U.S. Special Initiatives: Opportunities for Reducing Inequity. May 9, 2007

Transcription

1 U.S. Special Initiatives: Opportunities for Reducing Inequity May 9, 2007

2 Executive Summary Identify the greatest opportunities to reduce inequity in the U.S. Contrary to American beliefs, the circumstances of one s birth still in large measure predict life outcomes for poor Americans and, in fact, barriers to opportunity appear to be growing not shrinking» The Problem: Access to opportunity for the poorest Americans has decreased over the past 30 years, and this problem will continue to compound if left alone The number of poor people have increased from 2000 to 2005 from 32 to 37 million Americans, with the fastest growth in those living below 50% of the federal poverty line Economic gains growth in income and wealth are not shared equally, and the poorest have significantly unequal access to opportunity and low socioeconomic mobility This unequal access to opportunity and mobility results in dramatically lower life prospects for the poor» The Causes: Social and economic changes over the last 30 years including globalization, technology, deregulation, and changes in the labor force have created new challenges that are excluding the poor from opportunity Changes to the U.S. economy and social systems over the last 30 years have created 6 new challenges for low-income Americans: 1. Lower wages and less opportunity for earnings advancement; 2. Greater need to acquire skills; 3. Greater job and earning unpredictability; 4. Shift of risks towards individuals; 5. Higher relative costs of living; 6. Increased need for family and community supports The response from societal systems to these new challenges has been inadequate (and in some cases compounding)» Affected Populations: The impact of these system changes disproportionately affects specific places and populations but we do not recommend a particular focus because it would exclude large segments of the poor Urban poverty is the most concentrated, suburban poverty is the fastest growing, and rural poverty is the most persistent over time The disproportionate impact of poverty cuts across a wide variety of groups, including those with lower educational attainment, less workforce participation, younger ages (i.e., children), and single parent families African Americans, Hispanics, and Native Americans are much more likely to be poor but whites still make up over a third of the poor Ongoing demographic shifts will further amplify the impact of these new challenges in future years Despite the challenges, we are encouraged by the potential for impact because we understand the building blocks for opportunity, we can leverage growing public and political will, and we have a body of successful programs on which to build» Building blocks of change: Based on our analysis of inequity in the U.S., we identify key building blocks of change for improving access to opportunity» Lessons on what works: Despite the persistence of poverty and barriers to opportunity, there is a large body of successful U.S. interventions upon which we can draw We have identified six broad strategies to help the poor meet the new challenges to opportunity» Broad strategies: These strategies are a starting point for analysis but are not yet narrow enough to be actionable 1

3 The Federal Poverty Line (FPL) is the primary metric for measuring U.S. poverty The Federal Poverty Line (FPL) Established in the 1950s at three times the annual cost of a nutritionally adequate diet for the household Sample poverty levels for 2006» Individual under 65 years: $10,488» Single parent with 2 children: $16,242» Married parents with 2 children: $20,444» Married parents with 3 children: $24,059 Imperfections of the official U.S. Federal Poverty Line Measures income poverty, but does not include taxes, EITC, work expenses, inkind benefits like Food Stamps and housing assistance Does not incorporate rising costs of medical expenses, technology access, housing transportation, etc. Varies by family size and number of children but not by regional cost of living differences The National Academy of Sciences has suggested 12 alternative measures of poverty, 11 of which are higher than the official level Source: U.S. Census Bureau: Understanding Poverty; 2

4 Poor people in the U.S. now top 37 million, with the fastest growth coming from those below 50% of the FPL Below poverty line Number of people living at 50%, 100% and 200% of the Federal Poverty line ( ) 100M 80 82M 85M 87M This includes 41 million working poor adults 89M 91M Between % of poverty line 91M Change % % % % % % 7.3% 40 32M 33M 35M 36M 37M 37M % % % % % % 10.7% 0-50% 0-50% 0-50% 0-50% 0-50% 0-50% 26.5% Source: U.S. Census Bureau

5 Progress against the overall poverty rate has stalled despite economic growth Real Per Capita GDP, (in constant 2000 dollars) $40,000 % Change %Americansinpoverty ( ) 30.0% % change % % change % 30, , % 10, Source: Real GDP: Census.gov for population estimates; BEA for Real GDP. Poverty rate: Census.gov Note: GDP data is annual for prior year and the Census data is ~April 1; could be seasonality in the data but it is consistent over time. 4

6 at least partly because economic gains are no longer shared equally Economic gains used to be shared equally Change in family income by quintile and top 5%, but now accrue mainly to the top half of earners Change in family income by quintile and top 5%, % % Bottom 20% Second 20% Middle 20% Fourth 20% Top 20% Top 5% -20 Bottom 20% Second 20% Third 20% Fourth 20% Top 20% Top 5% Source: Collins, Hartman and Sklar. Divided Decade: Economic Disparity at the Century s Turn. 5

