The U.S. economy and society are rife with racial and ethnic inequalities, from wealth and income divides to disparities in health and well-being, education, and employment outcomes. These racial and ethnic inequalities are a result of centuries of systemic racism and discrimination, which prevents people of color from moving to better-paying work, accumulating wealth, and otherwise developing and fully deploying their human capital in the U.S. economy and labor market.
These disparities have only gotten wider during the coronavirus recession in 2020 and amid the continuing coronavirus pandemic. Economists and social science researchers have long debated and studied these trends, yet data collection and reporting have long faced obstacles in best reflecting the diversity of the U.S. economy. These challenges not only limit the scope of data-driven research but also obscure its findings and, in turn, impede efficient and effective policymaking aimed at promoting strong, stable, and broadly shared economic growth.
This was the general theme of an Equitable Growth and Groundwork Collaborative virtual event this past summer, “Data Infrastructure for the 21st Century: A Focus on Racial Equity,” in which I spoke on a panel of fellow academic experts on the importance of racial equity in federal data collection. My co-panelists and I—all scholars of color who study underrepresented populations and subpopulations in the United States—discussed actionable proposals to increase the quality and utility of data gathering and analysis.
One such technique is oversampling, a method in which particular groups are surveyed at higher rates than they actually appear in the population. Oversampling can facilitate data disaggregation for these underrepresented groups in the United States and enhance the accuracy and generalizability of research findings.
Aggregate data points and statistics, such as Gross Domestic Product or the unemployment rate, are inadequate representations of the current U.S. economic situation because they lump all populations together and calculate an average. In reality, various groups and subgroups of the U.S. population fare differently in the economy and across society, rendering averages inaccurate portrayals of most people’s lived experiences.
To properly measure how all U.S. workers and their families are faring in the labor market, or how policies are impacting their lives, disaggregating data is therefore essential.
As I mentioned in my opening remarks at the recent data infrastructure event, I do a lot of research on small groups in the U.S. population, such as American Indians, Alaska Natives, Native Hawaiians, and Pacific Islanders. This work is facilitated with the use of administrative data that contain the entire populations of AIAN or NHPI groups and thus make it possible to conduct statistical analysis and data disaggregation.
But it’s not only studies of these smaller demographic groups that benefit from better data disaggregation. Larger demographic groups such as Hispanic Americans and Asian Americans that tend to be clumped together in surveys have an array of subgroups that face diverse challenges and experience the U.S. workforce and economy differently.
When researchers use broad categories to analyze outcomes for these groups, we essentially just get the average effect and lose a lot of nuance that is incredibly valuable for our research and findings, as well as policy implications. (See the video for more details.)
There’s another side of this question of missing the nuance in research findings that comes from a lack of diversity among researchers doing the research, framing the questions, and surveying the population. It’s no secret that economics as a profession and a field in general has a diversity problem. Women, people of color, and especially women of color, face incredibly high barriers to entry and success, starting at the undergraduate and graduate level. For instance, in the United States, between 2015 and 2019, no economics doctorates were awarded to Native American women out of the 1,200 doctorates awarded in that time period.
This diversity problem extends beyond who studies economics or teaches it to the next generation. One of the many pitfalls of not having diversity among researchers is that certain areas of research, outcomes, and evaluation tend to be forgotten—many of which could inform future research and policy decisions.
One example I discussed at the virtual event this past summer is the universal basic income program that many American Indian tribes have provided for the past 25 years. This means there are extensive data that can shed light on the effects of a universal basic income on labor force participation or poverty rates, among other areas—yet no one is really talking about them or paying attention to them, despite the knowledge that policymakers could gain from learning about these communities’ long-run experience and the effect on their communities.
This is just one example. But there are probably many others that academics and policymakers alike don’t realize they are missing because of a lack of diversity among economists. These areas of unexplored research opportunities are often only known to the communities in which they are being put into practice, which means that without researchers from those communities, they will probably remain unknown.
This profound lack of diversity in economics not only limits the scope of academic research and policy evaluation but also curbs the effectiveness and creativity of policymaking itself, as well as the ability of federal, state, and local governments to set up effective economic and social programs that create better economic opportunities and build better communities.
Policymakers today have a unique opportunity to pass life-changing and essential legislation that will enable millions of Americans to achieve better economic and social outcomes in unprecedented fashion. But in order to fully comprehend the impact of these programs, we need disaggregated data to shed light on how various U.S. communities are affected by them, and we need economists from all backgrounds to analyze and evaluate those data. Not only will future research benefit from it, but so will the communities studied by academics and served by policymakers.
—Randy Akee is an associate professor in the Department of Public Policy and American Indian Studies at the University of California, Los Angeles.
Economics as a field is beleaguered by a diversity problem. This is not a new phenomenon, but diversity-related issues are now more widely discussed within many organizations and professional disciplines, including among economists, in light of how COVID-19 and the unraveling of the U.S. economy exposed sustained racial and social inequities alongside ongoing systemic discrimination and violence against Black Americans and other Americans of color.
The lack of representation in economics results in pervasive barriers and blind spots along the economics pipeline and pathways, from who becomes an economist and how economics is taught to how data are collected and the ways in which researchers and policymakers analyze and use those data. As a Latina economist who has long worked to diversify the profession—particularly with respect to race, ethnicity, and gender—I know all too well the obstacles that my peers face in the field, as well as the benefits of the diversity in lived experiences, viewpoints, and backgrounds that we bring to the table.
These challenges and their effects on the economics profession were largely what pushed my colleagues and me, back in 2002, to found the American Society of Hispanic Economists, a professional association of economists concerned by the underrepresentation of Hispanic voices in economics. We seek to promote research on economic and policy issues affecting Hispanic communities and the United States as a whole, and to encourage more Hispanic Americans to enter the economics profession.
I recently spoke about my experience founding ASHE and my desire to promote more diversity in economics at an Equitable Growth virtual event co-hosted by the Groundwork Collaborative earlier this year. I explained the importance of diversity of perspectives in academia to shape what we study and how we go about it. I also highlighted ASHE’s work—along with the American Economic Association’s mentoring program, which is funded by the National Science Foundation, for traditionally underrepresented minorities—in mentoring early-career economists and graduate students.
These young scholars tend to be more at-risk of leaving the economics profession—or even not entering it at all or completing their degrees—due to harassment, discrimination, feelings of isolation, or unfair treatment arising from lack of diversity. (See video for details.)
The event centered on the importance of racial equity in federal data collection and how disaggregating data can illuminate certain racial and ethnic inequalities that permeate our economy and society. Better understanding the lived experiences of various demographic groups expands our understanding of how the economy is working for all Americans in a way that is often obscured by more traditional macroeconomic aggregate numbers, such as Gross Domestic Product. And disaggregated data can guide policymakers as they work to address racial disparities and the systemic racism from which they stem.
The push to disaggregate data along race and ethnicity lines is one I have long worked on and am passionate about, particularly as it relates to specific subgroups of the Hispanic American community. The experiences of Mexican Americans or Puerto Ricans differ from those of Cuban Americans or Dominicans, for instance, but those distinctions are obscured by aggregate statistics that lump all Hispanics together.
There also are differences within subgroups. Mexican Americans, for example, include immigrants from Mexico but also U.S. natives whose families have lived in areas that predate the United States. And Puerto Ricans growing up in Puerto Rico are U.S. citizens by birthright, but their lived experiences are not necessarily the same as those growing up on the U.S. mainland.
As I mentioned at the Equitable Growth-Groundwork Collaborative event, “When we think about the Hispanic or Latino population, it’s actually quite heterogeneous. And sometimes … we just hear about the ‘Hispanic population’ or what’s happening with Hispanic employment or unemployment, without understanding that there are key differences within the Hispanic population.” (See video for details.)
So, what can academics and policymakers do about it?
For one, oversampling would improve the ability to analyze subgroups of the U.S. population. Oversampling is a survey tool that targets specific groups at a higher rate than they appear in the overall population to address the frequent underrepresentation of these groups in surveys. Larger samples would help researchers uncover different economic and social experiences of these communities and facilitate disaggregation among subgroups that are not well-represented by the aggregate data.
For instance, I often use the U.S. Census Bureau’s American Community Survey in my research because it is a large dataset that allows for some disaggregation of Hispanic groups. But even the ACS is limited in its ability to break down certain smaller subpopulations, and this is where expanding sample sizes could be useful.
In addition to oversampling, it is essential to complement survey and administrative data with on-the-ground data so that policymakers can develop and implement more effective policies to address specific needs of target groups. When I served on the board of directors of the Federal Reserve Bank of Dallas’ San Antonio branch, I quickly understood the value of having researchers and other stakeholders in the community learn firsthand about local conditions and gather so-called economic intelligence from the areas we, as board members, represented.
Indeed, the conversations we had in our respective communities shaped our understanding of the lived experiences of local residents and allowed us to examine, almost in real time, the potential effects of policies under consideration by the Fed. By sharing our insights with the Fed, we were able to help it formulate and implement more effective monetary policy.
In other words, collecting more and better data allows for more and better data disaggregation and analysis, which, in turn, allows for better policy decisions and outcomes. Knowing how to collect these data begins with empowering economists from diverse backgrounds to shape how we study different groups of people while providing unique perspectives from our lived experiences, making sure all voices are heard and respected.
As I and my fellow panelists reiterated, while disaggregating the data we collect and having “boots on the ground” requires effort and resources, not taking these steps is doing a disservice to ourselves, our research, the communities we study, and to local and national economic prosperity.
—Marie T. Mora is associate vice chancellor for strategic initiatives and professor at the University of Missouri-St. Louis.
Our recent policy conference, “Equitable Growth 2021: Evidence for a Stronger Economic Future,” brought together policymakers, academics, advocates, and thought leaders to discuss the best evidence-based ideas for building a stronger economic future for all Americans. The key themes of the 2-day conference included outlining a vision for sustained public investment in structures and institutions to spur equitable economic growth, with a focus on Black and Indigenous workers and workers of color and how to recover from the pandemic while addressing the ongoing racial, climate, and care crises our nation faces. Below is Equitable Growth President and CEO Michelle Holder’s opening address to the conference.
Since its inception in 2013, Equitable Growth’s mission has been to advance evidence-backed ideas and policies that promote strong, stable, and broadly shared growth. I’ve admired Equitable Growth from afar for so long, and I’m now thrilled to take the helm as its leader to help further its mission. After all, Equitable Growth’s mission hits home for me.
As a labor economist, my research examines why some groups in the U.S. workforce hold a more favorable status, while other groups hold a less favorable one. I also look at the consequences of this stratification and how it contributes to marginalization and disempowerment—and ultimately less prosperity and slower growth.
My research is informed by my lived experience, which lies at the nexus of characteristics associated with marginalization and cuts right to the heart of the issues affecting the economy today. The economy is not an abstract system that we have no control over. It is made up of people. People like me: a second-generation immigrant, first-generation college graduate, and working mom.
The economy is also a direct result of choices that policymakers make. A new day has dawned in government, and with it comes the possibility for long-overdue structural changes to the economy. The coronavirus pandemic continues to expose deep fragilities in our economy—especially racial and gender inequities—that economic policymakers have a once-in-a-generation opportunity to address.
Broadly shared economic growth is achievable, but a stronger, more equitable future requires deliberate policy choices coupled with a better understanding of what makes the economy grow. This is why I’m so excited to lead Equitable Growth in this moment, and this is why Equitable Growth’s mission is more important and relevant than ever.
