Inequality was the top issue on the agenda of last week’s World Economic Forum meetings and the subject of regular commentary on editorial pages. Star columnist Linda McQuaig, for instance, recently questioned the “morality of so much wealth concentrated in so few hands.” She, like so many on the far left, plead with governments to undo what markets have produced.
But let’s give the market its due. While income inequality is an issue of concern, nothing in human history has done more for the poor than markets and our capitalist economic system.
In a fascinating new book on the family, libertarian David Horowitz points out that at the end of the 19th century the average working class family in New York dedicated 90 percent of its income to food clothing and shelter. And a third of that family income came from their children.
Today’s poverty line Low Income Cuttoff is constructed on the assumption that those below it spend 20 percent more after tax income than the average family, who in 1993 spent 43 percent of their income in these basic goods. And the working poor of today, like their counterparts across the income scale, work day and night to provide their children with education and leisure activities to prepare them for a better life.
The poor of today are much better off than the middle class of yesteryear. And we have our economic system to thank for that.
But what of the distribution that that market produces? For all of the ink spilled about the need to address inequality, progressives tend to put forward a one-dimensional solution focused on redistribution. But too much redistribution becomes an impediment to economic growth, because it undermines the conditions for broad-based opportunity.
A smarter inequality-reducing agenda would start with the family. Strong, stable families are the foundation for economic and social mobility. Fragile families are a significant risk to the well being of children and our society, to borrow a phrase from one substantial study. And, to give the left its due, progressive policy thinkers such as the Center for American Progress’s Judith Warner and the Brookings Institution’s Isabel Sawhill have written extensively about the correlation between stable families and positive economic and social outcomes. The key takeaway from this research is that economic inequality is at least in part a symptom of social inequality that stems from different family circumstances.
This finding is intuitive. The so-called “stickiness” between one’s family background and adult outcomes is evident all around us. It is often the result of uneven access to values transmission, early learning, recreational and social opportunities, and parental attachment.
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Canadian researchers have found a weaker links between family background and economic and social outcomes relative to the US. But the link remains. Canadian marriage rates among the wealthiest “remained remarkably stable” over a 30-year period between 1976 and 2011 and yet fell for low- and middle-income Canadians. The situation is particularly acute among Canada’s Aboriginal population who are distressingly over-represented among Canada’s poor. Aboriginal youth comprise half the children in foster care despite representing only four percent of the population.
Is there something we can do to prevent the link between family background and economic and social outcomes to deteriorate to levels seen in the United States?
This requires big thinking that exceeds the space available here. But here are two key points.
First, we can and should be prepared to use public policy levers to support strong, stable families. As I argued in the Canadian Tax Journal, “kids are not boats” and policy should reflect this critical distinction. We have, to use the phraseology of the left, a collective interest in stronger families.
Second, rather than a purely redistributional program, we need to think more about direct transfers to families to ease and promote child care choice, greater labour policy flexibility for working parents, and a tax and transfer system that reflects the cost of raising children (e.g., saving for post-secondary education). These are all items at the centre of the pro-family agenda of the recently defeated federal Conservative government.
We need to pick up that mantle and run with it. A policy agenda that seeks to strengths and sustain families should be at the centre of any plan for inclusive growth. And that requires a fusion of respecting markets while also strengthening the institution of the family.