7 Persistent limited economic mobility for poor children suggests significantly unequal access to opportunity Adult income distribution for sons born into a family in the bottom fifth of the income distribution % 34% i.e., 42% of those born in the bottom quintile will end up as adults in the bottom quintile This general trend has been observed for both sons and daughters born between 1951 and % The data from 1951 and 1975 do not suggest an upward or downward trend th percentile 20th - 50th percentile 50th to 80th percentile 5% 80th percentile and above Research on children born after 1975 is not yet available Note: This is for the cohort of sons born in The sons income was measured in the mid 1980s. This assumes a correlation coefficient of 0.4 Source: Solon The American Economic Review. Intergenerational Income Mobility in the United States. 6

8 Growing income and wealth inequality are likely to further erode economic mobility Percent distribution of income (2000) and wealth (2001) by quintiles 100% 80 i.e. the top 20% of Americans own 84% of all the wealth Wealth Bottom 40% 12 4 Middle quintile Fourth quintile Income Top quintile % change in income ( ) %changeinwealth ( ) Note: Wealth defined here as net worth, which is the current value of all marketable assets less the current value of debts. Source: Changes in Household Wealth in the 1980s and 1990s in the U.S. in Edward N. Wolff, Editor, International Perspectives on Household Wealth, Elgar Publishing Ltd., forthcoming. 7

9 This unequal access to opportunity results in dramatically lower life prospects for the poor Life prospects based on income quintile Likeliness of children being in the bottom 20% of income earners as adults* Likeliness that children are within the top 60% of income earners as adults* Chance of children graduating high school by age 26** Chance of children obtaining a bachelor s degree by age 26** Bottom Mid Top 42% 17% 6% 35% 61% 83% 64% 86% 95% 7% 22% 51% Average net worth in 2004** -$1,000 $116,350 $1,560,000 Average increase in net worth from ** Average household income in 2000 (2001 dollars) 0% 41% 65% $10,440 $43,412 $146,240 Change in real income from % 8% 38% Maximum annual swing in income (as percent of total salary)*** 51% 27% 19% * The sum of these two numbers for each column do not total 100%; the difference between the sum of these two numbers and 100% is the likeliness of children being in the bottom 20-40% (2 nd quintile) of income earners as adults ** Data shown for bottom and top quartiles as opposed to quintiles; middle refers to middle two quartiles. *** Data shown for families at the 20th, 50th, and 90th percentiles of the income distribution. See appendix for sources 8

10 Executive Summary Identify the greatest opportunities to reduce inequity in the U.S. Contrary to American beliefs, the circumstances of one s birth still in large measure predict life outcomes for poor Americans and, in fact, barriers to opportunity appear to be growing not shrinking» The Problem: Access to opportunity for the poorest Americans has decreased over the past 30 years, and this problem will continue to compound if left alone The number of poor people have increased from 2000 to 2005 from 32 to 37 million Americans, with the fastest growth in those living below 50% of the federal poverty line Economic gains growth in income and wealth are not shared equally, and the poorest have significantly unequal access to opportunity and low socioeconomic mobility This unequal access to opportunity and mobility results in dramatically lower life prospects for the poor» The Causes: Social and economic changes over the last 30 years including globalization, technology, deregulation, and changes in the labor force have created new challenges that are excluding the poor from opportunity Changes to the U.S. economy and social systems over the last 30 years have created 6 new challenges for low-income Americans: 1. Lower wages and less opportunity for earnings advancement; 2. Greater need to acquire skills; 3. Greater job and earning unpredictability; 4. Shift of risks towards individuals; 5. Higher relative costs of living; 6. Increased need for family and community supports The response from societal systems to these new challenges has been inadequate (and in some cases compounding)» Affected Populations: The impact of these system changes disproportionately affects specific places and populations but we do not recommend a particular focus because it would exclude large segments of the poor Urban poverty is the most concentrated, suburban poverty is the fastest growing, and rural poverty is the most persistent over time The disproportionate impact of poverty cuts across a wide variety of groups, including those with lower educational attainment, less workforce participation, younger ages (i.e., children), and single parent families African Americans, Hispanics, and Native Americans are much more likely to be poor but whites still make up over a third of the poor Ongoing demographic shifts will further amplify the impact of these new challenges in future years Despite the challenges, we are encouraged by the potential for impact because we understand the building blocks for opportunity, we can leverage growing public and political will, and we have a body of successful programs on which to build» Building blocks of change: Based on our analysis of inequity in the U.S., we identify key building blocks of change for improving access to opportunity» Lessons on what works: Despite the persistence of poverty and barriers to opportunity, there is a large body of successful U.S. interventions upon which we can draw We have identified six broad strategies to help the poor meet the new challenges to opportunity» Broad strategies: These strategies are a starting point for analysis but are not yet narrow enough to be actionable 9

11 Dramatic changes in the U.S. economy and social systems have occurred over the last 30 years, creating many benefits Major changes Globalization Technology Deregulation Female participation in the labor force Benefits to the economy Specialization Economies of scale Increased productivity Cost efficiencies Increased competition Lower costs of compliance Increased percentage of the total population that participates in the labor force By-products Faster cycle times/ pace of change More short-term orientation Sectoral shifts Changing contract with workers Increased pressures on families and children Note: Consensus exists that economic changes are a major driver of outcomes for the poor. However, experts disagree as to how many are influenced by changes in the economy versus social changes (e.g., changing social norms about marriage, work, etc.). 10