Since 2013, Equitable Growth has provided more than $7 million in grants to more than 300 researchers aiming to understand how economic inequality affects growth and stability. Just last month, we announced $1.3 million in grant funding for 2021, a new record for the organization.
And we’ve managed to maintain this growth despite some pretty intense challenges, including the coronavirus pandemic. When the pandemic-induced recession hit, Equitable Growth was prepared. Our vast body of research exploring how inequality leads to a more fragile economy when shocks occur quickly moved from abstract to concrete.
The organization was able to meet the moment, connecting scholars and their research to policymakers desperate for data and recommendations to help guide their work. The result of that collaboration—as well as tireless organizing and advocacy from groups across the country—was the largest public program of economic relief in the nation’s history. Policies that both brought immediate relief amidst the recession and helped lay the groundwork for a more equitable future.
In 2019, for example, Equitable Growth, jointly with The Hamilton Project, published Recession Ready: Fiscal Policies to Stabilize the American Economy, a collection of big ideas and proposals aimed to help policymakers navigate the next recession. We were able to quickly amplify these ideas at the beginning of the coronavirus recession to help policymakers ameliorate the recession’s worst effects.
There are other examples as well. We published the books Vision 2020: Evidence for a Stronger Economy and Boosting Wages for U.S. Workers in the New Economy, which have provided evidence-backed policy ideas for the new administration and Congress. In fact, in the session later today on social infrastructure as an engine for equitable growth, you will hear insights from one of the essayists in Boosting Wages on how the lack of social investments contributes to market failures, such as many families’ inability to find or pay for adequate child care or cushion themselves against unexpected job loss.
Our in-house policy experts have extensively promoted ideas and policies ranging from investing in the care economy, to raising wages, understanding market competition, promoting new ways of measuring economic well-being, and combating fiscal austerity.
The list goes on.
We have built a foundation of research and have engaged with policymakers about the necessity for long-term, structural changes to the economy to ensure it works for families up and down the income ladder. In doing so, we’ve helped change the narrative about what makes the economy grow.
But there is more work to be done.
In addition to the pandemic exposing deep fragilities in our economy, 2020 also brought with it a racial reckoning in this country. And we have continued to see the consequences of climate change take hold, most recently with the devastation wrought by Hurricane Ida and the fires in California.
The current moment calls for a vision of sustained public investment in structures and institutions to spur equitable economic growth, with a focus on Black, Indigenous, Latinx, and Asian American workers. The current moment also calls for addressing inequities such as the gender and racial wage and wealth divides, and for centering people in that vision who have been ignored by policymakers for far too long.
And last but not least, the current moment calls for a coherent and comprehensive vision for emerging from the pandemic stronger and more equitable, unafraid of addressing the ongoing and overlapping racial, climate, and care crises our nation faces. Public investments in these areas can spur strong, stable, and broad-based economic growth by addressing longstanding racial and income inequality, driving clean energy and creating good jobs, and jumpstarting a new era of innovation.
This is a moment we must continue to face head on if we want an economy that works for everyone, not just the few.
President Joe Biden asked the U.S. Congress to consider investing $200 billion over 10 years in “a national partnership with states to offer free, high-quality, accessible, and inclusive preschool to all three- and four-year-olds, benefitting five million children.”1 This report calculates the 10-year costs and benefits of such a program. To understand the long-run implications of such a program, the analysis is then extended to a 35-year period. The key findings are:
Total costs and benefits over the first 10 years of the preschool program
A high-quality, publicly funded preschool education program will generate growing annual benefits that will surpass the more-slowly growing annual costs of the program within 8 years. Over the entire 10-year period, the present-value benefit-to-cost ratio is 1.01, which means that every tax dollar invested in the preschool program will generate $1.01 in total benefits over the first 10 years.
The benefits take the form of government budget benefits, increased wages and earnings of workers, and reduced costs to individuals from better health, less crime, and fewer incidences of child abuse and neglect.
Because the annual benefits grow more rapidly than the annual costs, in the 10th year itself, as opposed to over the course of the entire 10-year period, the present-value benefits exceed the present value costs of the program by a ratio of 1.68-to-1.
A high-quality universal preschool program will cost $6,600 per participant and could be expected to enroll about 64 percent of 3- and 4-year-olds, or just less than 5.2 million children, when it is fully phased in after 2 years.
The federal investment in the preschool program will also have a short-run stimulus effect that will boost Gross Domestic Product by $28.6 billion and create 210,200 additional new jobs during the first 2 years to help the U.S. economy recover more equitably and more sustainably from the coronavirus recession of 2020.
Government costs and benefits over the first 10 years
The present-value government benefit-to-cost ratio over the first 10 years of the preschool program is 0.47, which means that every tax dollar invested in the program will generate $0.47 in budgetary savings over the first 10 years. This means the budgetary savings of the preschool program, in the form of higher tax revenues and lower public expenditures on several public programs, will pay for almost half the total taxpayer cost of the preschool program during the first 10 years.
The margin by which taxpayer costs will exceed offsetting budget benefits declines progressively over each of the first 10 years of the preschool program. Thus, in the 10th year itself of the program, the tax-revenue increases and expenditure savings due to the preschool program pay for 68 percent of the program.
Total cost and benefits over 35 years
Over the first 35 years of the preschool program, the present-value total benefit-to-cost ratio is 4.93, which means that every tax dollar invested in the preschool program will generate $4.93 in benefits.
The annual benefits continue to grow faster than the costs. Thus, the benefit cost ratio improves with each subsequent year. In the 35th year, the final year of this analysis, the present value of the total benefits from government budgetary savings, increased compensation of workers, and reduced costs to individuals from better health, less crime, and reduced incidences of child abuse and neglect exceed the present value costs of the program by a ratio of 10.20-to-1.
By the 35th year, the long-run productivity effects of the preschool investment boost Gross Domestic Product by 0.5 percent and may generate as many as 787,000 new jobs.
Government costs and benefits over 35 years
Over the entire 35-year period, the present-value government benefit-to-cost ratio is 1.51, which means that every tax dollar invested in the preschool program will generate $1.51 in budgetary benefits over the first 35 years. This means the program more than pays for itself in budgetary terms.
Taxpayer costs initially exceed offsetting budget benefits, but by a steadily declining margin for the first 14 years. By the 15th year of the program, budgetary benefits exceed the taxpayer costs, and the program generates a budget surplus that grows every year thereafter.
In the 35th year of the program, the present-value government budget surplus amounts to $36.2 billion, with present-value government budget benefits that exceed the present-value government costs by a ratio of 2.84-to-1. This means that every tax dollar invested in the preschool program in the 35th year will generate $2.84 in budget savings, nearly triple the annual cost of the program.
Overview
The policy of investing in high-quality preschool in the United States provides a wide array of benefits to children, families, and society as a whole. Empirical research shows that all children, regardless of where their families are on the income ladder, benefit from preschool programs. In addition, the research confirms that higher-quality preschool programs provide greater benefits than lower-quality preschool programs.
Children ages 3 and 4 who participate in high-quality preschool programs require less special education and are less likely to repeat a grade. They and their families are involved in fewer incidents of child abuse and neglect, which reduces public child-welfare expenditures. And once these children enter the U.S. labor force, their incomes are higher, along with the taxes they pay back to society.
Both as juveniles and as adults, these children are less likely to interact with the criminal justice system, thereby reducing incarceration and criminal justice costs. As adults, preschool participants suffer less from depression and have lower rates of smoking, generating better health, steadier employment and income, and lower public health expenditures. And guardians of public preschool participants take advantage of the child care that, in effect, the programs provide to get a job or work longer hours and earn higher wages—and pay more in taxes.
Additionally, high-quality preschool programs provide budget benefits. High-quality preschool delivers government savings on Kindergarten through 12th grade spending, child welfare, the criminal justice system, and healthcare. High-quality preschool also increases government tax revenues. Thus, investment in high-quality preschool results in significant benefits for future government budgets, for the economy, and for society.
The economic and social benefits from preschool investment amount to more than just improvements in public balance sheets. A myriad of benefits accrue to the affected children, their families, and society as a whole. Children who participate in high-quality preschool programs fare better in school, have better home lives, and are less likely to engage in criminal activity than their peers who do not attend such programs.
The data show that participating children go on to higher achievement later in life, graduating from high school and attending college at a higher rate, and earning more once they enter the labor force. And the parents or guardians of children participating in preschool programs benefit both directly and indirectly from the services offered in high-quality programs.
Investment in young children not only has positive effects on the U.S. economy by raising incomes, improving the skills of the workforce, reducing poverty, strengthening U.S. global competitiveness, improving health outcomes, and reducing crime and incarceration rates. Given that the positive impacts of preschool are larger for at-risk than for more advantaged children, a universal preschool program will also help to reduce achievement gaps between poor and nonpoor children, ultimately reducing income inequality nationwide.
A nationwide commitment to high-quality early childhood education would cost a significant amount of money up front. But over time, government budget benefits outweigh the costs of high-quality preschool education investment—over time, high-quality preschool pays for itself. Yet our political system, with its 2- and 4-year election cycles, tends to underinvest in programs with lags between when investment costs are incurred and when benefits are enjoyed. The fact that governments cannot capture all the benefits of preschool investment may also discourage governments from assuming all the costs of preschool programs.
Although governments do not capture all the benefits of preschool investment, the economic case for making long-term public investment in preschool is compelling. Most government expenditures do not create offsetting receipts to the extent that early childhood education does. Indeed, it may be rare to find public programs that pay for themselves at the budgetary level. It is striking that a preschool program will have significant positive effects on the long-term government budget outlooks. This is why policymakers should consider a national preschool initiative as a sound investment on the part of government that generates substantial long-term benefits and not simply as a program requiring expenditures.
The evidence for long-term public investment in a nationwide public preschool program
Studies of high-quality preschool programs and their participants find that investing in the education of young children delivers a number of lasting benefits for the children, their families, and society at large, including taxpayers. Over time, these investments boost productivity, earnings, and taxes—and pay for themselves. This section of the report details the benefits to children, to families, to society, and to a more equitable economy.
