Economic inequality in the Unites States has been studied extensively, it has been nearly impossible to determine what precisely is causing the inequality and how this inequality may be harming the economic well-being of United States and its people.
25
We do know that economic inequality matters when we consider its effect on the overall efficiency of the United States economy.
26
Economists may not be able to put their finger on one cause or solution, they do find correlations between unequal societies and poor public health or mass incarceration. These are just two things that negatively impact the growth of human capital which is the foundation of the American Dream of upward mobility.
Human capital is an individual’s collection of skills and knowledge that increase economic value for the individual.
27
Development of human capital begins from the day a person is born. And, as you can imagine, the circumstances of birth greatly impact how fast or slow human capital grows.
Wealth can be inherited, unlike income. Therefore, children born into wealthy families have an advantage. Especially if the families have large amounts of wealth that make it easier for them to save more of their annual income than they spend.
28
This increases the likelihood that wealthy families can provide better housing and educational supports that help grow their human capital.
29
Upward mobility and human capital is linked to the areas in which a child grows up. For example, a low-income family can find adequate housing in a neighborhood that they can afford. However, that neighborhood may have lower tax rates to fund local schools.
30
Areas with higher tax rates are linked with higher rates of upward mobility because there are more quality resources available to its residents.
Figure 3. This figure illustrates the geography of upward mobility in the United States. Lighter colors indicate places where children from low-income families are more likely to make a higher income than that of their parents.
31
While economic inequality poses a threat to all people regardless of race and gender, it is worth noting that upward mobility is lower in areas with larger African American populations.
32
Historically, these areas tend to have greater racial and income segregation.
33
White individuals living in these areas also have lower rates of upward mobility. Therefore, it is possible that segregation by race and income has harmful effects on upward mobility for all races.
34
Opportunities such as quality day cares and preschools increase human capital, however, not everyone has access to these programs. These institutions increase language acquisition and the ability to hold a conversation, skills necessary for success in kindergarten. For example, children in wealthier families can use approximately 1,116 words by the age of three. Whereas a child born into the working class may know 749 words and child born into poverty knows 525 words.
35
Children in wealthy homes not only have access to preschool opportunities but also educational add-ons such as books, tutoring, and extra-curricular activities.
A child’s economic status determines there starting line for education as early as kindergarten. Additionally, it is almost impossible for a child to catch up on this skill building once they enter primary school. This loss of human capital means that children born into poor or working-class families will not be prepared in the same ways as their wealthier peers for their years in education. This, coupled with high tuition costs, puts them at a disadvantage when it comes to accessing a quality higher education program.
36