12 These changes create new challenges for low-income Americans 1.Lower wages and less opportunity for earnings advancement 2.Greater need to acquire skills 3.Greater job and earning unpredictability 4.Shift of risks towards individuals 5.Higher relative costs of living 6.Increased need for family and community supports 11

13 1. New challenge: Lower wages and less opportunity for earnings advancement Job growth distribution has skewed towards very high-end and low-end occupations Smoothed changes in occupational employment shares , with occupations ranked by their 1980 median wage. As a percent of the total jobs in the U.S. lowpaying jobs are growing As a percent of the total jobs in the U.S. middlewage jobs are shrinking As a percent of the total jobs in the U.S. highpaying jobs are growing Source: Auter, Katz, Kearney, Polarization of the U.S. Labor Market, January 2006: Source: Census Integrated Public Use Microsamples, 1980, 1990,

14 2. New challenge: Greater need to acquire skills Post-secondary education is increasingly important to earning a decent wage Additional skills/education translates into a higher income than it did 25 years ago Income by educational attainment (persons 18+, , inflation adjusted) Fastest growing jobs require additional education Projected job growth by educational attainment ( ) 30% Source: Left Behind: Unequal Opportunity in Higher Education, The Century Foundation, 2004; BLS Statistics, Bridgespan Analysis 13

15 3. New challenge: Greater job and earning unpredictability Life for low-wage workers is less predictable, with more variable earnings and job losses Income volatility is a major challenge Maximum swings in annual income for most families at the 20 th (working poor), 50 th (middle class), and 90 th (upper income) percentile of income distribution Dislocated workers is a major challenge Dislocated workers 300K 228K K 166K 154K K Note: Data includes dislocated workers certified through TAA or NAFTA-TAA Source: US General Accounting Office, Trade Adjustment Assistance: Trends, Outcomes, and Management Issues in Dislocated Worker Programs, 2000; Standards Matter: The Economic Roots of K-16 Reform,Carnevale and Desrochers. Los Angeles Time article found at

16 4. New challenge: Shift of risks towards individuals Reduced employer benefits that resulted from competitive pressures have disproportionately impacted the poor More people do not have year-round health Percent insurance of at persons every income not covered level by health insurance during the entire year Percent of people without health insurance during the entire year 30% Percentage Fewer private ofsector* private workers sector have workers* employer whose sponsored employers pension sponsored plans at every pension income plans level Percent of private sector workers with employer sponsored pension plans 100% Less than $25K $25K- $49.9K $50K- $74.9K $75K and up * Wage and salary workers ages 25-64, employed full-time year-round; pension plans include both defined benefit and defined contribution plans Note: Family coverage is defined as health coverage for a family of four Source: Kaiser Family Foundation 2005 Annual Survey on Employer Health Benefits; US Census Bureau Current Population Survey, 1994; Income, Poverty, and Health Insurance Coverage in the United States: Purcell, CRS Report for Congress Pension Sponsorship and Participation: Summary of Recent Trends, Lowest quartile Lower middle Upper middle Earnings quartiles Top quartile 15

17 5. New challenge: Higher relative costs of living Price premiums for the poor along with inflation have increased the burden of basic needs Number of households with severe rent burden* 8M %oftotal renter households % 17% 20% CAGR % Low-income households pay more for most everyday goods and services (Philadelphia example)** Cashing checks: State law allows check-cashing establishments (most of which are located in lowincome neighborhoods) to charge up to $450/year to cash checks for families earning $15,000 Buying groceries: Sizes of stores shown to be a strong determinant of food prices; smaller grocery stores and convenience stores tend to be located in low-income neighborhoods Car insurance: Annual cost to insure the same car is $400 more in neighborhood with median income below $30K than neighborhood with median income of $70K Gas prices: At rates in 2005, cost of gas was $300 more annually for families living in Philadelphia than for those in suburbs Home loans: National lending data shows average interest to mortgage a home is 8.1% for families earning less than $30K compared to 7.9% for families earning $70K *Defined as burden greater than 50% of income spent on rent. **According to the Brookings study, the poor pay higher prices due to a variety of reasons: perceived risk by businesses of selling in poor neighborhoods; lack of full information on the consumer s part; weak enforcement, deregulation, and limited regulation fostered market abuses that take advantage of the poor; and the higher cost of public utilities in urban areas for all, which especially burdens the poor. Source: Trends on worst case needs for housing, , U.S. Department of Housing and Urban Development (Table A-2); The Food Stamp Program is Growing to Meet Need, Center on Budget and Policy Priorities. The Price is Wrong: Getting the Market Right for Working Families in Philadelphia, Brookings Institute,

