By Egon Frech, Center for the Study of Democracy
Is the American Dream really slipping away from Americans of modest and less than modest means? The fear that many in the country will no longer be able to get ahead by striving and hard work alone found solid support from a group of academics, elected officials, and policy foundations at a two-day conference in Baltimore March 30 and 31.
Speakers at the conference, “United, Not Divided – The Public Forum on Economic Inequality and Opportunity Gap,” presented statistical evidence that the wage gap between the rich and the middle class is widening and expressed concern that the resulting public backlash is eroding the country’s democratic system of government.
“This is the most important issue in our country today,” said Congressman Steny Hoyer (D-MD). “If we don’t give hope and opportunity to our people, our democracy as we know it will be at risk.” The phenomenon is making people fearful, he said, and that fear is being expressed in the current presidential election campaign by people supporting Donald Trump and Bernie Sanders.
The conference was organized by the Center for the Study of Democracy, part of St. Mary’s College of Maryland, and drew about 250 registered participants.
Dr. Tuajuanda C. Jordan, president of the College, cited recent research that indicates growing political polarization in the United States is not due just to politicians’ impotence or unwillingness to work together but is also related to the widening gap between the rich and poor. The study showed that the states that have the highest level of inequality also have the most political polarization.
Dr. Maija Harkonen, executive director of the Center, told the conference that economic inequality has been increasing faster in the U.S. than in other countries. “It has contributed to a nagging sense of gloom and the feeling that all is not right in our democracy,” she said. “Our country is hurting. Increasing economic inequality has resulted in falling living standards for many of us. It is shrinking the middle class. It is preventing us from reaching our dreams of upward social and economic mobility. Worse yet, it is also eroding our democratic social order and stability.”
The concentration of income at the very top of the scale has risen to a level not seen since the “Roaring Twenties,” more than 90 years ago, when the top one percent of Americans owned more than 50 percent of the wealth in the country, said Dr. Nasir Khilji, senior economist at the Office of Economic Policy in the U.S. Department of the Treasury. He said the increase in income disparity is not a new phenomenon; it began in the late 1970s after a period of substantial economic growth following World War II. During that period, incomes grew rapidly for everyone at about twice the rate of inflation.
Since 1980, he said, incomes of the top one percent have increased by 200 percent while incomes of the middle 60 percent have increased only 48 percent, and incomes of the bottom 20 percent have increased only 40 percent.
Wealth is even more concentrated than income, he said. While the bottom 90 percent of Americans got 53 percent of the income in 2013, the bottom 90 percent of wealth holders got only 25 percent of the wealth. The top three percent, on the other hand, got 31 percent of the income while top 3 percent of wealth holders and owned 54 percent of the wealth. He noted that wealth inequality is likely to increase even further. “As the distribution of wealth becomes increasingly unequal, the returns to that wealth – like interest, dividends, and capital gains – will generate even more inequality,” he said.
He cited that statistics show, however, that the increasing disparity is not due to a change in the ratio of returns between labor and capital but rather due to changes in the distribution of both labor income and capital income.
He also warned that the boom of the post-war period is not likely to be repeated. “We were on top of the world during that time,” he said. “We had no competition.”
The speakers listed the in-migration of cheap labor, globalization, technological change, and automation as the primary causes of the increasing disparity in income. One of the problems in the Baltimore area has been the disappearance of what was once the region’s largest employer, Bethlehem Steel. Speakers noted that ordinary people without a college education used to be able to find a job with this firm and earn a comfortable living. Now, the largest employer in the area is Johns Hopkins Medical Services, and the jobs associated with the medical field require higher education and specific skills, leaving few places to go for workers with only a high school education.
Dr. Khilji listed government policies that could promote inclusive growth:
- Strengthening aggregate demand (stimulus, extended unemployment insurance)
- Promoting equality of opportunity (free college tuition)
- Reducing both market power concentration and excessive profits
- A progressive tax system combined with important benefits like unemployment insurance, health care, and wage insurance
Dr. Branco Milanovic, professor of economics at City University of New York, warned that rolling back globalization, which has been going on for the last 30 years, would be extremely difficult now. The risk, he said, would be a flight of capital. He suggested that the only way to reverse the growth of inequality would be to redistribute the “underlying assets” of the economy, resulting in greater distribution of human, physical, and financial capital.
