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Prosperity 2050: Is Equity the Superior Growth Model?

Prosperity 2050: Is Equity the Superior Growth Model?

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Sarah Treuhaft and David Madland address the growing opportunity deficit, what it means for our economic future, and the next steps for building an inclusive growth agenda.
Sarah Treuhaft and David Madland address the growing opportunity deficit, what it means for our economic future, and the next steps for building an inclusive growth agenda.

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Published by: Center for American Progress on Apr 22, 2011
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04/22/2011

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Center for American Progress PolicyLink |
 
Prosperity 2050
Prosperity 2050
Is Equity the Superior Growth Model?
Sarah Treuhaft and David Madland April 2011
Introduction
 As our counry inches is way ou o he Grea Recession and looks oward he uure,he need or a new policy ramework o guide our economic growh is clear. Teeconomic model o he pas several decades is ailing nearly everyone, save hose a he very op. Wih he excepion o he laer years o he Clinon adminisraion, economicgrowh has been slower and less broadly shared over he pas several decades, leav-ing more and more amilies, even enire communiies, o all urher behind and wihdiminishing prospecs or caching up.Tis is rue no only or he poores o he poor bu also or lower- and middle-incomeamilies, who have seen heir incomes sagnae and heir qualiy o lie decline. And i isespecially rue or people o color, who are rapidly becoming he majoriy populaion o he Unied Saes and will cerainly be so by 2050.Our counry aces a mouning economic opporuniy deci and i is he exac opposieo he American promise ha i you work hard, you can achieve he good lie, exempli-ed by a secure paycheck ha grows year aer year, a nice home in a sae neighborhood wih decen schools, reiremen savings, healh care, some leisure ime o spend wihriends and amily, and he abiliy o send your kids o college and pass along o hem a bigger share o he American Dream.Te long-erm economic rends o greaer inequaliy and suned upward mobiliy clearly undermine American ideals o airness and equiy, and he noion ha prosperiy should be broadly shared. Bu could he eclipse o he American promise also be under-mining our economic compeiiveness? Is i possible ha he radiional assumpionha here is a radeo beween growh and equiy is wrong, and ha broadly sharedgrowh is ulimaely beter or he economy? Could a ocus on equiy—he economicand social inclusion o hose le behind—be much more han a humaniarian or moralac bu acually a superior economic growh model? And i so, wha does an inclusiveand susainable growh rajecory look like?
 
2Center for American Progress PolicyLink |
 
Prosperity 2050
Now is a criical momen o begin a naional dialogue abou he growing opporuniy deci and wha i means or our economic uure. oday, PolicyLink and he Cener or American Progress hos a convening o discuss he proposiion ha a ocus on equiy and economic inclusion is necessary o grow he U.S. economy. A his meeing, leadingeconomiss and policy expers will explore he connecions beween inequaliy, socialinclusion, and economic growh; ideniy areas or urher research; and discuss policiesha can suppor sronger and more equiable economic growh.Tis raming paper is inended as a saring poin or ha discussion. I highlighs key economic and demographic rends, summarizes he lieraure on equiy and growh,and suggess some nex seps or building an inclusive growh agenda.
Critical trends: Increasing inequity, growing diversity
Economic disparities on the rise
Over he pas several decades, longsanding inequiies in income, wealh, and opporu-niy have seadily worsened—and are now reaching unprecedened levels. While hereis no single causal explanaion, broad economic and poliical ransormaions, includinghe decline in union membership and he shi rom an economy based on manuacur-ing o one based on services and reail, have cerainly played a role.Enire neighborhoods, ciies, and even regions—paricularly older indusrial areas inhe Norheas and Midwes—have been devasaed by deindusrializaion. And in allplaces, coninued residenial segregaion by race and income, along wih he concenra-ion o opporuniy srucures (such as high-qualiy schools, good jobs, and services) inhigher-wealh communiies, has physically separaed people rom he resources, markes,and insiuions hey need o ge ahead. Key rends include:
•
Increasing income inequaliy 
•
Rising produciviy bu sagnan wages
•
 A growing wealh gap
•
Suned economic mobiliy 
•
More and deeper povery 
•
Persisen racial dispariiesLe’s examine each o hese rends briey in urn.
 
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Center for American Progress PolicyLink |
 
Prosperity 2050
Increasing income inequality 
Te gap beween rich and poor has widened since 1980 and he Unied Saes now hashe hird-wors income inequaliy among advanced indusrial naions.
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Economic gainsare no being widely shared and insead are concenraing a he op. Beween 1947 and1976 he op 10 percen o earners ook home a hird o he naions pre-ax income; by 2008 heir share had increased o 48 percen. In he same ime period, he share goingo he op 1 percen grew rom 8 percen o 18 percen.
2
Income growh is disribuedeven more unevenly: Te botom 90 percen o households only capured 16 percen o income growh beween 1989 and 2007 while he op 1 percen received 56 percen.
3
Rising productivity, stagnant wages
 American workers produce more oupu per hour han ever beore bu heir produciviy gains are no ranslaing ino higher wages. In 2010 average annual produciviy rose by 3.9 percen ye labor coss (workers’ compensaion) ell by 1.5 percen.
4
During he las business cycle (2001 o 2007) beore he Grea Recession, worker produciviy increasednearly 19 percen bu he real income o he median working-age household decreased by abou 2 percen while he coss o healh care, housing, and college have increased.
5
  Wha’s more, he rend began even earlier. From 1979 o 2005 he incomes o hemiddle 60 percen increased by 18 percen ($9,000) and he incomes o he botom20 percen increased by only 1 percen ($200). Meanwhile, he incomes o he op hincreased 75 percen ($99,200). Tis is a sark deparure rom he 1947-o-1973 period when he incomes o he poores h o amilies increased a abou he same rae as heincomes o he wealhies h.
6
 
Growing wealth gap
Te wealh divide in our naion has grown even more dramaically han he incomeand wage divide. Te collapse o he housing bubble, ollowed by he oreclosure crisis,he decline in home prices, and he glu o “upside-down” morgages, sripped many lower-income amilies o heir mos signican—and oen, only—asse. Wealh wasdesroyed across he board bu lower- and middle-income households were dispropor-ionaely aeced.From 2007 o 2009 he botom 80 percen o Americans los 25 percen o heir wealh,on average, and he op 20 percen los 16 percen. Te share o oal wealh held by he botom 80 percen o he populaion dropped rom 15 percen o 13 percen inhe same ime period while he share going o he op 20 percen increased rom 85percen o 87 percen.
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Stunted economic mobility 
 Americans end o be oleran o economic inequaliy as long as opporuniies exis omove up he economic ladder. Bu he acual chances ha a child born o a poor am-ily will improve his or her lo are much lower in he Unied Saes compared o oher

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