18 6. New challenge: Increased need for family and community supports At the same time, family and social structures have been weakening U.S. children increasingly live in single parent families Child living arrangements in the U.S. Percent, % %in married families % Change ( ) -21% Single family households account for two-thirds of child poverty Child** poverty population by family and work Millions (Percent of total), 2005 Single families* No fulltime work Full-time work 1.7 (14%) 6.3 (51%) %in single families 117% Married families No fulltime work Full-time work 1.8 (15%) 2.5(20%) 0 Total** 12.3(100%)** * No husband present for female headed households, no wife present for male headed households. ** Children are people under 18 who are related to the householder, but who are not themselves the householder or the householder's spouse. This excludes approximately 0.5M children. Sample universe is all people except unrelated individuals under age 15 (such as foster children). Source: U.S. Census. Living Arrangements of children. Monthly labor review

19 The response from societal systems has been inadequate and in some cases compounding New challenges 1. Lower wages and less opportunity for earnings advancement 2. Greater need to acquire skills 3. Greater job and earning unpredictability 4. Reduced access to benefits Some progress has been made Growth of work supports (e.g., EITC) Recent action on minimum wage No Child Left Behind High school reform Sectoral-based workforce development strategies Use of technology to increase labor market transparency (e.g., Monster.com) Modest increases in health insurance coverage, particularly for children Extensive product proliferation of savings products (e.g., IRAs, 401(k)s, 529s) but systems have not kept up with changes Profitability and short-term earning pressure combined with shorter worker tenure are disincentive to investment in employees Small and medium-sized businesses are ill-equipped to do skill development Worker adjustment systems built for the old economy (e.g., unemployment insurance not reemployment assistance ) Slow updates to high school curriculum, mandates, or structure High dropout rates and achievement gaps persist Flat graduation rates for higher ed Little national strategy/investment in a coherent non-college postsecondary system Government assistance is short-term and shallow (e.g., resume prep) when new need is deeper (e.g., longer-term skill development and education) No financing system for skill development and redeployment for out-of-work or low-skill working adults creates few incentives for existing institutions to serve them Uninsured rate continues to grow Longer duration of unemployment (benefits exhausted) Government programs to encourage asset growth favor those with assets (e.g., 90% of $362b in subsidy to top 55% of earners) 5. Higher relative costs of living 6. Changing family and social structure Some regulation at the state level to curb usury practices Some housing program successes (e.g., HOPE VI) Welfare reform moved single mothers to work Family and Medical Leave Act provides more time for parents to care for children Housing program funding remains limited (e.g., only 25% of families eligible for vouchers can receive them) Government child care and after school programs not to scale to meet need 18

20 Executive Summary Identify the greatest opportunities to reduce inequity in the U.S. Contrary to American beliefs, the circumstances of one s birth still in large measure predict life outcomes for poor Americans and, in fact, barriers to opportunity appear to be growing not shrinking» The Problem: Access to opportunity for the poorest Americans has decreased over the past 30 years, and this problem will continue to compound if left alone The number of poor people have increased from 2000 to 2005 from 32 to 37 million Americans, with the fastest growth in those living below 50% of the federal poverty line Economic gains growth in income and wealth are not shared equally, and the poorest have significantly unequal access to opportunity and low socioeconomic mobility This unequal access to opportunity and mobility results in dramatically lower life prospects for the poor» The Causes: Social and economic changes over the last 30 years including globalization, technology, deregulation, and changes in the labor force have created new challenges that are excluding the poor from opportunity Changes to the U.S. economy and social systems over the last 30 years have created 6 new challenges for low-income Americans: 1. Lower wages and less opportunity for earnings advancement; 2. Greater need to acquire skills; 3. Greater job and earning unpredictability; 4. Shift of risks towards individuals; 5. Higher relative costs of living; 6. Increased need for family and community supports The response from societal systems to these new challenges has been inadequate (and in some cases compounding)» Affected Populations: The impact of these system changes disproportionately affects specific places and populations but we do not recommend a particular focus because it would exclude large segments of the poor Urban poverty is the most concentrated, suburban poverty is the fastest growing, and rural poverty is the most persistent over time The disproportionate impact of poverty cuts across a wide variety of groups, including those with lower educational attainment, less workforce participation, younger ages (i.e., children), and single parent families African Americans, Hispanics, and Native Americans are much more likely to be poor but whites still make up over a third of the poor Ongoing demographic shifts will further amplify the impact of these new challenges in future years Despite the challenges, we are encouraged by the potential for impact because we understand the building blocks for opportunity, we can leverage growing public and political will, and we have a body of successful programs on which to build» Building blocks of change: Based on our analysis of inequity in the U.S., we identify key building blocks of change for improving access to opportunity» Lessons on what works: Despite the persistence of poverty and barriers to opportunity, there is a large body of successful U.S. interventions upon which we can draw We have identified six broad strategies to help the poor meet the new challenges to opportunity» Broad strategies: These strategies are a starting point for analysis but are not yet narrow enough to be actionable 19