Several of the speakers dealt with opportunity gap – the inability of poor people, especially poor African-Americans, to overcome the barriers that lead to gainful employment. Dr. Karl Alexander, professor emeritus in sociology at Johns Hopkins University, described a 25-year study during which researchers followed 800 first-grade students until they reached the age of 28. The work is described in a book, “The Long Shadow,” published in 2014. The title is a reference to the influence on a child’s later life exerted by the social and financial circumstances of the parents; it emphasizes the need to lift up the poor so they invest in their children, thus allowing the next generation to become productive members of society.
“Equal opportunity is a national myth,” Dr. Alexander said. “The life prospects of a child in America are more dependent on the income and education of its parents than in almost any other country in the world.”
He said the research revealed a remarkable difference between the life prospects of black children and white children. At age 28, for those in the study that did not go on to college, he said, 45 percent of whites were in skilled crafts, earning $20.34 an hour, while only 15 percent of black participants were in the same kinds of jobs, earning only $14.75 an hour. He found that social contacts, including family, friends, and churches, were important in helping the participants find a first job, develop skills, and build up a work history. That assistance was much less available to black participants.
“It’s not a pretty picture,” he said. “Going forward, we all need to be proactive in trying to change the narrative.”
Mr. Hoyer also emphasized the need to invest in children’s development, and he criticized Congress for cutting funding to help the poor. He said an increase in the minimum wage is needed. “Nobody can live on $7.50 an hour,” he said, noting that if the minimum wage had kept pace with inflation since it was first established in 1968, it would be at $10.60 an hour today.
Arloc Sherman, senior fellow at the Center on Budget and Policy Issues, provided statistics showing the positive effect of many government programs to help the poor. He said Head Start, for example, improved the adult success of black children in the areas of education, health, employment, and crime, to the point where it almost eliminated the disadvantage that black children start with. Court-ordered increases in school funding in the 1970s and 80s had a significant impact, he said. A 10-percent increase in public school spending over 12 years resulted in nearly half a year increase in completed education, 9.5 percent higher earnings, and a 6.8 percent decrease in adult poverty. The earned income tax credit of $3,000 to the parents resulted in 7.2 percent more of the children of those families finishing high school and in 4.8 percent more of them enrolling in college.
He said a program in Milwaukee called New Hope yielded academic gains equivalent to half the achievement gap between black and white kindergartners at a cost of $8,000 per family. It offered anyone under 1.5 times the poverty line a job of 30 hours or more a week and included wage supplements, licensed child care, and health care.
“What won’t work,” he said, “are deep cuts in social programs and turning the safety net into block grants,” referencing the budget bill approved by the U.S. House of Representatives on March 16. “That is not helpful.”
A number of the speakers focused on the problems of acute poverty, institutional racism, and lack of access to education or employment facing the African-American population of Baltimore. Antero Pietila, a Baltimore journalist, discussed the city’s transportation system, which he said is dysfunctional, as it does not provide the means for people without cars to either get to a job or to a place where they can get training or higher education.
Dr. Margery Austin Turner, senior vice-president for program and planning management of the Urban Institute, discussed the need for adequate housing for poor black inner city populations. She argued that past policies have confined poor blacks to a limited section of city neighborhoods and made their situation worse. “The historical record clearly demonstrates that our nation’s stark patterns of racial segregation, poverty concentration, and neighborhood distress were built by public policies and private actions,” she said. These policies, she continued, have excluded poor black families, especially those of color, from neighborhoods of opportunity and disinvested in the neighborhoods where poor people, especially those of color, were clustered. She suggested the solution may be to make decent housing an entitlement. It could be financed by decreasing the home mortgage income tax deduction, she said.
Michael Kelly, executive director of the Baltimore Metropolitan Council, said there are currently 1,800 families on the waiting list for housing in Baltimore. He outlined a number of initiatives under way in the greater Baltimore area to break up concentrations of poor people, provide public transportation systems that will take people to where the jobs are, and foster development that will provide more jobs. The task is made more difficult by the fact that the members of the Council don’t always agree on their priorities, he said.