Benefits for children
Assessments of well-designed and well-executed preschool programs find they provide a large variety of benefits to participating children. Preschool education enables young children to be more successful in Kindergarten and primary and secondary school, and in life after these school years, than children who are not enrolled in high-quality programs. In general, children who participate in high-quality preschool programs tend to have greater math, reading, and language abilities.2
More specifically, these children are better prepared to enter elementary school, experience less grade retention, and have less need for special education and other remedial coursework.3 They alsohavelower dropout rates, higher high school graduation rates, and higher levels of educational attainment.4 They also experience less child abuse and neglect, and are less likely to be teenage parents.5 Additionally, with the services offered in high-quality programs, they are better fed, gain improved access to healthcare services, have higher rates of immunization, and experience better health as children.6
As adults, high-quality preschool recipients boast higher employment rates, higher earnings, and lower rates of turning to public-assistance programs such as the Supplemental Nutrition Assistance Program and the Temporary Assistance for Needy Families program. Working and earning more, they pay more in taxes over their lifetimes. They exhibit lower rates of drug use and less frequent and less severe criminal behavior, engaging in fewer criminal acts both as juveniles and as adults and having fewer interactions with the criminal justice system, as well as lower incarceration rates. They also experience better health outcomes in adulthood, such as fewer episodes of depression and less tobacco use.7
In short, the benefits of high-quality preschool programs to participating children enable them to enter school “ready to learn” and help them achieve better outcomes in school and throughout their entire lives.8
Benefits for families
Parents and the families of children who participate in public, high-quality preschool programs also benefit. They benefit both directly from the services they receive in high-quality programs and indirectly from the child care provided by publicly funded preschool. In general, parents take advantage of the child care these programs provide by increasing their employment and earnings, and by investing in their own health and education.9
Mothers in particular benefit from preschool for their children. These mothers have better nutrition and smoke less during pregnancy.10 Parents with kids in preschool complete more years of schooling, have higher high school graduation rates, are more likely to be employed, have higher earnings, pay more in taxes, engage in fewer criminal acts, have lower rates of drug and alcohol abuse, are less likely to turn to public assistance programs, and are less likely to abuse or neglect their children.11
Benefits for society
Investments in high-quality preschool programs pay for themselves over time by generating benefits for participants, the nonparticipating public, and government itself. Studies of high-quality preschool programs find that they produce $2.63 or more in present-value benefits for every dollar of investment, with the programs whose subsequent benefits were studied over the longest periods generating well in excess of $7 in benefits per dollar of investment.12
The participants and their families get part of these total benefits, but the benefits to the rest of the public and government are large, too. On their own, these benefits outweigh the costs of these programs. Taxpayers benefit because preschool participants are less likely to repeat a grade or require expensive special education services or engage in crime or be incarcerated. They and their families also have less need for child welfare and public health services throughout their lifetimes. All of these are outcomes that reduce the cost of taxpayer-funded public services.
In addition, the increased lifetime earnings of the adults who receive a preschool education as children and of their parents enlarge the tax payments they make, pay for the preschool programs, and help fund other public services for society. Thus, it is advantageous even for nonparticipating taxpayers to help pay for these programs.
Benefits for a more equitable economy
Although children across the income distribution benefit from high-quality preschool education, the largest positive effects are on disadvantaged children from lower socioeconomic backgrounds.13 For mothers of preschool participants, the largest employment increases occurred among mothers without a high school degree.14 Thus, public investments in preschool reduce economic inequality.
A cost-benefits analysis of the American Families Plan’s proposal for a nationwide public preschool program
The 10-year, $200 billion American Families Plan’s investment in a nationwide preschool education program envisions a preschool program that is similar in its characteristics to the high-quality, public Chicago Child Parent preschool program. The Biden administration’s preschool proposal, for example, calls for a publicly funded preschool that will have “low student-to-teacher ratios, high-quality and developmentally appropriate curriculum, and supportive classroom environments that are inclusive for all students.”17
In addition, “educators will receive job-embedded coaching, professional development, and wages that reflect the importance of their work.” All employees participating in the preschool program “will earn at least $15 per hour, and those with comparable qualifications will receive compensation commensurate with that of kindergarten teachers.”18
So, what would be the effects of a 10-year, $200 billion public investment in a voluntary, high-quality, universal preschool program made available to 5 million 3- and 4-year-olds in the United States? To be consistent with the administration’s proposal, this analysis assumes a preschool program that is modeled on the Chicago Child Parent program. The program would operate 3 hours per day, 5 days a week, for 35 weeks a year (the school year), or a total of 525 hours.19 The program would be voluntary and available to all 3- and 4-year-old children.
The lead classroom teachers would all have bachelor’s degrees or higher, with certification in early childhood education, and would be required to pursue professional development. The teaching assistant in each class would have at least an associate’s degree. Teacher and staff pay would be high relative to most existing preschool programs, as compensation would follow the salary schedules of public schools.
For the children, the preschool program would provide health screenings, speech-therapy services, and home visitations. Parental involvement would be encouraged. The student-teacher ratio (including the assistant teacher) would be no higher than 17-to-2, and maximum class size would be 17 children. The curriculum would be comprehensive, with a focus that includes language and pre-reading skills, mathematics skills such as counting and number recognition, science, social studies, health and physical development, and social/emotional skill development.
This analysis assumes that the preschool education program would be largely housed within the existing or newly built public school infrastructure. But its services could be delivered in private care centers as well, if they meet quality standards.
A 2011 study of the Chicago Child Parent program that did not consider any short-run macroeconomic stimulus effects calculated a benefit-cost ratio of $10.83 by age 28.20 A 2015 study of the Chicago Child Parent program by the author of this report and Kavya Vaghul, then a research assistant at Equitable Growth, which focused only on the long-run productivity and behavioral impacts of the investments over 35 years, calculated that a voluntary, high-quality, public, universal preschool program modelled on that program would generate annual budgetary, health, and decreased crime benefits that would surpass the annual costs of the program within 8 years.
The 2015 study further found that within 35 years, when the first cohort of children would be in their late 30s, the annual benefits of the program would exceed the costs by a ratio of 8.85-to-1. Within 16 years, the budgetary benefits to governments alone—in the form of lower budget outlays for various programs and higher tax revenues—would surpass the costs of that program, and within 35 years, these budget benefits alone would exceed the costs by 2.37-to-1, or more than double the cost of the program.21 And these benefits would exceed the costs by a growing margin each subsequent year.
In this study, the costs and benefits of public investment in preschool, modeled on the Biden administration’s proposal, are calculated to analyze the effects of a $200 billion public investment over 10 years in high-quality preschool. Although the Biden administration’s proposal is for a 10-year program, this report assumes that the program will be renewed and become permanent. The analysis is then extended to consider the costs and benefits over a 35-year timeframe. These analyses take into account both the long-run productivity effects of preschool, as well as the immediate macroeconomic stimulus effects.
This study assumes that the program will be phased in over 2 years. The analysis considers budget effects on the federal government and the combination of state and local governments. Although responsibilities have shifted in the past and will continue to do so in the future over the 10- and 35-year timeframes used in this study, it is assumed that all levels of government will share in the costs of education, child welfare, criminal justice, and healthcare in the future in the same proportions as they do today.
Likewise, it is assumed that federal, state, and local tax rates will remain constant over the period analyzed in this study. It is assumed that federal, state, and local governments will maintain their efforts in Head Start, special education, and state preschool programs, but all additional costs attributable to the new preschool program will be paid by the federal government. However, regardless of which level of government pays the cost of the preschool program, the total budgetary benefits to all levels of government remain unchanged—only the cost burden shifts. In the case of a federally funded program, states and localities receive budget benefits without paying the additional costs of the program. And in a state-funded program, the federal government receives budget benefits without incurring the program’s additional costs.
Although the granular details of the plan are not yet all worked out, the preschool proposal currently being drafted and debated in the U.S. House of Representatives mimics the Biden proposal in many ways.22 The current House proposal seems to be designed to invest the same $200 billion in federal government money for universal preschool and enroll more children, though there is a greater expectation of the states and the District of Columbia sharing the costs and for the spending to sunset after 7 years. Assuming the program does not end after 7 years, these differences in cost sharing and enrollment do not significantly change the cost-benefit analysis provided here, although they would increase the number of children enrolled and reduce somewhat the ratio of benefits-to-costs calculated in this report.
An investment in a high-quality, publicly funded preschool program will generate annual costs and benefits that will vary from year to year. To evaluate the worthiness of the investment, we compare these annually varying costs and benefits, and calculate a benefit-to-cost ratio by using the standard economic and financial method of present value with a discount rate of 3 percent.23 Present value calculates the value in today’s dollars of future costs and benefits. If the ratio of present-value benefits-to-present-value costs is greater than 1, then the benefits of the investment exceed the costs, and it makes economic sense to undertake the investment.
Total costs and benefits over the first 10 years of the preschool program
A high-quality, publicly funded preschool education program will have both long-run productivity effects and a short-run stimulus effect on the U.S. economy that will generate growing annual benefits that will surpass the more-slowly growing annual costs of the program within 8 years. That is, over the first 7 years, the present-value costs will exceed the present-value benefits, but in the last 3 years, the benefits will be greater than the costs. Over the entire 10-year period, the present-value benefit-to-cost ratio is 1.01, which means that every tax dollar invested in the preschool program will generate $1.01 in total benefits over the first 10 years.
As noted above, the annual benefits grow more rapidly than the annual costs. Thus, in the 10th year alone, the present-value benefits—in the form of government budget benefits, increased wages and earnings of workers, and reduced costs to individuals from better health, less crime, and fewer incidences of child abuse and neglect—exceed the present value costs of the program by a ratio of 1.68-to-1.
The high-quality universal preschool program would cost $6,600 per participant and could be expected to enroll about 64 percent of 3- and 4-year-olds, or just less than 5.2 million children, when it is fully phased in after 2 years. As a result, the program would have a “gross” cost of about $34.3 billion annually when it is fully phased in. Some of this money, however, is already being spent on existing public preschool programs of mixed quality.24
A fraction of the funds used to finance these existing programs—equal to the ratio of children who would attend the new, high-quality preschool instead of the existing programs—would be used to fund the new preschool program. To avoid double-counting these expenditures, they are subtracted from the costs of the new program.
The bottom line is that the proposed high-quality universal preschool program would require approximately $19.1 billion in additional annual government outlays once it is fully phased in. The annual outlays for the program will then grow with inflation and the slowly growing population of children that it serves.
The federal investment in the preschool program during the first 2 years will also have a short-run stimulus effect that will boost Gross Domestic Product by $28.6 billion and create 210,200 additional new jobs to help the economy recover from the current recession.25
Government costs and benefits over the first 10 years
The present-value government benefit-to-cost ratio is 0.47, which means that every tax dollar invested in the preschool program will generate $0.47 in budgetary savings over the first 10 years. In other words, the budgetary savings of the preschool program, in the form of higher tax revenues and lower public expenditures on several public programs, will pay for almost half the total taxpayer cost of the program during the first 10 years.
For each of the first 10 years of the universal preschool program, taxpayer costs will exceed offsetting budget benefits but by a progressively declining margin. Thus, in the 10th year of the program, the tax revenue increases and expenditure savings due to the preschool program pay for 68 percent of the program.
The offsetting government budget savings begin small but grow over time. Budget savings in the first two years of the program will manifest themselves as reductions in child welfare expenditures as fewer children will be the victims of child abuse and neglect. In addition, some parents will take advantage of the universal pre-Kindergarten program for some of their child care needs, allowing them to work more and, thus, pay more in taxes.26
When the preschool participants enter the K-12 public school system, additional government budget savings will begin to appear, as these children will be less likely to repeat a grade or need expensive special education services. When the first cohort of children turns 10, further budget savings will begin to be realized as lower juvenile crime rates will require less public expenditure on the juvenile justice system.
The government budget deficit in the 10th year is based on a cash analysis that compares the impact of net government expenditures on the program to the additional taxpayer costs engendered by the program. Thus, the estimate that the government budget benefits pay for 68 percent of the cost of the preschool program considers all the additional costs due to the program but only the additional government budgetary benefits of the program—thereby ignoring the compensation, health, crime, and other social benefits of the program that accrue to the general public.
Once these other benefits of the program are taken into account, the universal preschool program, as noted in the previous section, pays for itself. In fact, the nonbudgetary benefits in the 10th year of the preschool program are, by themselves, equal to the costs of the program. Consequently, the budget benefits could be seen as bonuses that are in addition to the other nonbudgetary benefits that justify the investment.
