INCOME MOBILITY:

INCOME MOBILITY:

INCOME MOBILITY:Is It an Achievable

Goal and How Would We Measure Success?

Robert KnightDirector, Workforce PolicyResCare Workforce Services

Setting a CourseWIA Purpose: “The purpose of this subtitle is to provide workforce investment activities, through statewide and local workforce investment systems, that increase the employment, retention, and earnings of participants, and increase occupational skill attainment by participants, and, as a result, improve the quality of the workforce, reduce welfare dependency, and enhance the productivity and competitiveness of the Nation.”

House SKILLS Act adds at end of above: ‘‘It is also the purpose of this subtitle to provide workforce investment activities in a manner that enhances employer engagement, promotes customer choices in the selection of training services, and ensures accountability in the use of the taxpayer funds.’’

Among Senate HELP Purposes is the following: “To improve the quality and labor market relevance of workforce investment, education, and economic development efforts to provide America’s workers with the skills and credentials necessary to secure and advance in employment with family-sustaining wages and to provide America’s employers with the skilled workers the employers need to succeed in a global economy.”

The Doctor is In

“If the fundamental nature of the issue to be tackled is misdiagnosed, it is likely that the policy measures put in place to respond will perform sub optimally, and in some instances ‐may not work at all. To put it another way, no matter how lovingly crafted, cunningly designed and skilfully implemented a policy move may be, if it is not squarely addressing the real root of the problem that it is meant to be solving, its impact may be very limited indeed.”

– Paul McKelvie, Vice Chair, Board of the Scottish Funding Council and Chair of its Joint Skills Committee

Horatio Alger and the American Dream

• Widely shared belief in strong social and economic mobility—that Americans can and do rise from humble origins to riches

• Benjamin Franklin and Henry Ford• A mainstay of popular culture—

Horatio Alger’s stories, the Jeffersons TV show (“Moving on Up”), who else?

• Who is correct: A 2013 Brookings study found income inequality becoming more permanent, sharply reducing mobility. An academic study released in 2014 found income mobility has not changed much in the last 20 years.

A Word About Words

• Income mobility is not income inequality, although the two may be related

• There are two different ways to measure income or economic mobility: absolute and relative.

Bring In the Statisticians and Economists

• Absolute mobility measures how likely a person is to exceed their parents’ family income at the same age– Pew Economic Mobility Project: 84% of Americans exceed their

parents' income; but size of income gains is not always enough to move them to the next rung of the economic ladder

• Relative mobility focuses on one’s rank on the income ladder compared to their parents, their peers, or themselves over time– PEM Project: 40% of children in the lowest income quintile

remain there as adults; 70% remain below the middle quintile, i.e. 30% moved up two quintiles or more in one generation

It’s Complex• American Dream Report,

a 2007 study: "by some measurements we are actually a less mobile society than many other nations, including Canada, France, Germany and most Scandinavian countries.” Other research supports these findings.

Individual Vs. Family Mobility

• Another 2007 study (“PEM Project: Across Generations"): – significant upward "absolute" mobility from the late

1960s to 2007, 2/3 of children in 1968 reported more household income than their parents

– Individual vs. family income: most of this growth in total family income can be attributed to the increasing number of women who work since male earnings have stayed relatively stable throughout this time

Intragenerational MobilityUS Treasury Department study: "There was

considerable income mobility of individuals [within a single generation] in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period“

Or is it "the guy who works in the college bookstore and has a real job by his early thirties," rather than poor people rising to middle class or middle income rising to wealth?

A CHILD’S ECONOMIC POSITION IS HEAVILYINFLUENCED BY THAT OF PARENTS

• 42% of children born to parents in the bottom fifth of the income distribution remain in the bottom

• 39% of those who were born into the top quintile as children in 1968 are likely to stay there, and 23% end up in the fourth quintile

• Half of the generation studied exceeded their parents economic standing by moving up one or more quintiles

• Moving between quintiles is more frequent in the middle quintiles (2-4) than in the lowest and highest quintiles. Of those in one of the quintiles 2-4 in 1996, 35% stayed in the same quintile; and 22% went up one quintile or down one quintile

• Children from lower-income families had only a 1% chance of having an income that ranks in the top 5%; children of wealthy families have a 22% chance of reaching the top 5%

What’s It Take to be Middle Class?

