family, education, work), work is by far the most important. It has often been said that a job is the best antipoverty program. I would add that a full employment economy is the best jobs program.16 But it is not just the poor who have suffered from lack of work. The recent election has revealed considerable voter anger or concern about the disappearance of jobs due to trade, technology, and the deindustrialization of the economy. Working-age men, especially those without much education, have been dropping out of the labor force for decades.17 One reason is because they no longer have the skills that employers expect. A second is because mass incarceration has marked many of them as unemployable in the eyes of employers. A third is because the jobs available to them are largely in retail, in health care, or in other services where wages are lower than what they have come to expect.

While these problems are all too real, it would be easy for a new administration and Congress to misread the situation. First, it is not trade as much as technology that has destroyed manufacturing jobs; those jobs are not coming back, almost regardless of what we do. Second, there are no quick or easy solutions. Better education and training, especially career and technical education, have a critical role to play, but that approach will pay off only gradually over time. Third, there is much work to be done repairing our infrastructure and making bold investments in such things as highways for driverless cars and trucks, new technologies to combat climate change, or efforts to eradicate diseases such as cancer or Alzheimer’s disease. But to make a discernible difference in the lives of struggling individuals and communities, these projects will require large amounts of both public and private funds, something akin to the Marshall Plan after World War II. Given our already debt-ridden fiscal future, such a plan would be possible only if there are new revenues, perhaps from a value-added tax (VAT) or carbon tax or from a modest tax on the repatriation of the $2 trillion in overseas profits held by American corporations. The challenge is huge; it is potentially transformational; but it is totally inconsistent with a major reduction in taxes that would balloon an already out-of-control national debt.

Many jobs, new or old, will realistically continue to pay low wages. So a new administration should also worry about making work pay. One way to do that is to raise the minimum wage and increase the Earned Income Tax Credit (EITC) as proposed by myself and Quentin Karpilow.18 Our proposal would raise the EITC for families with very young children, eliminate the marriage penalty, and redirect some benefits from larger to smaller families and to single individuals. These provisions both incentivize work and encourage marriage and responsible child bearing. A reform with these elements—combined with an increase in the minimum wage to around $10.00 an hour—would reduce poverty by seven percentage points at virtually no cost to the government because a higher minimum wage reduces reliance on public programs. We could also provide an EITC bonus to those who work full time as a way to encourage more hours of work; the United Kingdom has done this with some success.19

A second possible option is a second-earner deduction. This proposal would also make work more rewarding by softening the blow of child care costs and other work-related expenses that affect two-earner households, while encouraging marriage.20

A third policy for getting more people working is to make it easier for Americans to combine work with raising families. That means more child care assistance and paid leave. Currently, our tax system tries to cover some child care expenses through the Child and Dependent Care Tax Credit (CDCTC). But because the credit is nonrefundable, much of the money goes toward families with incomes between $100,000 and $200,000.21

Making the CDCTC refundable and capping it at $100,000 in income would make the program more equitable and facilitate low-income parents’ labor force participation at little to no cost above the current spending on the CDCTC.

Meanwhile, the United States is the only advanced country that does not provide paid family leave as a matter of national policy. The four states that have shown the way here—California, New Jersey, New York, and Rhode Island—can serve as models for the rest of the country. Critics contend that paid leave will impose costs on employers and impede hiring. Yet 90 percent of employers surveyed after California’s paid family leave law was implemented said it had either a positive or neutral effect on productivity, profit, morale, and costs.

Finally, there will always be some people who want to work but cannot find jobs, even when the economy is at full employment. They may have a prison record, have the wrong skills, or be new entrants to the job market. For people who are not able to find a job on their own, the administration and Congress should consider transitional job programs that provide subsidized low-wage work in either the public or the private sector. Evaluations of these programs have a mixed record of success, but some promising models exist.22 These jobs also provide a way to identify which of the currently jobless are “truly unemployed” and how many are not interested in work. A transitional job offer could be tied to applications for safety net programs such as extended unemployment insurance to reveal who has the greatest need for such assistance, while simultaneously screening out those who refuse to work and reducing program costs.

conclusion

The new administration and Congress have a historic opportunity to address some of the problems that have prevented both the poor and the working class from moving up the economic ladder and have undermined their self-respect, their health, and even their longevity.23 Although the economy is now beginning to recover from a long and deep recession, structural problems remain. These include little or no gain in wages for these groups, difficulty accessing jobs, family fragmentation, alcohol and drug dependence, and deteriorating communities.24 The ingredients of a new, new contract with America exist. They would include a new domestic Marshall Plan funded by a new source of revenue, such as a VAT or a carbon tax, and in the short run by a “re-entry tax” on corporate profits. They would also include a much more robust education and training system that prepared people for the jobs of the future. To this must be added an effort to produce more stable families. A brighter future for children begins with families and especially with responsible decisions about when and with whom to become a parent.

As important as what we should do is what we should not do. Protectionism will not help anyone in the longer run. It would raise prices, destroy jobs in export-oriented industries, and lead to retaliation that could usher in a worldwide recession. A new round of budget-busting tax cuts favoring the more affluent and corporate America is neither affordable nor likely to significantly increase long-run economic growth25 (although the short-run effects could be very positive). Efforts to simplify the safety net and to provide more flexibility to the states have merit. But deep cuts in what is already a thin layer of protection for the most vulnerable must be avoided.

Download Sawhill and Rodrigue’s proposals from this paper, the AEI-Brookings poverty report, and the candidates »

Read more in the Brookings Big Ideas for America series »

The table of proposals available for download was updated on 10/11/2016 to include proposed changes to the Child Tax credit announced by the Clinton campaign that same day.