Kurt Schmoke, president of the University of Baltimore and mayor of the city from 1987 to 1999, related how he had believed, as a district attorney before he became mayor, that the war on drugs, which resulted in many black Baltimore residents getting criminal records, was the right thing to do. After he became mayor, he said, he realized that the drug problem is a public health issue rather than a crime issue and proposed decriminalizing marijuana use. He is now attempting to negotiate a better chance for released offenders to obtain employment by convincing employers to avoid making previous convictions an automatic disqualifier on a job application.
Keiffer Mitchell, special advisor to Maryland Governor Larry Hogan, said Baltimore is really two cities, and the black community has not benefited from the massive funds expended to develop the area around the Inner Harbor. He said the development funds were essentially wasted, because there was no development in the black neighborhoods, nor any jobs for their residents. “We built here in Baltimore, but who has come?” he asked. “Mainly tourists.” He said Governor Hogan is implementing some programs to try to help Baltimore’s black neighborhoods by committing $18 million to a blight elimination program that will tear down derelict buildings. This will be followed by new job-creating development that will eventually involve the expenditure of $700 million, he said.
Herbert Hoelter, CEO and co-founder of the National Center on Institutions and Alternatives, said 56 percent of black males in Baltimore are under some aspect of the criminal justice system. “It costs $25,000 a year to keep one person in jail,” he said. “If we gave the $25,000 to an employer to give the person a job, we wouldn’t have the problem.” Mr. Hoelter’s organization works with “people who live in the shadows of our lives” – released inmates, developmentally challenged individuals, and those with mental health issues — to train them for employment so that they can be productive members of society. He said Baltimore consists of “two societies, separate and unequal.”
Diane Bell McKoy, president and CEO of Associated Black Charities, said the problem of inequality will not be solved until those developing solutions have a complete framework for their deliberations. The missing link, she said, is the hard fact of structural racism. “The idea that most can make it if they work hard is an American myth,” she said. “If we do not eliminate racial inequality in the development of future policies, we won’t solve the problems.”
Congressman John Sarbanes (D-MD) felt that economic inequality results from inequality of opportunity, which results from political inequality. He noted that political inequality results from the fact that special interests are subverting the democratic system. “We need campaign finance reform,” he said, proposing that political campaign expenditures should be publicly financed to ensure that elected representatives actually remain representative of the voters who put them in office, rather than the special interests that financed their election campaigns.
Dr. Sheridan Todd Yeary, a member of the steering committee for OneBaltimore and senior pastor of the Douglas Memorial Community Church, said the political system that keeps black people in poverty is working as designed. “The country was not founded to be one of haves and haves, but rather haves and have-nots,” he said. “The people who founded the country took care to ensure that the have-not majority would never remove the haves from power. The deck is stacked because it was built that way.” He warned that the problems of inequality will not be solved easily and probably not in his generation. The market will not fix them either, he insisted. “Do the right thing doesn’t apply in business. It’s all about margins.”
Policy planners must start listening to the people, he said, adding that the voice from the streets is, “Stop doing it for me. Start doing it with me.”
He pointed out that the problems of Baltimore’s poor black population have been known for many years but were brought into new focus by the riots of 2015. “Freddie Gray’s death didn’t reveal something we didn’t know,” he said. “It simply removed the ability to believe the excuse that it had already been fixed.”
The forum included a number of students from St. Mary’s College of Maryland. Dr. Helen Daugherty, professor of sociology, was the moderator of the forum and a major contributor to its success. She noted the value of having her students attend the forum, participate in the debate, and serve on a panel to answer questions from the audience. Her students were familiar with the subject, having been assigned to read several of the books written by the speakers and discuss them in class. Dr. Harkonen praised the students who served as ambassadors for the Center and assisted in its organization and its resulting success. Dr. Jordan noted that the students achieved benefit through “experiential learning,” or learning through experience, an important element of the mission of the College. By helping organize the event, she noted, “our student ambassadors have learned organizational skills and how to connect and reconnect with different communities in the Baltimore area.” A number of St. Mary’s students, past and present, are Baltimore residents, and some of them spoke of the problems they faced in the poorer neighborhoods. St. Mary’s has several scholarship programs to assist students in achieving their desire for a higher education. The students are members of the next generation on whose shoulders rest the solutions to the problems noted in the Forum discussions.
Photos by Bill Wood.