21 Areas of high poverty are a concern for more than just urban centers 100% % of U.S. population total and in poverty for all metropolitan and nonmetropolitan areas (2005) M Outside metropolitan statistical areas 37M Outside metropolitan statistical areas Poverty Rate 14.5% Top cities in terms of poverty and rise in suburban poverty are areas of focus Top ten metro areas with highest number of poor people 2 :» NY (1.8M), LA (1.7M), Chicago (.8M), Houston (.6M), Philadelphia (.6M), Detroit (.5M), Riverside (.5M), Miami (.4M), Phoenix (.4M), Atlanta (.4M) Outside cities (suburbs) Outside cities (suburbs) 9.3% Suburban** poverty is growing and warrants notice:» Suburbs, particularly inner-ring suburbs, have seen a significant increase in poverty rates over the last ten years (although the poverty rate still lags that of rural and central city)» Explanations for this trend include long-run decentralization of people and jobs in the United States" and the effect of federal housing policies that deconcentrated poverty (e.g., HOPE VI, Section 8) 20 0 Urban cities Total Population Urban cities Poor Population 17.0% 1 Income, Poverty and Health Insurance Coverage in the United States: 2005, US Census Bureau, 08/06; 2 Urban Institute, Concentrated Poverty, A Change in Course: May 2003, 3 "Two Steps Back: City and Suburban Poverty Trends, ," Berube and Kneebone, Brookings Institution, 12/06. *Urban Cities uses the Census Principal City designation, defined as The largest city of a Core Based Statistical Area, plus additional cities that meet certain statistical criteria. Metro areas include both Principal Cities and Outside Cities and is a statistical area associated with at least one urbanized area w/ a population of at least 50,000. The MSA includes adjacent outlying counties with a high degree of social/economic integration with the central county measured by commuting. Outside MSAs are areas associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000 **Brookings Institution report defines Central Cities as the primary city in an MSA or a city in the MSA with a population of at least 100,000 in Hence, the population in central cities is less than the Census Principal Cities; population for Suburbs includes some cities that Census classifies as Principal Cities. 20

22 Concentrated poverty is more persistent in rural areas than metropolitan areas Counties with persistent concentrated poverty (Counties with 20% plus poverty rates 1959, 69, 79, 89, 99) Most communities in persistent concentrated poverty are rural areas 65% of counties in persistent concentrated poverty are rural However, fewer people are in these areas than in the urban and suburban areas the 35% of counties that are metropolitan and suburban have higher concentrations of people Source: Rural Poverty Research Institute and Oregon State University, Persistent Poverty and Place: How Do Persistent Poverty Dynamics and Demographics vary across the Rural-Urban Continuum, Miller and Webber, January

23 Areas of high poverty magnify negative outcomes for children Percent of children by neighborhood poverty rates (1999) 60% Neighborhood poverty rates 40%+ Note: Experts continue to debate whether concentration of poverty (% of population below the poverty line) or average overall income level in a neighborhood is a better predictor of life outcomes 15-20% 0 In single parent households 3-4 year olds not enrolled in preschool High school dropouts Parents not working <5% Source: Mather and Rivers, The Concentration of Negative Child Outcomes in Low-Income Neighborhoods, Population Reference Bureau and Kids Count (Annie E. Casey Foundation), 2006; original data sourced from Census Note data is illustrative, taken from bar graph 1 Concentrated Poverty vs. Concentrated Affluence, Pebley and Sastry,

24 Poverty disproportionately affects single parents, non-workers, poorly educated, and the young Percent of total population and percent of poor population Poor by family Total families Married Couple Male householder, no wife Female householder, no husband 8M 77M Poverty in America is disproportionately experienced across different populations Family makeup: 1 in 3.5 female-headed families are poor vs. 1 in 20 married families 16+ in poverty Total 16+ Families Households w/ head in >25 in poverty Total families w/ Total households head >25 Worked FT, year round Worked PT, year round HS dropout Did not work at least one week25m Some College HS diploma B.A. 227M 7M 74M Workforce: 1 in 4.5 people who didn t work (< one week) were poor vs. 1 in 36 who worked full time and 1 in 8 who worked part time Education: 1 in 4 households without a high school diploma is poor, vs. 1 in 14 with some college and 1 in 35 with a bachelor s degree Poor by age Total pop < M 293M Age: 1 in 5.5 children are poor vs. 1 in 9 adults % Source: Census Bureau, Income, Poverty and Health Insurance Coverage in the United States: 2005, August

