How Progressive Policies Boost Economic Growth

At the core of the debate between liberals and conservatives is a dispute over whose policies are better for economic growth, and particularly for the middle class. A new studyby Bryan Dettrey and Harvey D. Palmer suggests one way to test this question — by examining how economic growth differs under Republican and Democratic presidencies. Their finding might not be too surprising: Under Republicans, growth boosts the stock market, while under Democrats, it reduces unemployment.

The two academics examine how economic growth is distributed over time. Their data are expansive, covering the 60-year period from January 1951 to December 2010. They find that once economic growth increases above 1 percent a year — and it does so over most of the period they studied — “the average level of unemployment is significantly higher under Republican administrations.”

As the above charts (from their paper) show, with either a one- or two-year lag, Democrats reduce unemployment dramatically during periods of GDP growth compared to Republicans. Some of this effect has to do with inflation rates (as a I note below), but the authors note another key difference: They argue that Republican policies (for instance, massive tax cuts for the rich and cuts to capital gains) incentivize corporations to use money to compensate CEOs or distribute to shareholders, rather than invest in workers and jobs.

Dettrey and Palmer are not the first academics to raise these points. In a 2004 paper, Larry Bartels showed that “Democratic presidents have produced slightly more income growth for poor families than for rich families.” He updated that analysis earlier this year and found the same result. One reason he cites is the minimum wage: Its real value increased 16 cents a year under Democrats, but decreased by 6 cents a year under Republicans. Aseminal study by Douglas Hibbs found that “the unemployment rate was driven downward by Democratic and Labor administrations and upward by Republican and Conservative governments.” In another study, Alan Blinder and Mark Watson found that the economy grows faster under Democrats, but couldn’t determine why. It could be that the safety net boosts entrepreneurship by making Americans feel more economically secure (and willing to take risks).

There is also an increasingly large body of research on differing government policies at the state level. Christopher Witko and Nathan Kelly note that “since the Republican takeover of Congress in 1995, the states have played a more important role in shaping the income distribution,” and, consequently, in driving income inequality. In another paper, Elizabeth Rigby and Megan Hatch identify three major policies that states can pursue to slow the income growth of the 1 percent. In particular, they find that “policies played a significant role in shaping income inequality in the states.” If states had adopted more liberal policies, Rigby and Hatch suggest, the increase in inequality (as measured by the Gini Coefficient) would have been 60 percent smaller — and the share going to the top 1 percent would have been halved.

(Story continues below the chart.)

Overall, Hatch and Rigby find that conservative policies tend to exacerbate inequality, while liberal policies tend to reduce it. Rigby tells me that the “more redistribution” scenario can be considered the “liberal” scenario, and “less redistribution” the “conservative” scenario, although Democrats don’t always line up perfectly behind liberal policies. Kelly and Witko concur: “We observe that when unions are stronger and left party governments are in power at either the federal or state level we see lower levels of inequality.” Numerous other studies surveyed by Anne Case and Timothy Besley suggestthat Democrats boost government spending, particularly on workers’ compensation and Medicaid (see pages 44 and 45).

Finally, it’s worth noting the racial impacts of these policies. I recently highlighted research by Zoltan Hajnal and Jeremy Horowitz showing that people fare far better under Democrats than Republicans. Given that black and Latino Americans are more likely to end up unemployed — research suggests this is part of the reason for the racial wealth gap — Republicans’ preference for tightening monetary policy is most likely to fall on people of color. Conservatives may not be intending to harm black people, but their policies can end up having a disproportionate impact on them nonetheless.

Inequality did not arise in a vacuum. Government policy plays a significant role in determining the distribution of income. To take one policy, Anthony Atkinson and Andrew Leigh find that reductions in tax rates explain between one half and one third of the rising share of income going to the 1 percent in Australia, Canada, New Zealand, the U.K. and the U.S. (As I’ve noted elsewhere, there is strong evidence that unions and Democrats can reduce inequality, although unions are more effective.) Meanwhile, Olivier Bargain and others find that tax policy accounted for at least 29 percent of the increase in inequality between 1979 and 2007, and likely more. Further, they find, “Republican policymakers increased inequality especially at the top whereas Democrats increased the income share of the bottom 80 percent of the distribution.”

These findings decimate the idea that there isn’t “a dime’s worth of difference” between America’s two major parties. Many commentators in particular focus too much on marquee policies and miss the “market conditioning” and other minor policies that Republicans and Democrats pursue in office, which can have an outsized impact on economic outcomes. (The fact that these same commentators often worry about “rising polarization” is telling.)