2010 Individual Income

Q1 < $12,500$12,500 < $25,000

20%28%

Q2 $25,000 < $37,500$37,500 < $50,000

13%14%

Q3 $50,000 < $62,500$62,500 < $74,500

7%6%

Q4 $75,000 < $87,500$87,500 < $100,000

3%2%

Q5 $100,000 + 7%

6-Month Average Earnings For Workforce System Placements

• 6-month average WIA adult=$13,383• 6-month average WIA DW=$15,949• 6-month average Reintegration Grants=$9,797• Registered Apprenticeship=$23,826• TAA=$18,373• Wagner-Peyser=$14,252

Level Playing Field?• “The level of opportunity is alarming, even though it’s stable

over time,” said Emmanuel Saez, a professor at the University of California, Berkeley. Mr. Saez is a recent winner of an award for the top academic economist under the age of 40.

• Today, the odds of escaping poverty appear to be only about half as high in the United States as in the most mobile countries like Denmark, Mr. Saez said.

_________________________http://eml.berkeley.edu/~saez/Equality of Opportunity Project

Strategies to Enhance Income Mobility

Build Skills of Workers

Develop Diverse Set of Policies That Enhance Worker Well-being

Encourage/Mandate Changes Inside the “Black Box”

Investments in Workers-To-Be• Preschool exposure can have

lasting positive effects on educational and economic disparities by family background, especially for low- and middle-income children but we need more effective policies.

• Reforms to K-12• Better Employment

Outcomes For Community Colleges, 4-Year Institutions and For-Profit Schools

Investments in WorkersPartial Public Funding:– Classroom Training (loans, Pell Grants, WIA, etc.)– On-the-Job Training– Apprenticeship– Customized Training– Sectoral Approaches– Coop Ed Approaches

Self Investment and Employer InvestmentLife-long Learning Which of These Promote Income Mobility? How?

Public/Economic Policy Concerns With Workplace Implications

1. Growing wage inequality2. Gender equality3. In work poverty‐4. Weak inter generational social mobility ‐5. Limited progression for low waged workers6. Low pay/no pay cycles due to temporary and casual work7. Weak, uncertain and unstable youth transitions from learning to earning8. Low relative levels of productivity9. Limited levels of innovation10.Under employment and poor skills utilization‐

Agree?An estimated 1 in 4 working adults will hold a low-wage job by 2020. New approaches that focus on opportunities to improve job quality need to be included in today's workforce strategies.“Good" jobs—

– stable schedules,– wages that keep workers and families out of poverty,– skill development opportunities,– job flexibility

These are increasingly hard to find. A singular focus on preparing low-income workers for securing high-quality jobs is not a sustainable field-wide strategy.

Policies That Influence Work and Might Improve Income

•Career ladders and opportunities for workers to improve their skills • Affordable Child Care• Adequate Stock of Moderate Rental Housing• Time and Cost Reasonable Transportation• Affordable Health Care

Inside the Black Box of the Workplace

• Minimum Wage Increases or Other Higher Wage Strategies

• Access to Promotions and Career Ladders• Improved Benefits Including Paid Leave and

Retirement• Job Redesign Leading to Full-Time and

Predictable Hours of Work

A few of the proposals from Workforce Strategies Initiative at Aspen Institute

If It’s the Only Tool You Have …

1. Training funds should be directed to evidence-backed programs and to workers who can benefit from those programs.

2. Training programs should directly engage employer and industry partners, or actively guide students to career-specific training.

_________________ Brookings, The Hamilton Project; Michael Greenstone and Adam Looney

QUESTIONS

COMMENTS

THANK YOU!