Before the pandemic, our economy was not working for everyone. Only about 50 percent of people born in 1980 could expect to out-earn their parents once they became adults, compared with 90 percent of those born in the 1940s, according to Heather Boushey, president and chief executive officer of the Washington Center for Equitable Growth, quoting the work of Raj Chetty. Boushey was part of an opening panel launching WorkRise, a new research-to-action network hosted by the Urban Institute with the mission of building a more equitable and resilient labor market that expands opportunity and economic mobility for workers.
Boushey described this loss of economic mobility as an enormous change to have occurred in just one or two generations and pointed to two big trends as contributors to this loss: greater economic inequality and slower economic growth. Chetty found inextricable links between these two trends, concluding that to increase mobility, we must first close the equality gap.
Michael Strain, director of economic policy studies at the American Enterprise Institute, found the narrative that something is fundamentally broken in our economy and that people cannot get ahead with hard work today to be overstated, citing the general increase in living standards and wages across all income levels in recent years. He sees the US as still upwardly mobile overall, noting that those raised in the bottom 20 percent have an 86 percent chance of out-earning their parents at comparable ages. But Strain agreed that we cannot be complacent and need to do much better for low-income Americans and the working class.
COVID-19 is exacerbating the situation and creating an even less dynamic and fluid labor market, according to Jason Furman, professor of the practice of economic policy at the Harvard Kennedy School. Furman is concerned that in the aftermath of the pandemic, we’ll see trends from 2001 and 2008 reemerging, such as more long-term unemployed and more part-time workers. It’s going to take time to even get back to the imperfect place we were in February 2020.
The panelists agreed that past priorities and choices were to blame for decreased economic mobility. Darrick Hamilton, incoming Henry Cohen Professor of Economics and Urban Policy at The New School, puts the blame squarely on policies that have gutted the social safety net and reduced regulations and taxes for the wealthy, as well as the misguided theory that corporate dynamism will trickle down to the rest of society.
The panelists also agreed that the failure to focus on workers themselves was a key error of past policies. Hamilton explained this as a failure to realize that people are our greatest resource and that we need to think about the economy from workers’ perspectives. Strain sees this as the bipartisan habit of putting policies that make the middle class more comfortable ahead of policies that support low-income Americans. He noted that learning more about what policies can enhance economic mobility, particularly for low-income workers, is key to what makes WorkRise an important and exciting endeavor.
The panelists agreed that making better and more intentional policy choices that enhance economic mobility coming out of the crisis is crucial to changing the landscape. Furman suggested that the first priority coming out of this pandemic should be securing jobs for all because being excluded from the labor market is profoundly damaging. Achieving this goal requires quick and comprehensive fiscal stimulus and relief, training and job search assistance, and a widespread effort to reexamine our support systems—such as training programs, flexible leave, and unemployment insurance—to make them more effective in a recession.
Boushey suggested we need to address structural racism, increase the minimum wage, and ensure we do not have a “K-shaped recovery” from the pandemic, with those who could work from home and keep their jobs continuing to prosper and those who lost jobs and wages and experienced health setbacks continuing to face hardship. She sees strengthening labor unions as key to ensuring workers have the supports they need, such as child care, health care, and transportation.
Hamilton warned that we can’t get to where we need to be by getting out of the way and having a pure, free labor market with no minimum wage. We need to proactively connect people to jobs and opportunities, and we need to establish infrastructure to do that.
Strain wants to hold businesses more accountable, suggesting we may have gone too far in the direction of the competitive labor market, which has led to a deterioration of the worker-firm relationship. He would like more research to establish how businesses can be more profitable and pay workers more and create an environment where they want to stick around.
To address the stalled economic mobility of Black Americans, Hamilton argued for big, bold policies that explicitly include race and gender, such as baby bonds, reparations, and federal job guarantees that employ anyone who wants to work in a job building our political and physical infrastructure.
Several panelists noted that although early Congressional action in response to COVID-19 was swift, ambitious, and critical, the failure to continue the stimulus since July has been perplexing and frustrating. Congress’s original response proves that our political system can respond if policymakers see the need. Now is the time for the policy community to identify and communicate this need.
Click here to watch the full panel.