In fact, there are differences in the way Republicans and Democrats govern. Pretending there aren’t doesn’t just sow confusion, it may hurt the left as well. A recent study findsthat when people don’t perceive large differences between the parties, they are less likely to vote; and when people become alienated from the political process, they are less likely to vote. By contrast, as David Brockington argues, “choice-rich environments” increase the probability that people will turn out to vote.

It is clear that the parties offer distinct options to voters. While it is certainly true that liberal parties sometimes do less to fight inequality in the era of globalized finance, they still have an important influence over outcomes. The Republican party has indeed become the party of the rich.

Worryingly, however, Jan Leighley and Jonathan Nagler find that “respondents who perceive a greater difference between the candidates… are more likely to vote.” And “those in the top income quintile see a larger difference between the candidates on ideology than do those in the bottom quintile.” Research suggests that when voters gain more information, they shift to support more liberal policies and parties. In the current system, much of the problem rests in the fact that low-income and middle-income voters don’t realize that conservatives are fleecing them. The rich do realize they benefit fromRepublicans, and therefore have an incentive to turn out. Commentators who suggest that the two parties are the same, rather than galvanizing Democrats toward more progressive policies, may be simply keeping conservatives in power.

This piece originally appeared on Salon

How Racism is Destroying the Middle Class

Progressives have long argued that conservatives play up racial resentments to undermine the welfare state. Conservatives tend to respond to such accusations with their own charges of liberal “race baiting.” But whatever right-wing voices might say on the matter,  a new analysis of the data suggests that racism does, in fact, strongly predict welfare spending.

Using two surveys from 2008, Douglas Spencer and Christopher Elmendorf estimatedracial resentment across the states by measuring responses to questions about the work ethic, intelligence and trustworthiness of blacks Americans. They estimate the portion of whites in each state that are in the top quartile of racial resentment (so a state with large amounts of racism would have more than 25 percent of whites espousing racially biased views).

I combined this with data from the Center for Budget and Policy Priorities showing Temporary Assistance for Needy Families benefits for a single-parent household of three. As the scatterplot below shows, these two variables are strongly correlated:

I asked Eric Stone, the lead data scientist at Smarterer and a former hedge fund manager and USDA statistician, to help me see if there was another factor driving this trend. He ran the numbers again, controlling for state revenues per capita (based on Tax Foundationdata, averaged from 2008-2010), as well as the average ideology of citizens and the average ideology of the state government (based on data from Richard Fording, again averaged over the period of 2008-2010).

Stone tells me that after controlling for these factors, “racial resentment is indeed the strongest predictor of TANF, at least in the context of this model.” He reports a p-value of <.001 (indicating there is a less than .1 percent chance that the relationship was observed by chance) and an R2 of .556 for the model (meaning that these variables collectively explain more than half of the variation in TANF spending).

The idea that racism strongly predicts opposition to welfare has strong support in the academic literature. In his book, “Dog Whistle Politics,” Ian Haney Lopez showed how conservatives have used racial animus to drive opposition to welfare. In an interview with Salon, he said,

Dog-whistle politics is not fundamentally about race. It’s fundamentally about attacking liberal government, attacking New Deal government, which is good for the country as a whole, but bad in the perception of some of the very rich. This is fundamentally about power, it’s fundamentally about how we are going to organize a society for everybody. The core point here is that race is being used to wreck the middle class.

The research supporting Lopez’s argument is strong. Political scientists Richard Fording, Sanford Schram and Joe Soss find in their book “Disciplining the Poor,”

concerns over welfare were significantly more likely to be activated among respondents who perceived “most blacks” as lazier than “most whites.”

This aligns with Martin Gilens, who found that, “racial considerations are the single most important factor shaping whites’ views of welfare.” Media are certainly part of the explanation, as he finds elsewhere that “network TV news and weekly newsmagazines portray the poor as substantially more black than is really the case.” International research on the social safety net confirms this research.

Alberto Alesina, Edward Glaeser and Bruce Sacerdote find that racial fractionalization (a measure of racial diversity) strongly predicts social spending. This relationship also holds within the United States: states where a larger portion of the citizens are black spend less on welfare. Matthew Fellowes and Gretchen Rowe find that as the share of African Americans on TANF increased, states lowered benefits, made eligibility rules stricter and reduced the flexibility of work requirements. In another paper, Alesina and his co-author, Paola Giuliano, write, “When the poor are disproportionately concentrated in a racial minority, the majority, coeteris paribus, prefer less redistribution.” They further note, “ In the US the racial majority (whites) is much less favorable to redistribution than minorities.” The U.S. also has an unreasonably strong belief in the idea that hard work is the key to success, and therefore believes that those who are unsuccessful must be lazy.