25 Also, the challenges to opportunity disproportionately affect different races New Challenges Data for Asians, Blacks, Hispanics, and Native Americans Lower wages and less opportunity for earnings growth Greater need to acquire skills Greater job and earning unpredictability Reduced access to benefits Higher relative costs of living Income levels relative to that of whites is 61% for blacks, 71% for Hispanics, and 120% for Asians Even at similar levels of educational attainment, earnings for minorities lag those of whites Only 50% of blacks, 53% of Hispanics and 51% of Natives will graduate high school compared to 75% of whites Only 21% of blacks and 20% of Hispanics will receive an associate s degree or higher compared to 40% of whites Natives, blacks, and Hispanics experience significantly higher unemployment rates (12.8% for Native American men, 9.5% for black men and 4.8% for Hispanic men versus 4.0% for white men) Blacks make up 25% of marginally attached workers and only 11% of the labor force On average, wealth for African-Americans only ~14% that of whites; wealth disparities observed even at similar income levels Blacks and Natives have lowest life expectancy (68 years for black males, 73 years for American Indian males, versus 75 years for whites) Blacks, Hispanics and Natives fare poorer across numerous health measures; also have higher prevalence of obesity and diabetes Higher rates of uninsured (35% of Natives, 34% of Hispanics, 18% of blacks, and 17% of Asians compared to 16% of whites) African-Americans are charged on average $300 more for the same automobile Changing family and social structure Source: See appendix for complete listing of sources 86% of black children in poverty live in single-parent households compared to 50% of poor Hispanic children, 27% of poor Asian children, and 63% of poor white children Of children living with both parents, 65% of black children live in families where both parents are working compared with 54% of whites Of children living with both parents, 3x more likely for mother to be the sole income earner in black and Native American families than white families 24

26 However, focusing on individual races excludes large numbers of the poor Black NH* Child poverty rate Percent, Child poverty population Millions (Percent of total), (30%) Black, Hispanic, and white children each represent about 1/3 of total poor children Hispanic, immigrant mother Hispanic, native mother Other NH* (19%) 2 (13%) 1 (5%) Poverty rates still differ across subpopulations» 1 in 12 whites are poor vs. 1 in 9 Asians, 1 in 4.5 Hispanics, and 1 in 4 blacks White NH* 10 4 (33%)» 1 in 8 native-born are poor vs. 1 in 5 foreign-born noncitizens Total*** (100%)*** * NH: Non-Hispanic ** Rates between native and immigrant mothers varies significantly: Hispanic children with a native mother have ~25% poverty rate, ~1.7M children, and compose ~13% of total poor children; Hispanic children with an immigrant mother represent ~31%, ~2.5M, and ~19% respectively *** Children are people under 18. Sample universe is all people except unrelated individuals under age 15 (such as foster children). Source: Census Bureau

27 Ongoing demographic shifts will amplify these challenges Labor Force Age 25 and over (millions) ( (f)) 100% 80M 119M 138M Immigrants % % % 40% All net growth in working age adults will be from immigration 80 Natives % 81% Natives (f) 44% 0% Even within flat growth among natives, differential birth rates will increase share of children of poverty in workforce: Children born to high school dropouts = 2.6 Children born to high school grads = 2.0 Children born to college dropouts = 1.9 Children born to college grads = 1.6 Note: excludes undocumented immigrants Source: David Ellwood: Grow Faster Together, Or Grow Slowly Apart: How Will America Work in the 21 st Century, The Aspen Institute,

28 In particular, immigration presents both unique challenges and opportunities Immigrants face more challenges than the native born and their burden on social systems is debated but they provide a critical supply of labor, are resilient, and have high economic mobility 3.5x less more likely to have less than a high-school education 2.5x less likely to have health insurance 1.7x more likely to be poor (non-citizens).4x spent on per capita medical expenditures X (New immigrants and their children account for 73% of the growth of the uninsured population) Restaurants are the nation s largest private sector employer with 12.5 million employees and their demand for labor is expected to grow at 15% between 2005 and 2015 with the native-born workforce growing by only 10% in that period Immigrant mobility patterns are very responsive to economic opportunity, as immigrants communicate to their compatriots at home that some job markets are flat while others are booming, which produces just-in-time-like delivery of workers where they are needed most Socioeconomic mobility among children of immigrants has been strong historically, aided by ethnicity-based networks that are heterogeneous across income levels (however, debate exists as to whether this trend will continue given the shifts in the job market and the increasing percentage of immigrants with low education levels) Note: Debate remains on the net positive or negative impact of immigrants. The preponderance of evidence suggests that immigrants contribute more to the economy and tax base than they cost in social systems though communities with particularly high populations of recent immigrants appear to be an exception. Source: CIS, Immigrants at Mid-Decade: A Snapshot of America s Foreign-Born Population, December 2005, Steven Camarota; Migration Information Source, Why Immigrants Lack Adequate Access to Health Care and Health Insurance, September 2006, Heritage Foundation 27

29 Summary: The poorest in the U.S. face significant inequities Poverty is persistent» Since 1960s, poverty has ranged between 11% and 15%» Child poverty rate of 18%; half live below 50% of the poverty level Poverty is concentrated» Concentration exists along racial/ethnic, geographic, educational, and family structure characteristics» Geographic concentration exacerbates symptoms: Teen parenting, crime, dependency, unemployment, high school dropouts, gangs, drugs Poverty is compounding» Inequities block poor families from accessing opportunities» Poor families have more children than wealthy families» Children of poor families are much more likely to be poor as adults Despite these compelling facts, we believe that it would be premature to focus our analysis and/or solutions based on race or place because we would exclude large portions of the poor Note: Some experts would contend that race, in particular, is so fundamental to understanding poverty that the diagnosis of the problem and potential solutions must begin with race. We have not seen sufficient evidence to recommend that approach to offset the costs of excluding other large portions of the poor 28

