Tag Archives: Mobility

Growth in Income and Health Care Costs

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Worried about the stagnation of income among middle-income households? Or about the growth in health care costs? The two are not unrelated. In fact, middle-income families have witnessed far more growth than the change in their cash incomes suggest if we count the better health insurance most receive from employers or government. But is that all good news? Should ever-increasing shares of the income that Americans receive from government in retirement and other transfer payments go directly to hospitals and doctors as opposed to other needs of beneficiaries? Should workers receive ever-smaller shares of compensation in the form of cash? Continue reading →

Homeownership as a Means of Reducing Wealth Disparities

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A recent paper by Bayer, Ferreira, and Ross on mortgage delinquencies and foreclosures finds that people of color had greater problems once Recession hit than did many others in roughly equal circumstances, such as income and location, but with different racial backgrounds. We believe this is a useful, though not surprising, finding in ongoing studies of the impact of the Recession on different types of households. Yet we worry about how its results get extrapolated into policy recommendations. Continue reading →

Wealth Accumulation by Race Over the Life Cycle

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While the income inequality among different racial and ethnic groups is significant, it is nothing compared to wealth inequality. In 2010, whites had six times more average wealth than blacks and Hispanics ($632,000 versus $103,000). The income gap, by comparison, was twofold ($89,000 versus $46,000). In a recent study, several colleagues and I examine in more depth how these ratios are affected by wealth accumulation over a person’s lifetime. Early in wealth-building years (when adults are in their 30s), white families have 3.5 to 4 times the wealth of families of color. As adults age these initial racial differences grow both absolutely and relatively. Continue reading →

Lost Generations? Wealth Building Among the Young

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The young have been faring poorly in the job market for some time now, a condition only exacerbated by the Great Recession. Now comes disturbing news that they are also falling behind in their share of society’s wealth and their rate of wealth accumulation.

Signe Mary McKernan, Caroline Ratcliffe, Sisi Zhang, and I recently examined how different age groups have shared in the rising net wealth of the U.S. economy. Despite the recent recession, our economy in 2010 was about twice as rich both in terms of average incomes and net worth as it was 27 years earlier in 1983. But not everyone shared equally in that growth. Continue reading →

How Tax and Transfer Policies Affect Work Incentives

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When the design of safety net programs is considered alongside that of our tax code, it is easy to see that our tax and transfer systems need to focus less on increasing consumption and more on promoting opportunity, work, saving, and education.

The government doesn’t affect work incentives just through direct taxes. Implicit taxes—that is, penalties for earning additional income—are everywhere, whether in TANF or SNAP, Medicaid or the new health exchange subsidy, PEP or Pease (reductions in tax allowances for personal exemptions and itemized deductions), Pell grants or student loans, child tax credits or earned income tax credits, unemployment compensation or workers compensation, or dozens of other programs. These implicit taxes combine with explicit taxes to create inefficient and often inequitable, certainly strange and anomalous, incentives for many households. Continue reading →

Henry Ford, the American Experience, and Why and How the Distribution of Income Affects Growth in the Modern Economy

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One hundred years ago Henry Ford dropped the price of his Model T to $550. Having adopted new and successful engineering and assembly techniques, the company’s sales expanded exponentially, approximately tripling between 1911 and 1914 alone. Henry Ford bragged that his car would be “so low in price that no man making a good salary will be unable to own one.”

On the American Experience (January 29, 2013) PBS covers the biography of Henry Ford. That story has application to our own time in explaining how the distribution of income affects economic growth. Continue reading →

The Case for Optimism in the New Year: Still Standing on the Shoulders of our Forebears

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With all the silliness going on in Washington these days, and with recovery from recession slow here and halting in many other developed nations, we could easily adopt a pessimistic attitude that obscures the prospects lying right at our feet. At the beginning of a new year, I think we instead need to pause and reflect on our graces and blessings, even as we confront the obstacles we have placed in the way of realizing our potential. Continue reading →

How Earnings Affect Benefits for Households with Children: The Extreme Welfare Case

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In theory, a household may be eligible for a broad range of government supports. Some are universally available, such as earned income tax credits and SNAP (formerly called food stamps) to a household with children if earnings are low enough. (See a previous short on this subject.) Others are only available to some people. For instance, government establishes waiting lists for programs like rental housing subsidies and limits number of years of participation in the traditional welfare program, now called Temporary Assistance to Needy Families or TANF. Continue reading →