Similarly, a Pew study finds that the global median of people disagreeing with the idea that “success in life is pretty much determined by forces outside our control” is 38 percent, in the U.S. it’s 57 percent; the percentage of people internationally agreeing that it’s “very important” to work hard to get ahead in life is 50 percent, in the U.S. it’s 73 percent. In a country where poverty is deeply pathologized, and people of color are more likely to be poor, racism will be more likely.

As I’ve noted elsewhere, almost half of Americans end up on welfare at some point in their lives, but of those, less than 5 percent spend 10 consecutive years on welfare. The idea of welfare dependence is an utter fabrication invented by rich Republicans to gut the social safety net. But this safety net has actually been incredibly effective. As Christopher Jenks notes, “With these corrections the official poverty rate falls from 14.5 to 4.8 percent, making the 2013 rate roughly a quarter of the 1964 rate (19.0 percent).” Such a dramatic reduction in poverty should be considered one of humanity’s greatest accomplishments (though there is still more to be done).

While the Tea Party, and Republicans, have denied that their war on the poor isn’t racially biased, they occasionally slip up (Rick Santorum’s famous “blahs,” comment for instance). But the data strongly suggest that opposition to the welfare state is tied up in the belief that it is simply a way to give “them” benefits. Indeed, Daniel Tope, Justin Pickett and Ted Chiricos recently confirmed that racial resentment was “among the strongest predictors” of Tea Party membership. But through the “submerged state,” the governmentprovides massive benefits to the middle class (not to mention the big bailouts to banks and corporations). Racism is still a major factor in American politics, and racial resentment continues to erode the safety net, for the benefit of the super-wealthy.

This piece originally appeared on Salon.

How the Supreme Court is about to explode America’s racial wealth gap

When discussing race, the conservative argument is best expressed by the famous words of Chief Justice John Roberts: “The best way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” Translation: America has done bad things in its history, but those bad things are gone now, so we should move past those horrors and look forward.

Conservatives believe that if blacks and Latinos simply work hard, get a good education and earn a good income, historical racial wealth gaps will disappear. The problem is that this sentiment ignores the ways that race continues to affect Americans today. A new report from Demos and Brandeis University, “The Racial Wealth Gap: Why Policy Matters,” makes this point strongly. The report shows that focusing on education alone will do little to reduce racial wealth gaps for households at the median, and that the Supreme Court, through upcoming decisions, could soon make the wealth gap explode.

WealthAccumulation

Wealth is the whole of an individual’s accumulated assets, not the amount of money they make each year. As such, in his recent book, “The Son Also Rises,” Gregory Clark finds that the residual benefits of wealth remain for 10 to 15 generations. To understand why that matters, consider the fact that Loretta Lynch, Obama’s recent nomination for U.S. attorney general, is the great-great-granddaughter of a slave who escaped to freedom. (That’s four generations). Consider also that most people on Social Security today went to segregated schools. (That’s two generations.) If Clark is correct in his thesis, then the impacts of wealth built on the foundations of American slavery and segregation will continue to affect Lynch’s great-great-great grandchildren.

It is therefore unsurprising that addressing just one aspect of this disparity cannot solve racial wealth gaps. Demos/Brandeis find that equalizing graduation rates would reduce the wealth gap between blacks and whites by 1 percent, and between Latinos and whites by 3 percent at the median. Equalizing the distribution of income would only reduce the wealth gap by 11 percent for blacks and 9 percent for Latinos. Part of the durability of wealth gaps is the disproportionate benefits that whites still enjoy: They face less job market discrimination and are more likely to reap a big inheritance, for example. This means that the returns to education and income are generally higher for whites. But even after controlling for these returns, income and education can’t explain the entire wealth gap.

Because America’s primary vehicle for wealth accumulation is our homes, much of the explanation of the racial wealth gap lies in unequal homeownership rates. According to the Brandeis/Demos analysis, equalizing homeownership would reduce the racial wealth gap by 31 percent for blacks and 28 percent for Latinos. This effect is muted because centuries of discrimination—including racial exclusion from neighborhoods where home values appreciate, redlining, and discriminatory lending practices—mean that people of color are segregated into relatively poor neighborhoods. Indeed, in 1969, civil rights activist John Lewis bought a three-bedroom house for $35,000 in Venetian Hills, Atlanta. He and his wife were the first black family in the middle-class neighborhood. In his book, “Walking with the Wind,” he notes that, “within two years… the white owners began moving out.” Had the value of his house simply kept up with inflation, it would be worth $222,881 today. But Zillow shows that three-bedroom houses in Venetian Hills, Atlanta, are currently selling for around $65,000 to $100,000.