It would similarly be unwise to judge the merits of investments in preschool solely in terms of their 10-year effects because many costs and benefits (both to the government and the public) manifest themselves only after 10 years and are a function of the long-run productivity effects of high-quality preschool.27 Among the other quantifiable costs and benefits of preschool investment are its impact on the future costs of K-12 education, the earnings of, and taxes paid by, preschool participants, their improved health, and their fewer interactions with the criminal justice system.
To capture these longer-term effects, we extend the analysis of costs and benefits to a 35-year framework, assuming that investment in preschool continues to grow with inflation and the population of 3- and 4-year-olds grows to maintain a 64 percent enrollment rate.
Total cost and benefits over 35 years
The present-value total benefit-to-cost ratio is 4.93, which means that every tax dollar invested in the preschool program will generate $4.93 in total benefits over the first 35 years.
The annual benefits grow faster than the costs. Thus, the benefit-cost ratio improves with each subsequent year. In the 35th year, the final year of this analysis, the present value of the total benefits from government budgetary savings, increased compensation of workers, and reduced costs to individuals from better health, less crime, and reduced incidences of child abuse and neglect exceed the present-value costs of the program by a ratio of 10.20-to-1. Thus, by making this investment, we will be leaving our children and grandchildren an enormous inheritance.
By the 35th year, the long-run productivity effects of the preschool investment boost Gross Domestic Product by 0.5 percent and may generate as many as 787,000 new jobs.28
Government costs and benefits over the first 35 years
Over the entire 35-year period, the present-value government benefit-to-cost ratio is 1.51, which means that every tax dollar invested in the preschool program will generate $1.51 in budgetary benefits over the first 35 years.
Taxpayer costs exceed offsetting budget benefits but by a steadily declining margin for the first 14 years. By the 15th year of the program, budgetary benefits exceed the taxpayer costs, and the program generates a budget surplus that grows every year thereafter. In the 35th year of the program, the present-value government budget surplus amounts to $36.2 billion, with total present-value government budget benefits that exceed the present-value government costs by a ratio of 2.84-to-1.
What explains this pattern of slowly growing budgetary costs and more rapidly growing budgetary benefits? On the cost side, after the first 10 years, the costs of the preschool program continue to grow as a result of inflation and the modestly increasing population of 3- and 4-year-olds that it serves. In addition, there are increases in government expenditures due to the increased educational attainment of preschool participants who drop out of high school at lower rates and complete more years of high school and go on to public colleges and universities at higher rates.
On the benefits side, the benefits identified during the first 10 years continue to manifest themselves. There are reductions in child welfare spending due to lower rates of child maltreatment. There are increased tax revenues generated from the earnings of parents who can now work due to the newly available child care. Public education expenditures diminish due to less grade retention and less need for expensive special education. And governments experience lower judicial system costs due to less juvenile crime, starting when the first cohort of pre-Kindergarten participants reaches age 10.
What’s more, there are significant additional budgetary benefits that manifest themselves after the first decade of the program. After a decade and a half, the first cohort of children begins entering the workforce, resulting in sharp increases in earnings and tax revenues because participants in high-quality preschool earn significantly more than nonparticipants. In addition, when the first cohort turns 18, governments experience lower judicial system costs due to less adult crime and lower public healthcare costs because preschool participants have fewer episodes of depression and lower tobacco usage.
Timing of phase-in
This analysis assumes a 2-year phase-in of the proposed preschool program. For political purposes, however, such as the need to secure enough votes to enact the program, it may be necessary to have a longer phase-in period. In addition, for practical reasons, such as the recruitment and training of teachers and staff and the establishment of appropriate locations, the preschool program may have to be phased in over a longer period. A longer phase-in would push back both the costs and benefits of the program and would reduce the 10- and 35-year benefit-to-cost ratios.
Omitted benefits of universal preschool
The various benefit-to-cost ratios of preschool investment are understated in our estimates because the analysis is limited to considering only benefits for which it was possible to obtain monetary estimates. Perhaps most important in terms of omitted benefits is the potentially positive effects on the children born to preschool participants who, as parents, will have higher earnings and employment, lower incarceration rates, and better health outcomes, which were not calculated.
Preschool is an investment in the parents of the future, who, as a result of that early childhood education, will be able to provide better lives and better educational opportunities to their own children. Hence, the children of preschool participants may be able to earn more and lead better lives. If this intergenerational effect were properly accounted for, then the benefits of preschool education may be substantially larger than those estimated in this analysis.
Other benefits that could not be monetized—such as the financial savings to families who would place their children in the publicly funded program but who, in its absence, would have paid the costs of private preschool—were left out.29 Since about one-quarter of all families with 3- and 4-year-old children place their children in private preschool programs, the savings to families from the use of publicly funded preschool are potentially very large.
Other examples of omitted benefits include the value of lower drug use and fewer teenage parents, the intrinsic value of the increase in the knowledge, skills, and literacy of participants, and the potentially greater levels of happiness and job satisfaction that preschool participants will experience as adults.
If the ultimate aim of public policy is to promote the well-being of individuals, families, communities, and the nation, then investment in high-quality preschool is an effective strategy. Investing in high-quality preschool can help us achieve a multitude of social and economic objectives, including:
Strengthening economic growth
Increasing incomes
Creating jobs
Reducing poverty
Tempering inequality
Improving education
Reducing crime
Ameliorating health problems
Improving public balance sheets
Moreover, high-quality preschool helps to create the conditions that enable people to achieve their potential, live lives of dignity, and maximize their well-being.
A high-quality, nationwide commitment to universal preschool would cost a significant amount of money up front, but it would have a substantial payoff in the future. Our political system, with its 2- and 4-year election cycles, tends to underinvest in programs with lags between when investment costs are incurred and when benefits are enjoyed. The fact that governments cannot capture all the benefits of preschool investment may also discourage them from assuming all the costs of preschool programs. Yet the economic case for public investment in preschool is compelling.
The economic and social benefits from preschool investment amount to more than just improvements in public balance sheets. Investing in young children has positive implications for the current generation of children, for future generations of children, and for earlier generations of children. The current generation of children will benefit from higher earnings, higher material standards of living, and an enhanced quality of life. Future generations will benefit because they will be less likely to grow up in families living in poverty. And earlier generations of children, who are now working or in retirement, will benefit by being supported by higher-earning workers who will be better able to financially sustain our public health and retirement benefit programs such as Medicaid, Medicare, and Social Security.
In short, strengthening the economic and social conditions of our youth will simultaneously help provide lasting economic security to future generations, as well as to all of us, including our elderly.
Investing in young children has positive effects on the U.S. economy by increasing economic growth, improving the skills of the workforce, reducing poverty, and strengthening U.S. global competitiveness. Crime rates and the heavy costs of incarceration to society will be reduced. Health outcomes improve as well. Additionally, given that the positive impacts of preschool may be larger for at-risk than for more advantaged children, a universal preschool program will help to reduce achievement gaps between poor and nonpoor children, ultimately reducing income inequality nationwide. In other words, investment in high-quality preschool promotes equal opportunity and widely shared economic growth.
The long-term nature of the benefits of preschool investment suggests that policymakers should not impose the costs of the investment (through lower public services or higher taxes) only on the current generation of beneficiaries. Instead, they should spread them over the lives of the current and future generations of beneficiaries of the programs.
Public investments in the quality and quantity of education are important determinants of productivity, growth, and international economic competitiveness. They are also central to human well-being. Investing in the education and skills of our people—our most valuable resource—can immediately boost the economy, create jobs, and help lift us out of our current economic malaise, while simultaneously laying the groundwork for future growth. Investments in the cognitive skills of our people help create pathways for more rapid future growth by enhancing long-run productivity, and they reduce economic disparities by providing ladders of opportunity for all.30
The evidence is clear that one of the most effective ways to promote faster and more widely shared economic growth is to raise academic achievement and narrow socioeconomic-based achievement gaps. Investment in universal high-quality preschool does both. By raising academic achievement, it will improve well-being now and for future generations of Americans, and it will encourage long-term economic growth.
—Robert G. Lynch is the Young Ja Lim professor in economics at Washington College and was a visiting scholar at Equitable Growth from 2014–2015.
The coronavirus pandemic and resulting historic economic and societal shock revealed underlying systemic fragility driven by longstanding economic inequalities and structural racism. More expansive, more transformative, and more equitable economic policies have helped power a far more rapid recovery, compared to the years following the Great Recession of 2007–2009. But now, the coronavirus pandemic is surging anew while most of those underlying structural fragilities exacerbated by the coronavirus recession, as well as ongoing consequences of climate change, remain exposed and raw.
These economic policy challenges provide an opportunity for policymakers to rebuild a more resilient and inclusive U.S. economy and society. In a nutshell, this is what is on our agenda at our virtual policy conference, “Equitable Growth 2021: Evidence for a Stronger Economic Future,” on Monday and Tuesday, September 20–21.
The Washington Center for Equitable Growth, over the course of these 2 days, will examine the progress to date in building a resilient and inclusive economy and the needs for the future by bringing together policymakers, academics, advocates, and thought leaders. The remarks and sessions at the conference will highlight pathbreaking leadership and cutting-edge scholarship that recognizes how a stronger economic future is built on the linkages between racial justice, climate resilience, access to care and family economic security, financial stability, and rebalancing power, so that all can share in the gains of economic growth.
Headlining the conference in a series of fireside chats and remarks are the new Equitable Growth President and CEO Michelle Holder, U.S. Secretary of Labor Marty Walsh, U.S. Rep. Hakeem Jeffries (D-NY), Michigan State University economist and Equitable Growth Steering Committee member Lisa Cook, University of California, San Diego assistant finance professor Carlos Fernando Avenancio-León, and Marketplace host and correspondent Kimberly Adams. Notable panelists are featured in our four panel sessions, taking place in two concurrent blocks on the second day of the conference, focused on the key economic questions of the day.
Equitable Growth 2021: Evidence for a Stronger Economic Future
Below is a preview of the second day of conference and our featured panelists and moderators in the upcoming sessions, as well as their relevant work and experience that will be brought to bear during these discussions. And here is a complete agenda and details about attending the conference.
Concurrent sessions: Block 1
Envisioning a new economic future: What’s next?
Tuesday, September 21, 2:05 p.m. – 2:50 p.m.
As U.S. communities and the economy recover from the coronavirus recession, there is an opportunity to build a new economic future defined by investment centered on racial equity and climate mitigation and adaptation. This requires re-envisioning industrial, labor, and macroeconomic policies and redefining economic success beyond aggregate statistics. Panelists will discuss how to leverage deficits to invest in a green future and build broadly shared and sustainable economic growth while ensuring Black, Latinx, Indigenous, and Asian American, Native Hawaiian, and Pacific Islander communities can fully benefit from any such investments.
The panelists are:
Olivier Blanchard, the Robert Solow professor emeritus at the Massachusetts Institute of Technology and the Fred Bergsten senior fellow at the Peterson Institute for International Economics. He is a macroeconomist and has worked extensively on issues including monetary and fiscal policy, labor markets, and the recent global financial crisis. When the coronavirus pandemic hit, French President Emmanuel Macron asked Blanchard, as a leader in the field of macroeconomics, along with Jean Tirole, to chair a commission and write a report on the major structural challenges societies will face in the aftermath of the pandemic, as well as policy solutions to address them. These challenges include climate change, economic inequality and insecurity, and economic disruptions stemming from demographic changes.