30 Executive Summary Identify the greatest opportunities to reduce inequity in the U.S. Contrary to American beliefs, the circumstances of one s birth still in large measure predict life outcomes for poor Americans and, in fact, barriers to opportunity appear to be growing not shrinking» The Problem: Access to opportunity for the poorest Americans has decreased over the past 30 years, and this problem will continue to compound if left alone» The Causes: Social and economic changes over the last 30 years including globalization, technology, deregulation, and changes in the labor force have created new challenges that are excluding the poor from opportunity» Affected Populations: The impact of these system changes disproportionately affects specific places and populations but we do not recommend a particular focus because it would exclude large segments of the poor Despite the challenges, we are encouraged by the potential for impact because we understand the building blocks for opportunity, we can leverage growing public and political will, and we have a body of successful programs on which to build» Building blocks of Change: Based on our analysis of inequity in the U.S., we identify key building blocks of change for improving access to opportunity 7 building blocks directly linked to opportunity can be represented through an interrelated hierarchy of key drivers (Job market, Education), assets (Financial assets, Family, social, and cultural assets), and basic needs (Costs of living, Health, Security) 2 cross-cutting building blocks (Communities, Effects of race) are crucial to any initiative; however, they will apply later in the strategy development process» Lessons on what works: Despite the persistence of poverty and barriers to opportunity, there is a large body of successful U.S. interventions upon which we can draw We have identified six broad strategies to help the poor meet the new challenges to opportunity» Broad strategies: These strategies are a starting point for analysis but are not yet narrow enough to be actionable 29

31 Considering the causes and the affected populations, we identify 9 building blocks of change for increasing access to opportunity Causes of inequity: New challenges that are excluding the poor from opportunity 1. Lower wages and less opportunity for earnings advancement 2. Greater need to acquire skills 3. Greater job and earning unpredictability 4. Shift of risks towards individuals 5. Higher relative costs of living 6. Increased need for family and community supports Populations disproportionately affected by inequity: 1. Urban and rural areas of highly concentrated poverty 2. Minorities, less-educated, single-parent families and other groups of people Building blocks of change Job Market Education Financial assets Family, social, & cultural assets Costs of Living Health Safety & security Communities/place Race/populations Direct link to increasing access opportunity Cross-cutting building blocks 30

32 The building blocks can be organized in an interrelated hierarchy Job market Education Core drivers: These are the fundamental source of independent, productive lives, but they cannot be pursued without at least a base level of the other building blocks Financial assets Family, social, & cultural assets Assets: These play a dual role of protecting against downside risks and providing the platform for future advancement Costs of living Health Safety & security Basic needs: Alone, these do not create opportunity, but they can be a significant barrier to opportunity if they are not met Communities/place Race/populations Cross-cutting factors: Our working assumption is that these will be part of any strategy, but not the basis of the strategy 31

33 These building blocks have important links to Opportunity for foundation to effect sustainable change opportunity Lever of change Description of building block Link to opportunity Job market All areas of gainful employment that contribute to earning income, including partand full-time jobs, on-the-job training, maximizing use of government benefits (e.g., EITC), and employer- and employee-based strategies. Direct connection through both increasing income and providing a career path to advancement; additionally, there is a dual generation effect as improvements for parents accrue to their children High rank Low rank Several interesting interventions but most are subscale and rely on an underdeveloped government and nonprofit sector; potential to leverage private markets Education All forms of formal education, from pre-k through to advanced university degrees. Also includes trades, associate degrees, and other community college education. Does not include on-the-job training. Most powerful predictor of intergenerational and intragenerational social mobility through improved work prospects; however, the payback is over the long-term Numerous opportunities exist for significantly impacting education, but some areas still require additional work to develop more effective and scaleable models (e.g., early childhood education) Financial assets Assets that are considered personal financial assets (e.g., home ownership, savings), the ability to fairly access financial products (e.g., savings, debt, remittance), and the skills to effectively manage cash flows and accumulate assets (e.g., financial literacy). Only recently accepted as a critical link to opportunity though size of impact remains debated; growing importance with increasing returns to education and costs of higher ed; very long payback on investments Social science field slow to recognize importance of wealth/assets, but now broadly accepted Some clear opportunities exist (e.g., banking the un-banked), but this field is at an earlier stage in its development relative to others Family, social, & cultural assets Behaviors and characteristics that pertain to families, societies, and cultures. This includes normative attributes (e.g., marriage, mentorship, college-going cultures) and community assets (e.g., rec centers) Some effects easy to measure (e.g., family structure) while others are hard (e.g., future orientation), but consensus exists that they are important how important remains debated Generally difficult to directly impact either because they involve social norms (e.g., marriage) or do not have a tight link to an institution (e.g., adult relationships) Costs of living Almost all private and public market entities that sell (or provide) goods or services to consumers. These goods include food, affordable rental housing, clothing, and more. This excludes all types of financial services (see Financial Assets). Immediate impact through greater net income and stability; size and timing of impact on longterm opportunity creation is more clear for some interventions (e.g., housing, child care) Involves the intersection of government and the private sector with many, wide-ranging opportunities though some may fall into the purview of government (e.g., housing vouchers) Health Physical and mental health as it relates to the needs of individuals in developed countries. Includes basic health needs (e.g., vaccines, emergency medicine), specific topics (e.g., obesity, smoking), personal safety, and all other health related items. Poor health can have a sizable impact on opportunity, but effects are indirect and many interventions have long paybacks Research unclear on best pathways to improve health disparities and increase opportunities for poor/minorities Safety & security All aspects of personal protection and safety. Includes legal justice, civil rights, personal rights/safety, and absence of crime. Without security, opportunity is impossible. While most people have basic security; when they don t, outcomes can be very destructive. Personal safety and upholding civil legal rights require significant resources on an ongoing basis. Sustainable change seems difficult 32