WealthAccumulation2

Systematic disinvestment in communities of color means that even when blacks and Latinos own their homes, they are worth far less than white homes. In addition, blacks and Latinos are targets of shady lending. They are more likely to be offered a subprime loan even if they are qualified to receive a better rate. In the wake of the financial crisis, big banks like Blackstone scooped up foreclosed homes and are now offering them to people of color to rent, further pulling wealth out of these communities to benefit rich whites.

The financial crisis had a disparate impact on people of color. A Center for Responsible Lending report examined the loans originated during the subprime boom (2005 to 2008), and found that blacks and Latinos were almost twice as likely to have foreclosed during the crisis. The New York Times reported that Wells Fargo “saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania.” They discovered that loan officers “pushed customers who could have qualified for prime loans into subprime mortgages” and “stated in an affidavit… that employees had referred to blacks as ‘mud people’ and to subprime lending as ‘ghetto loans.’”

These problems are troubling, but, as unlikely as it seems, things are about to get even worse. The Supreme Court is set to decide Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, a landmark case challenging the disparate impact test, which allows a practice to be considered discriminatory if it disproportionately and negatively impacts communities of color, even if a discriminatory intent can’t be proven.

The case involves an excellent example of why disparate impact is so important: Nearly all of the tax credits that the Texas Department of Housing and Community Affairs had approved were in predominantly non-white neighborhoods. At the same time, the department disproportionately denied the claims in white neighborhoods. A federal judgedecided that regardless of racial intent, the result had a “disparate impact” and increased neighborhood segregation. As Nikole Hannah-Jones has extensively documented, disparate impact has been crucial in holding banks accountable. For instance, the Justice Department used it to settle with Bank of America for $335 million after it was discovered that a mortgage company purchased by BofA had been pushing blacks and Latinos into subprime loans when a similar white borrower would have qualified for a prime loan.Because there was no official policy that required blacks and Latinos to get worse loans, the case would not have been won but for the disparate-impact statute.

The Supreme Court has already decimated the Voting Rights Act, opening the door for onerous restrictions on voting. They upheld a law banning affirmative action at state universities and have already crushed integration efforts at K-12 schools. Worryingly, as Demos Senior Fellow Ian Haney López told ProPublica, “It is unusual for the Court to agree to hear a case when the law is clearly settled. It’s even more unusual to agree to hear the issue three years in a row.” Given the importance of neighborhood poverty to upward mobility and wealth building, this case had the potential to be the most destructive, dramatically curtailing opportunity and making the wealth gap into a chasm. As Patrick Sharkey notes, “Neighborhood poverty alone accounts for a greater portion of the black-white downward mobility gap than the effects of parental education, occupation, labor force participation, and a range of other family characteristics combined.”

Demos and Brandeis suggest policies to boost homeownership, like better enforcement of anti-discrimination laws, lowering the cap on the mortgage interest deduction so blacks and Latinos can benefit and authorizing Fannie Mae and Freddie Mac to allow homeowners to modify their loans. In addition, America needs to systematically invest in poor neighborhoods. Equalizing public school education funds for poor and nonwhite schools would increase home prices in poor neighborhoods. In addition, a baby bond program would directly reduce wealth gaps by giving children money that could be used for a down payment on a house or an investment in their education. What’s clear is that we cannot simply hope that wealth gaps will disappear. These gaps were created by racially biased federal policies and need to be remedied by public policy as well. Government created the white middle class in the 1950s; now it’s time to create a black and Latino middle class. The Supreme Court, with its supposedly race-neutral philosophy, will only make it more difficult to close racial wealth gaps.

Catherine Ruetschlin is a Senior Policy Analyst at Demos and co-author of the report “The Racial Wealth Gap: Why Policy Matters.

The myth destroying America: Why social mobility is beyond ordinary people’s control

In America, there is a strongly held conviction that with hard work, anyone can make it into the middle class. Pew recently found that Americans are far more likely than people in other countries to believe that work determines success, as opposed to other factors beyond an individual’s control. But this positivity comes with a negative side — a tendency to pathologize those living in poverty. Indeed, 60 percent of Americans (compared with 26 percent of Europeans) say that the poor are lazy, and only 29 percent say those living in poverty are trapped in poverty by factors beyond their control (compared with 60 percent of Europeans).

Such beliefs are just that: beliefs. While a majority of Americans might think that hard work determines success and that it should be relatively simple business to climb and remain out of poverty, the reality is that the United States has a relatively entrenched upper class, but precarious, ever-shifting lower and middle classes. While many Americans might hate welfare, the data suggest they are fairly likely to fall into it at one point or another.