Dania Francis, an assistant professor of economics at the University of Massachusetts Boston. She studies the structural causes behind racial and socioeconomic achievement divides. Francis’ work includes analyses and research-based policy recommendations for implementing a reparations program for the descendants of enslaved African Americans, economic inequality and the digital divide, school racial segregation,and the link between racial, mental health, labor market, and educational disparities. Her work demonstrates how addressing racial divides are core to addressing the structural challenge imposed by economic inequality.
Brenda Mallory, the chair of the White House Council on Environmental Quality. She has worked alongside academics and in a number of senior roles in public office to advance environmental protections for low-income and communities of color. In her current role, Mallory advises President Joe Biden on policies that foster public health, environmental justice, and the resiliency of U.S. communities to the effects of climate change and natural hazards such as floods and sea-level rise and hurricanes, as well as the best practices to develop carbon capture, utilization, and sequestration projects.
Michelle Holder, president and CEO of the Washington Center for Equitable Growth, will moderate the panel.
Rebalancing Big Tech’s grip on the economy
Tuesday, September 21, 2:05 p.m. – 2:50 p.m.
From digital marketplaces to invasive worker surveillance, tech companies play an outsized role in the everyday lives of U.S. workers and their families while evading sufficient scrutiny and providing few consumer and worker protections. Dominant tech platforms stifle innovation and hinder entrepreneurship opportunities, and ubiquitous and invasive management tools risk exacerbating longstanding inequities for workers. Panelists will discuss how sound policy, coupled with a strong, organized advocacy strategy, are needed to manage technological integration so the gains from these advancements are fairly distributed, spurring competition and broadly shared economic growth.
The panelists are:
New York Attorney General Letitia James, who is at the forefront of tackling anticompetitive behavior in the technology industry. James will provide opening remarks to the panel. She has led multipleantitrustsuits that allege monopolistic behavior by tech giants, including the acquisition of smaller rivals and other activities that limit competition by other players in the ecosystem.
Antoine Prince Albert III, the government affairs policy counsel at Public Knowledge, a tech-focused think tank. He examines what policymakers are doing and can do when it comes to fostering online platform governance and competition, as well as addressing privacy concerns, with a recent detailed piece on how Congress is approaching these issues. Albert has explored questions related to how technology functions within Black, Latino, and Indigenous communities in the United States, which helps illuminate how technology integration and oversight influences different communities and interacts with people’s social and economic lives.
Ryan Gerety, a senior advisor to United for Respect, an advocacy organization for retail workers. She focuses on the economic and political implications of new technology and its impact on structural inequality. Gerety has also explored the issue of workplace technologies, such as face recognition, worker surveillance, and just-in-time scheduling, as worker monitoring and discipline tools that disproportionately harm Black, Indigenous, and other people of color.
Fiona Scott Morton, the Theodore Nierenberg professor of economics at the Yale University School of Management. She is renowned for her research on competition in the areas of pricing, entry, and product differentiation. In a piece for Equitable Growth, Scott Morton wrote about the importance of antitrust enforcement for economic redistribution and proposed policies for the U.S. Congress and the Biden administration to adopt that confront market power, including in the technology industry. She also has explored the importance of an interoperability remedy in the technology industry to address entry barriers created by network effects.
Lydia DePillis covers economic policy for ProPublica and will moderate the panel.
Concurrent sessions: Block 2
Boosting aggregate demand amid decreased debt
Tuesday, September 21, 2:55 p.m. – 3:38 p.m.
The relief and recovery efforts following the coronavirus recession offset the financial hardship that families in the United States often face in economic contractions and averted a long-term aggregate demand shock. But the sharp recession and ongoing pandemic came after decades of rising income inequality, featuring wealthier households saving more while most households leveraged debt to sustain demand. This session will dive deep into who takes on debt and how different households along the income distribution spend and save, influencing aggregate demand and U.S. macroeconomic stability. Coming out of a unique economic crisis featuring broad-based relief to families, but against a backdrop of inequality and a continuing pandemic, panelists will discuss the opportunities that will lead to a more stable future for families and the U.S. macroeconomy.
The panelists are:
Kristen Broady, a fellow at the Brookings Institution’s Metropolitan Policy Program and professor of financial economics on leave from Dillard University in New Orleans. Her research includes an exploration of mortgage foreclosure risk, and she recently wrote that, with the expiration of the Centers for Disease Control’s rental eviction moratorium, a looming eviction crisis will hit Black-majority neighborhoods the hardest. She has also explored how the Black-White wealth gap, coupled with labor market disparities, left Black households more vulnerable to the pandemic’s economic shocks, which provides insight into the path forward for maintaining aggregate demand through centering policymaking on the economic well-being of historically excluded communities.
J.W. Mason, an associate professor at John Jay College, City University of New York and fellow at the Roosevelt Institute. He has written on issues of government debt and household debt. In his paper titled, “Income Distribution, Household Debt, and Aggregate Demand: A Critical Assessment,” he finds that income inequality, household debt, and aggregate demand were closely linked during the housing boom period of 2002–2007, but that those linkages are not as clear following the post-1980 rise in household debt.
Atif Mian, the John H. Laporte, Jr. Class of 1967 professor of economics, public policy, and finance at Princeton University and director of the Julis-Rabinowitz Center for Public Policy and Finance at the Princeton School of Public and International Affairs. Mian, a member of Equitable Growth’s Steering Committee, has proposed a theory of indebted demand, resulting from rising income inequality and financial deregulation, that leads to lower aggregate demand. This research follows the argument in his book, House of Debt, co-authored with Amir Sufi at the University of Chicago, which finds that a significant increase in household debt and then drop in household spending caused the Great Recession and Great Depression.
Bharat Ramamurti, the deputy director at the White House National Economic Council. He focuses on financial reform and consumer protection and also has worked on pandemic support for smallbusinesses, as well as assessing the consequences for consumers from consolidation in the meat processing industry. Ramamurti previously served as the chief economic advisor and senior counselor on banking to Sen. Elizabeth Warren (D-MA), with a focus on the financial reforms that came out of the Great Recession.
Social infrastructure as an engine for equitable growth
Tuesday, September 21, 2:55 p.m. – 3:38 p.m.
Policy debates on infrastructure spending following the coronavirus pandemic pushed forward our collective understanding of the importance of social infrastructure investments such as child care and the Child Tax Credit, early education, community-based services and support for older adults and people with disabilities, paid sick time, paid leave, and Unemployment Insurance. These social infrastructure programs are core to the health and stability of the U.S. economy. Investments in social infrastructure reap benefits for the families of today and into the future, especially families of color. Panelists will explore potential economic impacts of these investments with a focus on the specific policy levers that will yield significant increases in labor force participation and productivity.
The panelists are:
Hilary Hoynes, a University of California, Berkeley professor of public policy and economics. Her research focuses on social infrastructure programs, including food and nutrition programs, as well as government tax and transfer programs for low-income families, which form the floor of our social infrastructure. She has authored research that shows that social infrastructure is a long-term investment in our children, based on an evaluation of the food stamps program from 1961 to 1975. She has also written about strengthening the Supplemental Nutrition Assistance Program as an automatic stabilizer in economic downturns, in the Equitable Growth-Hamilton Project co-published book Recession Ready.
Shilpa Phadke, special assistant to the president and deputy director at the White House Gender Policy Council, which covers a range of issues, including economic security, with a focus on gender equity and equality. In her work, Phadke has written about the pandemic’s impact on economic inequality and the caregiving crisis, particularly experienced by women of color, who felt the brunt of the shock of the pandemic, highlighting anew the need to invest in social infrastructure that centered the role of caregiving and gender equality as a priority for a new economic policy agenda in the recovery.
William E. Spriggs, the chief economist at AFL-CIO and a professor in, and former chair of, the Department of Economics at Howard University. He has written about how Unemployment Insurance has not kept up with the changing workforce composition and values of racial and gender equity, and has noted that the result is a system that does not adequately protect part-time workers or workers in the service sector who receive very low wages and who are disproportionately Black. In recent congressional testimony, Spriggs argued that the United States was less resilient than our trading partners during this pandemic due to “outdated and overwhelmed” Unemployment Insurance and “lack of paid leave,” making the argument that income supports are an aspect of our social infrastructure that supports the economy.
Jessie Ulibarri, the co-executive director of the State Innovation Exchange, a nonprofit policy resource and strategy organization, and a former Colorado state senator. His work focuses on pushing for and supporting transformational policy change at the state level and, over the past two decades, has passed hundreds of economic, racial, and gender justice policies into state law. While a state senator, Ulibarri led efforts to expand paid sick leave and paid family and medical leave in Colorado and brings practical insight to paving the way toward an expansive social infrastructure.
Alix Gould-Werth, director of family economic security policy at the Washington Center for Equitable Growth, focuses on various social infrastructure programs in her research and will moderate the panel.
To read more about these panelists, please visit our event website, which houses their bios, and register for the event here. We hope you will join us for this 2-day conference to hear from these panelists, and bring your curiosity and questions for the Q&A sessions sprinkled throughout the event!
President Joe Biden wants Congress to enact his two signature legislative packages—the $1 trillion bipartisan physical infrastructure plan passed by the U.S. Senate earlier in August and a $3.5 trillion social infrastructure package currently being crafted by Democratic congressional leaders. President Biden argues that these investments are needed to ensure the U.S. economy “builds back better” as it recovers from the coronavirus recession.
But even President Biden’s “big” rhetoric doesn’t fully capture the scope of his policy ambitions. He wants nothing less than to complete the unfinished business of President Franklin D. Roosevelt’s 1930s-era New Deal, once again rejecting fiscal austerity while correcting for racist carve-outs, filling in the holes in our social and care infrastructure, and investing to abate the increasingly dire consequences of climate change. And he wants to demonstrate that the federal government—and the democratic processes undergirding it—can deliver for everyday workers and their families in the United States.
Congress too has embraced this “unfinished New Deal” rhetoric, even going so far as to establish a Select Committee in the House of Representatives explicitly modeled on the FDR-era Temporary National Economic Committee, which was launched in 1938 to study the deleterious effects of overly concentrated economic power. The new House Select Committee on Economic Disparity and Fairness in Growth, chaired by Rep. Jim Himes (D-CT), promises to “develop solutions to the key economic issue of our time: the yawning prosperity gap between wealthy Americans and everyone else.”
Of course, the government programs that were first set up by the New Deal nearly a century ago—the Social Security Act turned 86 earlier this month—need a thorough update to address today’s different economic challenges and help the types of workers who were left behind by President Roosevelt.
Take, for example, infrastructure investment. The ringing success of the Tennessee Valley Authority—designed explicitly to bring electricity and economic development to one of the nation’s poorest regions of the early 20th century—baked into our policymaking the idea that the federal government has a wide-ranging obligation to provide for the overall public good through large investments in infrastructure. This is likely one reason why the physical infrastructure bill, which includes $550 billion in new investments in transportation, water systems, broadband networks, and electricity grids, won bipartisan support in the Senate. Unlike during the New Deal, though, these investments are, in many cases, specifically designed to provide Black, Latinx, and Indigenous communities with affordable transportation to jobs, safe drinking water, and reliable broadband access, addressing our country’s continuing racial inequities.
Similarly, President Biden’s proposals include investments in a range of job-creating projects to mitigate the effects of climate change, harkening back to President Roosevelt’s commitment to provide good-paying jobs to the many unemployed men laid low by the Great Depression. Today, of course, many U.S. industrial workers—men and women alike—are struggling in our post-industrial economy.