Footnotes

  1. Isabel V. Sawhill and Edward Rodrigue, “The Three Norms Analysis: Technical Background” (Brookings, 2016).
  2. Isabel V. Sawhill, Generation Unbound: Drifting into Sex and Parenthood Without Marriage (Brookings Institution Press, 2014).
  3. I estimate that the growth of single-parent families since 1970 has increased the child poverty rate by 25 percent; Sawhill, Generation Unbound.
  4. Isabel Sawhill and Joanna Venator, “Improving Children’s Life Chances through Better Family Planning,” CCF Brief No. 55 (Brookings Center on Children and Families, January 2015).
  5. Sawhill, Generation Unbound.
  6. Ibid.
  7. Sawhill and Venator, “Improving Children’s Life Chances.”
  8. Isabel Sawhill, “Reducing Poverty by Cutting Unplanned Births,” Health Affairs Blog, http://healthaffairs.org/blog/2015/08/21/reducing-poverty-by-cutting-unplanned-births/
  9. Ben Schiller, “Spending $1 Billion on Reducing Unintended Pregnancy Would Deliver $6 Billion to the Economy,” Fast Company, September 21, 2016, www.fastcoexist.com/3063555/future-of-philanthropy/spending-1-billion-on-reducing-unintended-pregnancy-would-deliver-6-b; Michelle Boyd, Devin Murphy, and Debby Bielak, “‘Billion Dollar Bets’ to Reduce Unintended Pregnancies: Creating Economic Opportunity for Every American” (Boston: Bridgespan Group, August 2016).
  10. See National Center for Educational Statistics, “Digest of Education Statistics, Table 219.10,” 2013, http://nces.ed.gov/programs/digest/d13/tables/dt13_219.10.asp.
  11. Christopher B. Swanson, “Closing the Graduation Gap: Educational and Economic Conditions in America’s Largest Cities” (Bethesda, Md.: Editorial Projects in Education, April 2009).
  12. Rebecca Unterman, “Headed to College: The Effects of New York City’s Small High Schools of Choice on Postsecondary Enrollment” (New York: MDRC, October 2014).
  13. James J. Kemple, “Career Academies: Long-Term Impacts on Labor Market Outcomes, Educational Attainment, and Transitions to Adulthood” (New York: MDRC, June 2008).
  14. Isabel V. Sawhill, “Higher Education and the Opportunity Act,” in How College Shapes Lives: Understanding the Issues, edited by Sandy Baum, Charles Kurose, and Jennifer Ma (New York: College Board, October 2013).
  15. Isabel V. Sawhill, “Target Aid to Students Most Likely to Succeed,” Education Next 14, no. 2 (Spring 2014): 58–64.
  16. Dean Baker and Jared Bernstein, “Getting Back to Full Employment,” CCF Brief No. 52 (Brookings Center on Children and Families, March 2014).
  17. White House Council of Economic Advisers, “The Long-Term Decline in Prime-Age Male Labor Force Participation” (U.S. Executive Office of the President, June 2016); and Nicholas Eberstadt, Men Without Work: America’s Invisible Crisis (West Conshohocken, Pa.: Templeton Press, 2016).
  18. Isabel V. Sawhill and Quentin Karpilow, “A No-Cost Proposal to Reduce Poverty and Inequality,” CCF Brief No. 51 (Brookings Center on Children and Families, January 2014); and Isabel V. Sawhill and Quentin Karpilow, “Raising the Minimum Wage and Redesigning the EITC” (Brookings Center on Children and Families, January 30, 2014).
  19. The current version of the U.K. program, called the Working Tax Credit, provides individuals with £810/year (roughly US$1,250 in 2015) if they work at least 30 hours per week. See HM Revenue and Customs, “Tax Credits, Child Benefit and Guardian’s Allowance,” 2016, www.gov.uk/government/publications/rates-and-allowances-tax-credits-child-benefit-and-guardians-allowance/tax-credits-child-benefit-and-guardians-allowance. See also Mike Brewer, Alan Duncan, Andrew Shephard and María José Suárez, “Did Working Families’ Tax Credit Work? The Final Evaluation of the Impact of In-work Support on Parents’ Labour Supply and Take-up Behaviour in the UK” (London: HM Revenue and Customs, 2005) www.gov.uk/government/uploads/system/uploads/attachment_data/file/329203/ifs-laboursupply.pdf.
  20. Melissa S. Kearney and Lesley J. Turner, “Giving Secondary Earners a Tax Break: A Proposal to Help Low- and Middle-Income Families,” Discussion Paper 2013-07 (Hamilton Project, Brookings, December 2013).
  21. James P. Ziliak, “Proposal 10: Supporting Low-Income Workers through Refundable Child-Care Credits,” in Policies to Address Poverty in America, edited by Melissa S. Kearney and Benjamin H. Harris (Hamilton Project, Brookings, June 2014), 109–17.
  22. Dan Bloom, “Transitional Jobs: Background, Program Models, and Evaluation Evidence” (New York: MDRC, February 2010), http://www.acf.hhs.gov/sites/default/files/opre/tj_09_paper_embed.pdf.
  23. Alan B. Krueger, “Where Have All the Workers Gone?” (paper prepared for the Federal Reserve Bank of Boston’s 60th Economic Conference, October 2016); and Anne Case and Angus Deaton, “Rising Morbidity and Mortality in Midlife among White and Non-Hispanic Americans in the 21st Century,” PNAS 112, no. 49 (December 2015): 15,078–83.
  24. Charles Murray, Coming Apart: The State of White America, 1960–2010 (New York: Crown Forum, 2012); Eberstadt, Men Without Work.
  25. William G. Gale and Andrew A. Samwick, “Effects of Income Tax Changes on Economic Growth” (Brookings, February 1, 2016).
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