In their recent book, “Chasing the American Dream,” sociologists Mark Robert Rank, Thomas Hirschl and Kirk Foster argue that the American experience is more fluid than both liberals and conservatives believe. Using Panel Survey of Income Dynamics (PSID) data — which has tracked 5,000 households (18,000 individuals) from 1968 and 2010 — they show that many Americans have temporary bouts of affluence (defined as eight times the poverty line), but also temporary bouts of poverty, unemployment and welfare use. (The study includes food stamps, Medicaid, Temporary Assistance to Needy Families/Aid to Families with Dependent Children, Supplemental Security Income and any other cash/in-kind program that relies on income level to qualify.) The researchers conclude that a large number of Americans eventually fall into one of these categories, but that very few Americans stay for long. Instead, the social safety net catches them, and they get back on their feet.



The authors also find that the risk of poverty is higher for people of color. (Since the PSID began in 1968, most non-white people in the survey have been black.) And while most Americans will at some time experience affluence, again, this experience is segregated by race.

In a study published earlier this year, Rank and Hirschl examine the 1 percent, and find that entry into it is more fluid than previously thought. They find that 11 percent of Americans will enter the 1 percent at some point in their lives. However, here again, access is deeply segregated. Whites are nearly seven times more likely to enter the 1 percent than non-whites. Further, those without physical disability and those who are married are far more likely to enter the 1 percent.

The researchers didn’t measure how being born into wealth effects an individual’s chances, but there are other ways to estimate this effect. For instance, a 2007 Treasury Department study of inequality allows us to examine mobility at the most elite level. On the horizontal axis (see below) is an individual’s position on the income spectrum in 1996. On the vertical level is where they were in 2005. To examine the myth of mobility, I focused on the chances of making it into the top 10, 5 or 1 percent. We see that these chances are abysmal. Only .2 percent of those who began in the bottom quintile made it into the top 1 percent. In contrast, 82.7 percent of those who began in the top 1 percent remained in the top 10 percent a decade later.

One recent summary of twin studies suggests that “economic outcomes and preferences, once corrected for measurement error, appear to be about as heritable as many medical conditions and personality traits.” Another finds that wages are more heritable than height. Economists estimate that the intergenerational elasticity of income, or how much income parents pass onto their children, is approximately 0.5 in the U.S. This means that parents in the U.S. pass on 50 percent of their incomes to their children. In Canada, parents pass on only 19 percent of their incomes, and in the Nordic countries, where mobility is high, the rate ranges from 15 percent (in Denmark) to 27 percent (in Sweden).

There is reason to believe that Chris Rock is correct that wealth, which is far more unequally distributed than income, is also more heritable.

In his recent book, “The Son Also Rises,” Gregory Clark explores social mobility in societies spanning centuries. He finds, “current studies… overestimate overall mobility.” He argues that,

“Groups that seem to persist in low or high status, such as the black and the Jewish populations in the United States, are not exceptions to a general rule of higher intergenerational mobility. They are experiencing the same universal rates of slow intergenerational mobility as the rest of the population. Their visibility, combined with a mistaken impression of rapid social mobility in the majority population, makes them seem like an exception to a rule. The are in instead the exemplary of the rule of low rates of social mobility.”

Clark finds that the residual effects of wealth remain for 10 to 15 generations. As one reviewer writes, “in the long run, intergenerational mobility is far slower than conventional estimates suggest. If your ancestors made it to the top of society… the probability is that you have high social status too.” While parents pass on about half of their income (at least in the United States), Clark estimates that they pass on about 75 percent of their wealth. Thus, what Rank and Hirschl identify, an often-changing 1 percent, is primarily a shuffling between the almost affluent and the rich, rather than what we would consider true social mobility.

The American story, then, is different than normally imagined. For one, Americans live increasingly precarious existences. In another paper, Hirschl and Rank find that younger Americans in their sample are more likely to be asset poor at some point in their lives. But more importantly, a majority of Americans will at some point come to rely on the safety net. Rather than being a society of “makers” and “takers,” we are a society of “makers” who invest in a safety net we will all likely come in contact with at one point or another. However, there are some who don’t.

The Gini Coefficient measures how equally distributed resources are, on a scale from 0 to 1. In the case of 0, everyone shares all resources equally, and in a society with a coefficient of 1, a single person would own everything. While income in the U.S. is distributed unequally, with a .574 gini, wealth is distributed far more unequally, with a gini of .834 — and financial assets are distributed with a gini of .908, with the richest 10 percent own a whopping 83 percent.

Wealth and financial assets are the ticket to long-term financial stability; those who inherit wealth need never fear relying on the safety net. And it is these few individuals, shielded from the need to sell their labor on the market, who have created the divisive “makers” and “takers” narrative. Using race as a wedge, they have tried to gut programs that nearly all Americans will rely on. They have created the mythos of the self-made individual, when in fact, most Americans will eventually need to rely on the safety net. They treat the safety net as a benefit exclusively for non-whites, when in reality, whites depend upon it too (even if people of color are disproportionately affected).