One group that President Roosevelt’s programs left out, though, were domestic service workers, mostly women and especially women of color. They were denied the benefits of the New Deal because of the opposition of racist politicians in the president’s Democratic congressional coalition and due to societal expectations at the time that men were the appropriate sole breadwinners for families. President Biden’s Build Back Better plans attempt to counteract these explicitly racist and sexist New Deal shortcomings by recognizing the role of women in the workforce and in caregiving, especially women of color, and investing accordingly.
The initial physical infrastructure plan, for example, included investments in long-term care services and long-term care workers, a large majority of whom are underpaid women of color. Those provisions were dropped by the Senate, but there is still a chance that the authors of the social infrastructure package take up the fight and begin to right those New Deal wrongs.
The social infrastructure package also could include a multibillion-dollar investment in child care—an investment that research demonstrates can boost parents’ labor force participation. That’s also why President Biden’s concomitant call for investment in universal pre-Kindergarten would, as academic research shows, create good-paying jobs and boost women’s labor force participation.
But President Biden, like President Roosevelt before him, sees these multitrillion-dollar investments over the remainder of this decade as far more than the sum of their parts. Back in the 1920s and 1930s, the United States faced political challenges from right-wing populists and fascist demagogues at home and abroad who sought nondemocratic means to “fix” the deep and severe economic problems of that era. FDR saw in his New Deal programs the means to respond to these challenges by having the federal government invest directly and sweepingly in the U.S. economy to demonstrate the superiority of progressive democratic values.
It worked, of course, helping to cement the 20th century as the “American Century.”
Fast forward to 2021. President Biden’s pitch is all about creating the economic and social conditions under which Americans of all races, ethnicities, and genders can prosper. This, in turn, could well turn back the dangerous and demagogic anti-democratic trends in our nation and shine a light anew on why completing the unfinished business of the New Deal to meet the challenges of a 21st century economy will ensure this century, too, remains an American Century.
Most workers in the United States at some point over the course of their lives will take on multiple unpaid caregiving responsibilities, be it caring for a child, an elderly parent, or an ailing relative. This can be highly rewarding and meaningful work, but it also can be incredibly challenging, particularly for those trying to balance these responsibilities with paid work.
The coronavirus pandemic highlights anew some of these work-life challenges, particularly as relates to working parents, especially mothers, who have had to piece together child care arrangements in the midst of school and day care closures or leave the labor force altogether. But much less is known about how the pandemic affects other family care arrangements or the consequences of these disruptions on caregivers’ mental health and employment status.
A working paper I co-authored earlier this year with Jessica Finlay and Lindsay Kobayashi of the University of Michigan, Ann Arbor explores this less-studied area of caregiving amid the pandemic. We look at how family caregivers ages 55 and older dealt with sudden disruptions in caregiving arrangements due to the coronavirus and COVID-19, the disease caused by the virus, in the in the spring of 2020.
Family caregivers are those people who provide care for a spouse, elderly parent, or other relative with a long-term illness or disability, as well as grandparents who care for their grandchildren and those providing unpaid care to recipients without a formal kinship relationship, such as a friend or a neighbor. Family caregiving typically does not include parents caring for their own children. We decided to study those ages 55 and up because this group typically provides family caregiving while also facing age-based elevated risks for COVID-19 morbidity and mortality.
Using data collected between April 17 and May 15, 2020 from the COVID-19 Coping Survey, an online questionnaire, our study measures the mental health and employment outcomes for a national sample of around 2,500 respondents, of whom 535—or more than 1 in 5—were family caregivers. We find that the coronavirus pandemic disrupted more than half of family caregiving arrangements, with more than 30 percent of caregivers reporting additional or new care responsibilities as a result of the crisis. Another 20 percent of caregivers reported that they were providing less care than usual, likely due to social distancing measures and concerns about their health or the health of their loved ones.
Troublingly, we also find that these disruptions were associated with negative mental health outcomes, such as increased depression, anxiety, and loneliness. Those respondents whose care arrangements were disrupted were 18.1 percentage points more likely to screen positive for depression, 19.5 percentage points more likely to screen positive for anxiety, and 16.1 percentage points more likely to screen positive for loneliness than either noncaregivers or those caregivers who did not face similar disruptions. Notably, mental health outcomes vary only slightly depending on whether disruptions resulted in caregivers providing more care than usual, or no care or less care than usual. (See Figure 1.)
Figure 1
Caregivers who experienced disruptions due to COVID-19 were not only more likely to report negative mental health effects but also 13.9 percentage points more likely to report employment disruptions. And those caregivers who provided more care because of the pandemic—disproportionately women and people of color—were almost 19 percentage points more likely than noncaregivers to report an impact on their employment, typically in the form of a job loss, furlough, or transition to working from home.
These findings confirm research that highlights the importance of investments in care infrastructure, not just for caregivers and their loved ones but also for the broader U.S. economy. Our research also emphasizes the need for policymakers to finally enact a nationwide paid leave program.
Turnover in the professional caregiving industry has long been high due to low wages and poor working conditions, a trend that the coronavirus pandemic has not curbed. These workers—whose daily efforts make it possible for the rest of us to do our jobs effectively and for our loved ones to live with dignity and grace—should be compensated at a level that is commensurate with the contributions they make to the economy.
Investing in the care economy to make these jobs attractive and well-paid would help workers who have left the labor force due to caregiving responsibilities over the course of the pandemic go back to work and would boost worker productivity. These actions would reverberate across the U.S. economy, bolstering the economic and labor market recovery from the coronavirus recession.
But more must be done. Given the piecemeal structure of the U.S. long-term care system, caregiving routines will always be subject to disruptions, meaning working family members are likely to require time off from their jobs to cover their loved ones’ care needs as new arrangements are made. A nationwide paid leave policy would ensure that workers do not have to make the impossible choice between caring for their ill family members and paying their bills or putting food on the table. As of now, only six states and the District of Columbia have paid leave policies for workers needing to care for ailing family members. These policies must be extended nationally to cover all family caregiving needs and situations.
Expanding paid leave also would work to address some of the racial and gender inequalities that arise as a result of caregiving responsibilities. Our study shows that caregivers who were more vulnerable to disruptions were disproportionately female, Black, and Hispanic, and that those who experienced disruptions were more likely to report negative mental health and employment outcomes. These trends were not brought about by the pandemic but have nevertheless been exacerbated in its wake. Policymakers cannot allow these inequalities to fester or worsen. (See Figure 2.)
As the U.S. population ages, family caregivers will increasingly play a central role in the national healthcare system. And while it is still too early to know for sure, the chaos and heartbreaking scenes of sickness and death in nursing homes over the past year may induce even more families to choose home- and community-based care for their loved ones.
These trends mean that good working conditions for professional caregivers and programs such as paid leave for all workers are all the more essential. Now is the time for policymakers to ensure these vital players in the U.S. economy and labor market have the support and infrastructure they need to take care of themselves and balance their caregiving responsibilities with their jobs. The benefits will extend beyond those directly impacted to the broader economy.
Before voting on legislation, members of Congress usually receive a cost estimate, or score, for that legislation from the Congressional Budget Office. This score provides nonpartisan CBO analysts’ best estimate of how the legislation will affect the federal budget deficit.
A cost estimate is useful information for legislators, but it represents only one side of the equation. Costs are incurred to deliver benefits, yet members of Congress rarely receive analysis to assess who will benefit from bills and by how much. Currently, without any requirement for this type of analysis, members of Congress all too often must vote on legislation with formal analysis of the costs but with only informal or no analysis of the benefits.
Today, Reps. Ro Khanna (D-CA) and Dean Phillips (D-MN) in the U.S. House of Representatives and Sens. Elizabeth Warren (D-MA) and Michael Bennet (D-CO) in the Senate introduced the CBO FAIR Scoring Act. The proposed law would represent a major step forward for the legislative process by directing the Congressional Budget Office to prepare distribution analyses by race and income for all legislation with substantial budgetary effects. In short, these analyses would provide members of Congress with CBO analysts’ best estimate of how the legislation would affect different groups of people—critical information for evaluating who would benefit. (See Figure 1.)
Figure 1
The need for a better understanding of how legislation would affect different groups of people is apparent in the high levels of inequality in the United States. In 2019, prior to the onset of the coronavirus pandemic, the median wealth of White families was $188,200, while the median wealth of Black families was only $24,100 and the median wealth of Hispanic families only $36,100. Families in the top 1 percent of the income distribution accounted for 20 percent of income, and families in the top 1 percent of the wealth distribution accounted for 33 percent of all wealth.
The coronavirus pandemic exacerbated, and was itself exacerbated by, these disparities. Job losses, for example, were concentrated among lower-wage workers. Unemployment rates for Black workers and for Hispanic workers remain consistently higher than unemployment rates for White workers since the onset of the pandemic more than a year ago.
If enacted, the CBO FAIR Scoring Act would ensure that members of Congress receive the distribution analyses they need to make informed policy choices in light of these economic disparities. It would clarify which bills would reduce economic disparities and which bills would increase them. And it would serve as an independent check on policymakers’ sometimes-inaccurate claims about who their policies would benefit.
Specific instances where distribution analysis would be useful in legislation
The laws that Congress already passed in response to the ongoing pandemic highlight the importance of this requirement. When the Coronavirus Aid, Relief, and Economic Security, or CARES, Act, passed in March 2020, the Congressional Budget Office estimated its cost at $1.7 trillion and produced subsequentreports of the detailed breakdowns of those costs by program. But where did the money go? Who benefited from this legislation? The Congressional Budget Office has not answered that question in a comprehensive fashion.
In a notable exception, however, the Joint Committee on Taxation produced a distribution analysis of a single provision of the law—a relaxation of limits on the tax deductibility of certain business losses. The analysis’ finding that this provision delivered significant financial benefits almost exclusively to the richest Americans drew substantial attention and confirmed the interest in distribution analysis among legislators and the public. (See Figure 2.)
Figure 2
Congress frequently revises legislation because of CBO cost estimates or designs bills to fit certain spending goals with CBO estimates in mind. With more frequent distribution analyses, Congress could also fine-tune legislation in response to the distribution analyses. Congress may want to revise a bill if an official CBO analysis shows that it would widen racial income gaps, or if almost all benefits accrue to the rich, as in the above example.
For instance, President Joe Biden and Senate Democrats are currently proposing a bill that will include massive investments in the U.S. economy, but media coverage of the bill overwhelmingly focuses on its costs, rather than its contents and benefits. The bill will include an extension of the recently enacted Child Tax Credit expansion, or child allowance, which delivers monthly checks of $250 to $300 per child to most families in the United States. Outside analyses show this will lower child poverty by nearly 50 percent, but Congress’ official scorekeeper may only analyze the costs of the bill, not its benefits, depriving Congress of crucial information before they vote.
A requirement that the Congressional Budget Office conduct distribution analyses of all legislation with substantial budgetary effects would build on existing informal practice. Currently, distribution analyses are conducted only on a discretionary basis by the Congressional Budget Office and the congressional Joint Committee on Taxation. The most common application is for tax legislation. Indeed, the JCT provided Congress with a set of distribution analyses by income during consideration of the Tax Cuts and Jobs Act in 2017, and think tanks such as the Tax Policy Center regularly produce distribution analyses for tax proposals. (See Figure 3.)