34 Each building block could impact millions of people Sample population segments (millions) Job market Education Financial assets Family, social & cultural assets Costs of living Note: Not mutually exclusive Health Safety & security 2.2 Incarcerated population Source: See appendix for complete listing of definitions, methodologies and sources for all population sizes 33

35 The building blocks interact with each other across a continuum of needs among families Families are different: Their needs will vary in the number and intensity, along a continuum Increasing need Stable families Fragile families Families in crisis Characteristics Are not engaged with major systems of care or criminal justice system, and are accessing benefits Their children and youth flourish: meet educational proficiency levels, are above threshold on composite health index, are engaged in enrichment programs, and are not involved with major systems of care Lack the resources to pursue opportunities and/or to remain resilient in the face of roadblocks and struggles Their children and youth have limited support systems and are at-risk of disengaging from education and/or getting involved in the criminal justice system Are experiencing deep economic or family crises (e.g., domestic violence, child neglect) and are unable to fulfill their basic needs and strain to stay together as a functioning unit Their children and youth have very limited opportunities for educational success and healthy development, and often become involved in the foster care and/or the criminal justice systems Our sizing methodology Earn more than 200% of the Federal Poverty Line Earn less than 200% of the Federal Poverty Line but do not meet the Families in crisis characteristics Are incarcerated or live in a severely distressed neighborhood * Estimated number of individuals ~200M (69%) 70M - 86M (24%-30%) 4M - 22M (1%-7%) * Severely distressed neighborhood defined as one standard deviation or more above the national mean on the following measures: a) % men not attached to the labor force; b) % teenagers who are high school drop outs; c) % families with children headed by women; and d) % households dependent on public assistance. The low end estimate includes all individuals in neighborhoods that met the criteria on all four of the indicators simultaneously; the high end estimate includes individuals in neighborhoods that met the criteria on three or more of the indicators Source: Census, 2005; Paul Jargowsky and Rebecca Yang, The Underclass Revisited: A social Problem in Decline, Brookings Institute, 2005; William O Hare and Mark Mather, the Growing number of Kids in Severely Distressed Neighborhoods: Evidence from the 2000 Census, Annie E. Casey,

36 Summary of building block assessment: The foundation is likely to have to work across multiple building blocks Each building block has characteristics that are potentially attractive for the foundation and no one building block appears to be the silver bullet However, the building blocks with a more direct link to economic opportunity (e.g., job market, education) are more compelling upon first analysis than those with an indirect link (e.g., health, security) The most effective interventions are likely to be the ones that act against multiple building blocks simultaneously, rather than are siloed in a single building block 35

37 Executive Summary Identify the greatest opportunities to reduce inequity in the U.S. Contrary to American beliefs, the circumstances of one s birth still in large measure predict life outcomes for poor Americans and, in fact, barriers to opportunity appear to be growing not shrinking» The Problem: Access to opportunity for the poorest Americans has decreased over the past 30 years, and this problem will continue to compound if left alone» The Causes: Social and economic changes over the last 30 years including globalization, technology, deregulation, and changes in the labor force have created new challenges that are excluding the poor from opportunity» Affected Populations: The impact of these system changes disproportionately affects specific places and populations but we do not recommend a particular focus because it would exclude large segments of the poor Despite the challenges, we are encouraged by the potential for impact because we understand the building blocks for opportunity, we can leverage growing public and political will, and we have a body of successful programs on which to build» Building blocks of change: Based on our analysis of inequity in the U.S., we identify key building blocks of change for improving access to opportunity 7 building blocks directly linked to opportunity can be represented through an interrelated hierarchy of key drivers (Job market, Education), assets (Financial assets, Family, social, and cultural assets), and basic needs (Costs of living, Health, Security) 2 cross-cutting building blocks (Communities, Effects of race) are crucial to any initiative; however, they will apply later in the strategy development process» Lessons on what works: Despite the persistence of poverty and barriers to opportunity, there is a large body of successful U.S. interventions upon which we can draw We have identified six broad strategies to help the poor meet the new challenges to opportunity» Broad strategies: These strategies are a starting point for analysis but are not yet narrow enough to be actionable 36