As I’ve noted before, the way the welfare state works (primarily inefficient tax credits for the middle class) has made this delusion tenable. It is therefore not that Americans believe themselves to be “temporarily embarrassed millionaires,” but rather “self-made men” (with a dose of racism), that drives opposition to the welfare state. The problem is that most people will eventually realize they won’t become millionaires, but few will realize the way government has benefited them throughout their lives.

This piece originally appeared on Salon

Our election system’s anti-minority bias is even worse than you think

In the wake of the recent gutting of the Voting Rights Act, partisans were quick to jump on the opportunity to restrict unfavorable voters. Across the country, conservatives in particular have debated fiercely whether to pursue voter suppression to remain competitive in an increasingly diverse electorate. There was, however, another way out, as I’ve argued before: Socially and economically conservative values are not unpopular, and if conservatives were to cease supporting people who made speeches at KKK rallies, they could garner enough votes to remain competitive. I worried, though, that the temptation of voter suppression would be too great. And, indeed, a new paper by Ian Vandewalker and Keith Bentele indicates that partisans have chosen the path of voter suppression to an even greater extent than previous thought.

When the conservative Supreme Court struck down key parts of the Voting Rights Act in Shelby County v. Holder, states flocked to impose voter ID laws. Early research by Bentele and Erin O’Brien found these laws were “highly partisan, strategic, and racialized affairs.” Another study finds that “where elections are competitive, the furtherance of restrictive voter ID laws is a means of maintaining Republican support while curtailing Democratic electoral gains.” Support for voter ID laws among the American population is strong, but also racially based: Voters are significantly more likely to support a voter ID law when they are shown pictures of black people voting than when shown white people voting.

Much of the extant literature has mainly been focused on voter ID laws; but Vandewalker and Bentele find that the strategy is actually more expansive than that. They have created an extensive metric that includes nine different measures of accessibility, including voter ID, absentee voting and same-day registration. They find that the accessibility of voting systems is negatively correlated with the share of the state’s population that is black (see chart). As the black population increases, voting systems become more inaccessible. The chart below includes all changes that were passed in the legislature; as of writing some of the changes were stalled in court.

The study finds that between 2006 and 2012, the most influential factor in determining whether a law would be passed was Republican control of government. It also finds that the level of anti-black stereotyping in a state (a measure based on survey respondents’ beliefs about work ethic and intelligence) strongly correlates with the proposal (though not the passage) of voting restrictions. Vandewalker and Bentele find that states with a recent increase in Democratic turnout were more likely to pass a restriction indicating “the passage of voter restrictions as a partisan response by Republicans to recent Democratic electoral gains.” States with large black populations were significantly more likely to pass restrictive laws. Finally, they note that what little voter fraud exists does not correlate at all with voter restrictions.

The GOP has dramatically expanded its control of state legislatures in recent years. Before the 2014 election, Republicans controlled 59 of the 98 state legislative chambers;they now control 67. MSNBC recently reported that Republicans are already working to pass voter ID laws in five major states. Bentele and Vandewalker’s analysis indicates that “restrictive voting laws are often discriminatory responses to minority voting strength.” They find that the correlation between anti-black attitudes in the state and a restrictive voting system increased between 2010 and 2013. Conservatives have moved beyond just pushing for voter ID and have also worked to curb early voting and other important methods to increase access.

To see the combined effect of all these different measures, I obtained the data that Vandewalker and Bentele compiled. I find that there is a strong raw correlation between their ease of electoral access index and voter turnout (see below). Using a variation of their analysis, I also find that electoral systems are significantly more open in states with a higher white population. The ease of accessibility index was also strongly correlated with voter turnout in the 2012 presidential election. Combined with the large academic literature showing that voting restrictions reduce turnout and that turnout affects the outcomes of elections, there is a strong case that the current push to reduce voting rights is rooted in partisan ambitions.

In America, it appears that nearly everything is now politicized, from sports to vaccines. However, the right to vote should not be a political pawn. To combat these attacks on voting rights, policymakers should expand early voting, enact same-day registration and reduce limits on felon voting. Congress should replace the old formula for pre-clearance with a new formula that takes into account how the racial composition of the electorate and non-white turnout affect the chance of voter restriction. All of these reforms can dramatically increase voter participation.

There is some hope: The Brennan Center for Justice recently found that “190 bills to expand voting access have been introduced in 31 states, compared to 49 restrictive measures in 19 states, the new analysis found.” This is a welcome development, however, my analysis of the Bentele dataset indicates that the overall change is positive, but modest. The chart below shows how voting access has changed between 2010 and 2014. States on the line remain the same, states above have seen voting rights contract, and states below the line have seen voting access increase. In total, 16 states increased accessibility while 14 states decreased accessibility. The mean score on the accessibility index shifted from 6.27 to 6.38 (assuming that all the passed laws go into effect).

