Branko Milanovic identified five reasons the rich got richer and the poor got poorer. High-income people have more money to invest. Capital is comprising a greater share of national income, and it is concentrating in relatively fewer hands. Between 1975 and 2012, capital investment increased from 33 to 37 percent of net income in the United States. The latest data, from 2007, indicates 38 percent of all stocks were owned by the wealthiest 1 percent and 81 percent of all stocks were owned by the wealthiest 10 percent. The two other reasons are people tend to marry others of the same income level, and the wealthy can pay to influence political decisions to protect and increase their wealth.
Megan McArdle, noted people may remain poor in spite of changes in income or wealth if changes in personal character and opportunities aren’t present. She further argued income inequality is not necessarily a problem. “Most people don’t care whether Warren Buffett is rich. They care that they feel shut out of their local economy.” Other writers acknowledged public policies to redistribute wealth from the 1 percent normally don’t affect the 1 percent, who can relocate or pay lawyers to find loopholes and lobbyists to create them. Instead, it is usually those in the middle class, without political connections or even the time to seek special privileges, who get harmed by higher taxes and exclusionary regulations.
Economic development incentives, which often prove perverse, reward large corporations making big changes. The little guy who wants to share his talents in small ways, perhaps only for supplemental income, can’t afford a lawyer and accountant to navigate local, state, and federal licensing, zoning, and permitting processes. Low-income entrepreneurs, therefore, have problems climbing the economic ladder. They can’t become higher-income professionals until they can afford to go back to school; so, without new blood, the middle class gets “hollowed out.”
Daniel Zaharopol believes public schools could help. Noting math skills and high incomes are strongly correlated, he told a tale of two students. One went to a high school where calculus was not taught and there was no math team. Her parents couldn’t pay $5,000 to send her to math camp. And she didn’t have an uncle to recommend that book that would turn her on to astrophysics. Students like her, “are told to do their work, keep doing the same practice problems and they’ll be fine. Well, they won’t be fine …”
But per-pupil spending isn’t the answer. In 2014, at $6,500, Utah had the lowest per-pupil spending of any state; yet, according to research by Raj Chetty, Salt Lake City showed more signs of upward mobility than any other large US city. People with earnings among the poorest 20 percent in the state had a 10.8-percent chance of moving into the top 20 percent of earners. Charlotte was selected as the poster child for a bad scenario, where the probability was only 4 percent.
McArdle paid a visit to Utah to see if she could identify policies replicable elsewhere. While the influence of a church with highly-organized workfare and disaster relief programs was all-pervasive; McArdle had to find solutions secular enough for government to swallow. Three anomalies she found while buzzing from one government meeting to another were: (1) no mention of race, as in us versus them; (2) no bureaucrats demanding bigger budgets or more staff; and (3) an expectation that problems would be solved by individuals and not government.
And the conversation returned to marriage. Utah also ranked first in marriage statistics, with the highest percentages of married adults and children raised by married couples. In Utah, 79 percent of children live in households with two parents, compared to 42 percent in Washington, DC. What’s more, Chetty discovered a high correlation between the percentage of married couples and the overall financial success of all children in neighborhoods throughout the country. Even more importantly, income disparities commonly attributed to race could just as easily be explained by family structure.
Anymore, it is difficult to avoid the adage that poverty can largely be avoided by finishing high school, working full time, and postponing having children until after marriage. Unfortunately, advocating for traditional marriage is likely to destroy any celebrity’s career, and any attempt to remove race from political discussions is likely to be viewed as racist.