Figure 3
Yet there is no requirement that distribution analyses be provided—and the lack of such a requirement is apparent in the inconsistency with which they are produced. The Congressional Budget Office prepared revised cost estimates for the Tax Cuts and Jobs Act in April 2018, for example, but it did not prepare revised distribution analyses when it did so.
Moreover, there is no tradition of providing distribution analyses by race by either the Congressional Budget Office or the Joint Committee on Taxation. The Institute on Taxation and Economic Policy, together with Prosperity Now, produced a distribution analysis by race for the Tax Cuts and Jobs Act, but no similar analysis has been produced by official scorekeepers.
Distribution analysis in academia
There is a long tradition of conducting distribution analysis in the tax context, yet it is underused in other contexts. Application of a distributional logic to these programs is on the rise in academic work, however. Recent research by economists Nathan Hendren and Ben Sprung-Keyser at Harvard University applied the same economic logic that underlies tax distribution analyses to a range of spending programs, from education and training programs to Unemployment Insurance—exactly the kinds of areas that rarely benefit from this lens in the policy process.
This recent academic research not only uses the techniques of distribution analysis to examine policy impacts for a wider array of programs, but also further clarifies why such analyses should be centered in the consideration of public policies.
The impact of legislation on the federal budget deficit can be measured in dollars and cents, but there is no single measure that captures the impact on all people affected. This academic work by Hendren and Sprung-Keyser highlights that the direct impact on people and families is an accurate measure of how it affects their well-being. Hendren’s prior work lays out in detail why these direct impacts answer this question. And Greg Leiserson, formerly of Equitable Growth, has formalized a similar logic in the specific case of the distribution analysis of tax legislation.
With policy impacts on people and families in hand, analysts must make choices about how to group and compare those impacts to illustrate what the legislation does in a more accessible way. And it is in that step where the need for a distributional perspective comes in.
The distribution analyses produced by the Congressional Budget Office and Joint Committee on Taxation in the past focused on different impacts by income, but the CBO FAIR Scoring Act requires distribution analyses both by income and by race. Thus, the analyses will not just report how legislation affects those at different income levels, but also how it affects Black families and families of Hispanic origin.
This aspect of the legislative proposal builds on prior research by Mehrsa Baradaran, a professor at University of California, Irvine School of Law, that proposes directing the Congressional Budget Office to assess how proposals would affect the racial wealth gap. And recent commentary from Andre Perry at The Brookings Institution and Darrick Hamilton, the director of the Institute for the Study of Race, Stratification and Political Economy at the New School, similarly argues that the White House Office of Management and Budget should develop a means for scoring proposals for racial equity.
Better information will deliver better results
Many inequalities in the United States are the result of policy choices. Just as we need to track who benefits from economic growth economywide—a measure Equitable Growth calls GDP 2.0—lawmakers need to be able to track who benefits from specific legislation they pass.
Public policies can exacerbate economic inequality, and they can reduce it, too. If members of Congress are to enact policies that foster broad-based growth rather than policies that deliver increased poverty and unequal growth, then it is essential that they receive analysis of the distributional impact of policies during the legislative process when it can inform their decision-making. Reps. Khanna and Phillips’ and Sens. Warren and Bennet’s CBO FAIR Scoring Act would require exactly that and would thus represent a dramatic improvement in the legislative process.
The recovery in the labor market continued to pick-up steam as the U.S. economy added 943,000 jobs last month, according to the most recent Employment Situation Summary released today by the U.S. Department of Labor’s Bureau of Labor Statistics. The unemployment rate fell from 5.9 percent in June to 5.4 percent in July and the share of the U.S. population ages 25 to 54 with a job—a measure known as the prime-age employment-to-population ratio—climbed from 77.2 percent to 77.8 percent.
These indicators reflect that last month was a very strong one for the U.S. economy, yet the labor market has not fully recovered and millions of workers continue to experience the economic pain brought about by the coronavirus pandemic. The prime-age employment-to-population ratio, for instance, continues to be 2.6 percentage points below its February 2020 level. While the labor force participation rate rose slightly with respect to the previous month, at 61.7 percent it is at the same level it was in August 2020.
This most recent U.S. labor market data show that across race and ethnicity the unemployment rate for Black workers fell 1 percentage point between mid-June and mid-July, although at 8.2 percent, it continues to be higher than for any other major racial or ethnic group and the labor force participation rate of Black workers declined in July. The jobless rate for Latinx workers is at 6.6 percent, for Asian American workers at 5.3 percent, and for White workers at 5.2 percent.
By race, ethnicity, and gender, the latest data show that among workers 20 years of age or older, employment continues to be down the most for women of color. In July 700,000 fewer Black women and 594,000 fewer Latina women had a job than in February 2020—a decline of 6.9 percent and 5 percent, respectively. (See Figure 1.)
Figure 1
Across industries, July’s employment gains were led by the leisure and hospitality sector, which added 380,000 jobs. Government, education and health services, and professional and business services also saw important gains, creating 240,000, 87,000, and 60,000 jobs, respectively.
But while many industries experienced robust job growth in the past few months, construction is one of the two major sectors to have actually experienced declines in net employment this summer, though the sector did add 11,000 workers in July. An incomplete and uncertain recovery in the industry is likely to be particularly tough on Latinx workers, who represent 30 percent of the construction workforce despite accounting for less than 18 percent of all U.S. workers. Between mid-April and mid-July the construction industry shed 18,000 jobs—significantly more than the 1,400 jobs lost in the utilities sector. (See Figure 2.)
Figure 2
What is slowing down job growth in the construction industry? Part of the answer is that despite a hot housing market, supply chain disruptions and rising cost of key materials are putting the brakes on new construction, especially in the non-residential sector. According to a recent survey by the Federal Reserve Bank of Minneapolis, big price increases for important inputs such as wood, steel, and aluminum are the major factors driving uncertainty and dampening demand for future projects.
The construction industry fared better during the coronavirus recession than in previous downturns, but long-term challenges remain
Employment in goods-producing sectors such as construction tends to be especially sensitive to fluctuations in the business cycle. The reason is that during downturns, a slowdown in economic activity translates into reduced demand for new construction projects, creating a negative feedback loop in which uncertainty further depresses investment and puts workers at risk of losing their jobs.
The coronavirus recession, however, hit service-providing industries much harder, and job losses in construction have been less severe than in the last economic crisis. During the Great Recession of 2007–2009 and the housing market crash of 2008–2011, the construction industry lost 2.3 million jobs from the peak of employment in mid-2006 to the trough of employment in early 2011. While the economy-wide peak-to-trough job losses were much greater during the coronavirus recession than during the Great Recession and its aftermath, the drop in construction employment was not as dramatic. (See Figure 3.)
Figure 3
Yet changes brought about by the pandemic could drive long-term disruptions to the industry. A Bureau of Labor Statistics analysis estimates that if a shift to telework lowers demand for new office space, job growth in the construction sector will slow down in the coming decade. Weak employment growth in this sector would reduce opportunities for what a team of researchers at The Brookings Institution call “skyway occupations”—jobs that have relatively low barriers of entry, often do not require a college degree, offer opportunities for career advancement, and which can act as stairways for better, higher-paying jobs.
The construction sector is an example of the ways in which the coronavirus crisis made already precarious work even more insecure
Workers in big occupations within the industry such as construction laborers are among the most likely to experience injuries and illnesses at work. A study by researchers at the University of California, San Francisco finds that workers in this occupation also are among the most exposed to the coronavirus. Latinx workers, who represent a large share of the industry’s workers, have higher injury and fatality rates than the overall workforce. And climate change and excessive heat are making construction work even more dangerous.
That foreign-born workers are also overrepresented in the industry means that some of the workers more likely to need employment protections such as paid sick leave are also among the least likely to access those benefits. Illegal misclassification of workers as independent contractors and unpredictable gaps in work also reduce construction workers’ earnings and reduce their economic security. According to a report by the Workers Defense Project on the working conditions of construction workers in the South and Southwest, a whopping 55 percent of workers do not have access to workers’ compensation and 53 percent reported that they do not have access to employer provided health insurance.
Research also shows that construction saw an especially large increase in minimum wage violations during the Great Recession. The research points to the need to have an effective enforcement of labor protections always, and especially during downturns such as the coronavirus recession.
In addition, Latinx workers, Black workers, women workers, and self-employed construction workers all experienced disproportionate employment declines at the onset of the recession—more evidence that even within industries, already vulnerable workers have been more exposed to the economic pain brought about by the coronavirus crisis.
Per the latest Employment Situation Summary, the U.S. economy continues to be 5.7 million jobs down compared to February 2020 at the start of the coronavirus recession. After months of robust but uneven job gains, economic policy priorities for rebuilding the U.S. economy must center job quality. Policymakers have coalesced around the need for physical as well as care infrastructure, but the workers who will build the country’s much-needed roads, schools, hospitals and other care facilities, and homes often face increasingly dangerous working conditions and little economic security. To meet the construction needs of the present and future, construction workers need strong and enforced labor standards and robust unions.
Perhaps most immediately, they need access to workplace benefits, including health insurance and sick leave, as they continue to work in an ongoing pandemic. Ensuring construction workers are fairly compensated and do their jobs under safe working conditions will both promote the creation of good-quality opportunities, job security, and boost economic growth.
The coronavirus public health emergency and resulting economic recession brought into stark relief the engrained problems with the system of income support for U.S. workers and their families. People in the United States access income support from a wide range of programs, including Social Security, Unemployment Insurance, the Earned Income Tax Credit, and the Temporary Assistance to Needy Families program, to name a few.
Despite the number of programs that make up our income support system, many people who need this support are blocked from accessing it. During the COVID-19 crisis, the existing income support infrastructure has been wholly insufficient for providing relief to those who needed it.31 And while the pandemic-specific income supports delivered through the Coronavirus Aid, Relief, and Economic Security, or CARES, Act and related programs successfully blunted some of the worst pain of the pandemic, they also failed to deliver for all who needed income support due to sustained underinvestment in these key income support programs over the past half-century.32
The coronavirus health and economic crisis is being felt widely by millions of U.S. workers and their families, yet people across the country face crises of their own every day no matter the broader economic or public health outlook. Whether it’s a personal or national crisis, the inability to access income support programs to weather unexpected storms has serious consequences, especially for many workers of color, women, and their families. Indeed, the coronavirus recession exposed already deep inequalities in access to income supports along lines of race and gender.33
What is it, precisely, that stops people from accessing income supports? There are three main barriers:
Eligibility rules are too strict.
Benefits are too hard to access even when people are eligible.
Benefits amounts are too low.
No matter one’s place in the income distribution at any given time, these weaknesses in our nation’s income support system prevent the U.S. economy from reaching its full potential through lowered labor force participation, a weakened macroeconomy during economic recessions, and underinvestment in the human capital of the next generation of workers. What’s more, all of us are likely to face a personal need for income support at some point over the course of our lives.
So, let’s examine the challenges confronting the United States’ system of income supports. Then, we will turn to examining why these are problems both for our economy at large and ourselves as individuals.
Problems with our current system of income support
We define income supports as those programs that transfer cash to households (including both social insurance programs that make transfers based on past earnings among other criteria, social welfare programs that make transfers based on current income and wealth levels among other criteria, as well as income transfers made through the tax system) and in-kind transfer programs that relieve pressure on household budgets and effectively provide income support (for example, when households receive food or housing support they no longer need to spend their limited income on food and housing and can instead use that cash to cover other needs). Together these distinct types of programs create our nation’s system of income supports. Let’s examine the challenges confronting our income support system across each of the three criteria mentioned before: eligibility, accessibility, and adequacy.