Voting rights are still in grave danger. And in particular, the voting rights of black Americans remain precarious.

This piece originally appeared on Salon.

How Donors Distort Democracy

It’s early, but arguably the most important paper of the year has already been released. The author, Michael Jay Barber, finds persuasive evidence that those who donate more than $200 (.22% of the population in 2014), wield more influence over our political system than anyone else.

Demos has explored this issue extensively, arguing that the rise of money in politics has hampered both racial justice and economic mobility. However, the new evidence makes our case even stronger, and more important than ever.

Barber mailed out 20,500 letters to people who donated to Senate campaigns in 2012 and then analyzed how similar the positions taken by politicians were to donor and  non-donors in the state. He notes that politicians almost perfectly align with the views of donors, align strongly with the preferences of those who are from the same party and voted for them, less well with those who voted for them and not at all with their constituents (see chart).

But the paper contains another disturbing fact: donors are polarizing our politics.

As I’ve noted before, polarization is an important driver of inequality, and the polarization is largely driven by elite control of the political system. Barber’s evidence supports this argument: he finds that donors are far more extreme than voters in general and supporters of the candidates (see chart).

He observes that while about 60% of Republican voters dislike the Affordable Care Act, opposition is nearly unanimous among donors. It is donors, not Republican voters, that are driving the numerous efforts to repeal Obamacare. Barber concludes that even among the rich, donors are far better represented than voters, and more extreme.

He finds support in a recent paper by Jesse Rhodes and Brian Schaffner, who wrote (in a study of the House of Representatives), “we estimate that millionaires receive about twice as much representation when they comprise about 5% of the district’s population than the poorest wealth group does when it makes up 50% of the district.” They find that conservative politicians are more responsive to the donor class than liberals (a finding supported elsewhere).

But is the story here that politicians are responding to donors, or donors responding to the positions of politicians. Another paper by Barber suggests that extreme donors are driving extreme politicians. He examines state-level campaign contribution limits and finds that states with higher limits have more polarized legislatures. This suggests that politicians become more extreme to get money from the donor class. Patrick Flavin notes that in states with stricter campaign finance laws devote a large portion of their budgets to programs that benefit the poor. In another study, Walter Stone and Elizabeth Simas find, “that challengers closer to the extreme received greater financial contributions, which enhanced their chances of victory.”

In a 2014 study, Barber, Brandice Canes-Wrone and Sharece Thrower examined how Presidents respond to the donor class. They find that, “there is no clear relationship between general public opinion on an issue and the president’s support for that issue.” However, they find,

when examining presidential issue support alongside co-partisan donor issue support, we observe a clear positive relationship. Particularly, as donors increase their support for an issue, so does the president. While this conforms to our expectations, we also see that there exists a similar positive relationship between the positions of the president and non-donors of his party.

To disentangle whether Presidential candidates were responding to donors or simply partisan supporters, they examined issues where partisan supporters and donors disagreed. In these conflicts, they find,

a one percentage increase in co-partisan donor support on an issue correlates with a one percentage increase in the probability that the president supports that same issue. Further, we find no significant effect of non-donor co-partisan opinion or general public opinion on presidential issue support.

That is, the views of the general public and even people of the same party of Presidential candidates has no effect on what issue a Presidential candidate supports. This is consistent with the work of Martin Gilens who finds,

economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.

American democracy is controlled by a small donor class who advocate in favor of issues that the vast majority of Americans oppose.

This piece originally appeared on Policyshop.

Are millennials tolerant racists?

Millennials are considered the most diverse, tolerant and racially progressive generation in U.S. history. “The younger generation is more racially tolerant than their elders,” the Pew Research Center declared in a 2010 report based on analysis of more than two decades of data. Commenting on the report, The Chicago Tribune’s Ted Gregory went one step further, arguingmillennials are “the most tolerant generation in history.”

America’s newest generation is more racially progressive than its predecessors’. For example, the Pew study shows that millennials are more likely to support interracial marriage and dating and are generally moreaccepting of immigrants. They see themselves as racially progressive as well. According to a 2014 survey (PDF) of millennials conducted by MTV and David Binder Research, nearly all respondents said they believe “everyone should be treated equally, regardless of race,” 72 percent said “their generation believes in equality more than older people,” and 58 percent believed “racism will become less and less of an issue” as they take on leadership roles. More than half believe that racial bias is “small but real” and “subtler” than it was in the past.

