Skip to main content
off the charts

Breaking Down Barriers to Economic Opportunity

The lack of upward mobility for low- and middle-income children – a product of inequality and poverty – strikes at the heart of the American dream.  But several evidence-based policies can boost opportunities for these children, as Jared Bernstein and I document in a new paper for the Peterson Foundation.

We describe at least three ways that inequality constrains opportunity.

First, inequality increases residential segregation by income.  As the middle class has shrunk, neighborhoods of concentrated poverty and of concentrated wealth have both become more common.  Relative to their peers in mixed-income neighborhoods, children in high-poverty neighborhoods are exposed to more environmental hazards, less diverse peer groups, and lower-quality public goods, all of which generate unequal opportunity from a young age.

Second, inequality leads to unequal access to quality educational experiences.  Wealthy families can invest more time and money in, for example, books, computers, and art lessons that likely contribute to the gaps in educational achievement that surface before students enter kindergarten and widen during summer months.  Inadequate and inequitable funding for primary and secondary schools also disadvantages low-income students, as do barriers to college affordability.

Third, and most importantly, inequality by definition channels the benefits of economic growth away from low- and middle-income families and toward those at the top.  The direct effects of economic hardship (including but not limited to “toxic stress”) and advantages of economic security are likely the largest drivers of discrepancies in opportunities between low- and high-income children.

Well-crafted policies can push back against these trends, though.  Research suggests that the following approaches hold promise for improving mobility:

  • Improvements to the Housing Choice Voucher program can help hundreds of thousands of low-income children who live in troubled neighborhoods.  Federal, state, and local agencies can implement these changes without new funding or congressional action.
  • Adequate and equitable public funding for education from pre-K through college would help level the playing field in schools.  Important steps include establishing universal pre-K and targeting loans, grants, and tax incentives in higher education more effectively.
  • Policies that directly address poverty, wage and income stagnation, and inequality have the greatest potential to improve economic opportunity.  A growing body of research indicates that safety net programs like the Earned Income Tax Credit, SNAP (formerly food stamps), and Medicaid boost low-income children’s opportunity and improve their outcomes in adulthood.  These vital programs must be maintained and strengthened.  Interventions that improve the market (pre-tax and transfer policy) outcomes of working families are key complements to the safety net and include raising the minimum wage, strengthening collective bargaining rights, reforming criminal justice, and enacting a full employment agenda.

Our paper also describes ways to help finance these investments that would improve mobility, including closing tax loopholes that tilt heavily toward the most affluent and strengthening the estate tax.  The American dream may now be out of reach for too many children, but it doesn’t have to be.