Eligibility rules are too strict
Despite fallacious stereotypes about profligacy in income support programs, it is actually intentionally quite hard to access them in the first place.34 Eligibility criteria typically screen out many people based on their family status, asset levels, age, or ability status. Simply by getting married, maintaining a modest “rainy day” fund, or keeping a reliable car, a person can lose eligibility for an income support program.35
Additionally, to access many income support programs, a person must be employed—despite the fact that lacking income may be the factor that is preventing a person from maintaining employment.36 If a person cannot afford transportation or child care, for example, it can be difficult to stay employed.
Since the 1990s, changes to our income support system have only further tied eligibility to work requirements, with the replacement of Aid to Families with Dependent Children with the Temporary Assistance for Needy Families program and the creation of the Earned Income Tax Credit. Even the Supplemental Nutrition Assistance Program, or SNAP, colloquially known as food stamps, has work requirements.37
While many people with inadequate incomes are indeed active participants in the labor force, others may have caretaking obligations, health challenges, or face discouragement in the search for employment situations that are safe.38 When workers hit a moment in their lives when they are unable to be in the labor force, this may actually be the time they need income support the most.
Benefits are too hard to access
But even among people who meet all the eligibility requirements for income support, the rate at which they access those benefits remains low.
The low proportion of eligible people accessing UI benefits provides a salient example of how systems and processes that are out of date or purposefully difficult to navigate keep people from accessing the income support they need and are eligible for.39 In the spring of 2020, an unprecedented number of workers were laid off as a result of the coronavirus recession and applied for Unemployment Insurance. More than 1 in 7 American workers applied for income support through the UI program.40
Yet poorly designed systems for applying for benefits, from understaffed phone lines to arcane websites, meant that millions of workers waited weeks to get the payments they were eligible for, if they got them at all. 41States make choices about whether to invest resources in improving system accessibility, and racism appears to shape these choices. Rates of UI access are low in states with a greater share of Black workers.42 (See Figure 1.)
Figure 1
Many headlines highlighted the difficulty faced by workers who lost their jobs through no fault of their own in accessing Unemployment Insurance during the early days of the pandemic, but this is not the only example of the challenges of claiming income support for which one is eligible. In all public health and economic contexts, people struggle to travel to Social Security Administration field offices to complete disability applications, complete the paperwork necessary to recertify for the Supplemental Nutrition Assistance Program, and correctly document their work participation to remain eligible for the Temporary Assistance for Needy Families program.43
The many difficulties people eligible for income support face is a policy choice, not an inevitability of bureaucratic programs.44 There are examples of income support programs with high take-up rates, such as the Earned Income Tax Credit and Social Security. The EITC has a nearly 80 percent take-up rate, and 97 percent of elderly Americans receive Social Security benefits.45
A key reason for the high take-up rates for these two income support programs is the lack of red tape. Filing one’s taxes once a year and submitting an initial application are all that is required to receive these sources of income support. In stark contrast to programs with lower take-up rates, such as Unemployment Insurance and Temporary Assistance for Needy Families, there is no regular ongoing process that people have to go through to prove their eligibility. Indeed, the relative absence of bureaucratic hurdles associated with claiming tax credits is a factor that influenced Congress’ recent passage of legislation that provides income support to children delivered through through periodic payments of a fully refundable Child Tax Credit during 2021.46
Benefit amounts are too low
Even people who surmount the obstacles of meeting eligibility requirements and navigate the process required to gain access to income support find that the income is insufficient to help meet their basic needs. The maximum monthly amount that a family of four with no income receives from the Supplemental Nutrition Assistance Program is $680, or $5.48 per person per day.47 Families with any income at all receive less than this.
Despite being a social insurance program, Unemployment Insurance also doesn’t begin to provide enough income to make up for the wages lost when a job is lost.48 Indeed, in no state are regular UI benefits sufficient to cover a person’s basic needs of housing, food, child care, transportation, healthcare, taxes, and other necessities such as clothing and school supplies.49 (See Figure 2.)
Figure 2
The income support provided by the Temporary Assistance to Needy Families program leaves a family of three below half of the poverty line in almost every state and is time-limited, as its name suggests.50Racism also shapes the level of support this program provides: States with a greater share of Black residents provide lower levels of income support through the Temporary Assistance to Needy Families program than states with fewer Black residents.51
Figure 3
A weak system of income support harms the entire U.S. economy
A weak system of income support harms individual workers and their families, who, at some point in their lives, experience the vicissitudes of life without adequate income. This weak system also harms the overall strength and growth potential of the U.S. economy.
During recessions, for example, income support acts as an “automatic stabilizer.”52 This means the use of income support programs, such as Unemployment Insurance and SNAP, increases during recessions as workers are laid off and apply for them to help replace their lost incomes.
This kind of income support not only helps those individual workers and their families in need, but also ensures people are still able to purchase goods and services during an economic downturn, which softens the aggregate impact of recessions on the economy.53 Indeed, increased government spending on Unemployment Insurance during the Great Recession of 2007–2009 boosted overall Gross Domestic Product: For every $1 spent on extending UI benefits, we saw an additional $1.61 in economic activity.54
Other income support programs, including the Temporary Assistance for Needy Families program, could also play this important countercyclical role, but policymakers have so eroded the program’s effectiveness that TANF income support does not respond swiftly when a recession hits.55 When any of these programs are difficult to access or have low benefit amounts, their efficacy as automatic stabilizers is blunted.
Another way a strong income support system strengthens the economy is via its positive impacts on U.S. labor market outcomes. Research shows that access to paid leave,child care support, and EITC income support all increase women’s labor force participation rates.56
Another example comes from the UI system, which researchshows improves workers’ “job matching.”57 This means that with more time, people are able to find jobs that are a better match for their skills. This doesn’t just benefit individual workers in terms of higher earnings. Better job matching also benefits the whole economy in the form of increased efficiency, productivity, and higher revenue on those higher earnings.
Weaknesses in our current system of income support also hurt the human capital development of workers, as well as the children of workers.58 This means the economic consequences of a weak system of income support aren’t just felt in the present but also extend into the future. An extensive body of research spanning decades shows the importance of childhood environments for human capital development.59
Human capital plays a crucial role in determining future education and earnings outcomes. Underinvesting in children’s human capital development today means less-educated and lower-earning workers in the future, which depresses the economy’s potential growth.
New research shows how widespread the economic benefits of just a single income support program—specifically, SNAP—can be.60 Hilary Hoynes, an economist at the University of California, Berkeley, and her co-authors find that children with early access to food assistance grew up to be better-educated and have healthier, longer, and more productive lives. This economically benefits all of us in the form of higher tax revenue, lower future expenditures on income support programs, and lower expenditure on the criminal justice system.
Our nation needs a strong system of income support because nearly everyone will need it at some point in their lives
The issues discussed above with eligibility requirements, access difficulty, and income adequacy are all examples of how our current system of income support is failing to meet the needs of so many people in the United States. Such inadequacies are not abstract issues. While a common perception is that only a small proportion of U.S. residents have unmet need for income support, evidence shows that the vast majority of people in the United States are at risk of a change in income that would lead them to experience poverty for 1 to 2 years.61
Nearly everyone at some point in their lives will experience an unmet need for income support. Contrary to racist portrayals of who actually uses and benefits from income support programs, the experience of poverty is actually something that the majority of people in the United States will face in their lifetimes.62
Research by Mark Rank at Washington University in St. Louis and Thomas Hirschl at Cornell University finds that between the ages of 25 and 60, 54 percent of U.S. residents will experience poverty or near poverty at least once.63 Further, 61.8 percent of U.S. residents will spend a year below the 20th percentile of the income distribution, and 42.1 percent will spend a year below the 10th percentile. (See Figure 4.)
Figure 4
Another way to think about this is through the construct of risk. Americans have a 54 percent chance of experiencing poverty at least once during adulthood. This is more than the chance of having appendicitis or getting divorced over the course of a lifetime.64
As economists Jesse Rothstein at UC Berkeley and Sandra Black at Columbia University argue, it is inefficient to have families self-insure against unpredictable risks they cannot reasonably calculate for themselves, such as the chances of losing a job or sufficiently saving for retirement.65 Either way, many families are not in a position to set aside substantial savings in case they experience a dip in income that pushes them under the poverty line.66
Even if families were in such a position, Black and Rothstein explain, “The federal government can provide social insurance protections at a much lower overall cost, and by removing major risks from families’ own balance sheets, enable families to stretch their market earnings further.” This kind of social infrastructure also allows for increased consumption overall.
Because most people will need income support at some point in their lives, and despite all the barriers our current system of income support puts up to accessing support, nearly all people in the United States will access income support programs at some point over the course of their lives. Analysis by the Urban Institute finds that in any given month, nearly 1 in 5 people benefit from SNAP, Supplemental Security Income, TANF, public or subsidized housing, the Women, Infants, and Children, or WIC, program, or the Child Care and Development Fund.67
In addition, analysis by the White House Council of Economic Advisers found that over the 32-year period from 1978 to 2010, more than one-third of all people received support from one of just three of these income supports: the Supplemental Nutrition Assistance Program, the Temporary Assistance for Needy Families and its predecessor programs, or Supplemental Security Income.68 Taking into account additional income support and social infrastructure programs such as school lunches, WIC, or disability insurance, among others, the percentage rises to nearly half of all households. This doesn’t mean that support levels are adequate or that workers and their families will receive income support every time they need it. But it does illustrate the breadth of people that need income support at some point in their lives.
Indeed, the U.S. Treasury Department recently found that when you consider Medicare and Social Security, nearly every single U.S. household receives some form of income support.69 This is an especially important example to keep in mind because, unlike most income support programs, Medicare and Social Security are the two components of our social infrastructure that are easiest to access when needed. Eligibility for Medicare is automatic at age 65 and may not even require a separate enrollment process for people already receiving Social Security.70 Similarly, Social Security’s nearly universal design and eligibility requirements mean that almost every member of the U.S. population will receive its benefits at some point. This makes Social Security the largest anti-poverty program in the United States.71
As the Medicare and Social Security case studies show, it is possible to design an income support system that easily reaches broad swathes of the population. So why do some programs reach so few people? This is an intentional policy choice, informed by ourracist history as well as our racist present.72 To prevent Black people in the United States, as well as other people of color, from accessing income support programs we restrict their availability.73 Policymakers make this choice despite the overwhelming evidence that nearly every person in the United States will at some point in time need a strong income support system, regardless of the racial group to which they claim membership.
Conclusion
The U.S. system of income support is inadequate to support U.S. workers and their families. This is an issue because it constrains and limits the overall strength of the U.S. economy, unnecessarily deepening recessions, depressing labor force participation, and harming future growth potential by underinvesting in the human capital of the next generation of workers. The problem is also personal: At some point, everyone will need some form of income support, whether it is to weather a job loss or illness or to be assured of a secure retirement.
By broadening eligibility, increasing the level of income support, and removing barriers to access, policymakers can strengthen these systems of income support in ways that will both help everyone weather the inevitable vicissitudes of life with less undue suffering, as well as strengthen the overall U.S. economy in ways that will pay dividends for all of us.
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Boosting Wages
Coronavirus Recession