However, such pervasive sentiments do not reflect reality. In fact, beneath the facade of a colorblind generation remains a deep underclass. And millennials are not as racially progressive as the narrative suggests. Studies show that white millennials have opinions similar to older generations’ on issues such as race. A closer look at the Pew Center’s data and other relevant research shows a less-reported but revealing fact: Much of the purported tolerance of the millennial generation is due to the inclusion of more people of color in the pool.

White millennials

Spencer Piston, a professor at the Campbell Institute at Syracuse University, examined the 2012 American National Election Studies racial stereotype battery. Respondents were asked to rate whites, blacks, Hispanics and Asians according to how hard working or intelligent they are. “White millennials appear to be no less prejudiced than the rest of the white population, at least using this data set and this measure of prejudice,” Pistonsaid during a recent New York magazine interview. A 2012 Public Religion Institute poll found that 58 percent of white millennials say discrimination affects whites as much as it affects people of color. Only 39 percent of Hispanic millennials and 24 percent of black millennials agree. Similarly, the MTV poll found that only 39 percent of white millennials believe “white people have more opportunities today than racial minority groups.” By contrast, 65 percent of people of color felt that whites have differential access to jobs and other opportunities. Still, 70 percent of millennials said, “it’s never fair to give preferential treatment to one race over another, regardless of historical inequalities.”

White millennials are more optimistic about the state of race relations. For example, a 2014 Pew survey found that 42 percent of white millennials said “a lot” needs to be done to achieve Martin Luther King Jr.’s dream of racial equity, compared with 54 percent of millennials of color. One-fifth of white millennials said “a little/none at all” needs to be done. There is a significant racial gap in terms of attitudes about how well blacks and whites get along. About 30 percent of nonwhite millennials said whites and blacks don’t get along “too well/not at all well,” compared with 13 percent of white millennials. These gaps remain unchanged across generations. All in all, when the Pew data are disaggregated, they shows large and persistent racial gaps that are obscured when the generations are considered as a whole.

Millennials don’t fare better than their parents on implicit racial bias either. The nonprofit Project Implicit conducts an association test to measure automatic and unconscious preference for European or African faces. A study of 2.5 million voluntary tests taken from 2000 to 2006 found very little variation on implicit bias across age groups, with the exception of those 60 or older. The chart below shows the results of the implicit-association test (IAT) and individuals’ self-reported bias, with a score of 2 indicating a strong bias toward whites and –2 indicating a strong bias toward blacks. The old and young showed differences in their self-evaluation of racial bias, with older people off by 0.38 points and those in the youngest two brackets underreporting their bias by 0.52 on average.

Implicit1

The fact that millennials perceive themselves as uniquely tolerant may make them more likely to practice or accept discriminatory behavior. “A representative panel of Americans interviewed immediately before and after the election [of Barack Obama] reveals a roughly 10 percent decline in perceptions of racial discrimination,” Nicholas A. Valentino and Ted Brader, wrote in a 2011 study in the journal Public Opinion Quarterly.

But the dramatic change in perceptions was clearly symbolic. Valentino and Brader found that “declines in perceived discrimination were associated with increases in negative opinions of blacks and heightened opposition to both affirmative action and immigration.” A large body of research supports this finding. For instance, a 2009 study by Vincent Hutchings found (PDF) “scant evidence of a decline in the racial divide” from 1988 to 2008 on policies that would alleviate racial inequality. Even more startling, Hutchings noted, “younger cohorts of whites are no more racially liberal in 2008 than they were in 1988.”

Implicit2

Millennials are more likely to view Obama’s electoral victory as proof that racial discrimination has been alleviated. Research shows that his election led to what is called symbolic racism, the belief that discrimination no longer exists and that persisting inequalities are due to blacks’ weakness. When whites were reminded of Obama’s victory (regardless of whether they supported him) they were more likely to say that racism is behind us and that blacks receive undeserved advantages. They were more likely to say that a continued push for racial equity is unjustified and that any failure of blacks to succeed is their own responsibility.

A 2009 survey of 74 undergraduates at the University of Washington found that Obama’s election led to a decline in the number of respondents who said there was a need for racial policies such as affirmative action, workplace diversity policies and measures that boost equitable access to health care. Similarly, while liberal undergraduate students at Stanford University wereprimed to recall their support for Obama over a white candidate, they were more likely to support a white job applicant over an equally qualified black applicant.

A flicker of hope

But there are signs of hope for racial progress. In a 2013 study, Tatishe Nteta and Jill Greenlee examined what they call the “Obama generation” — those born from 1982 to 1992. “It appears that the youngest generation of white Americans is leading the way toward a more liberal racial future, [but] the structure of these attitudes compels us to stop short of predicting a more racially liberal America,” they wrote in the journal Political Psychology. French essayist Albert Memmi’s observation on racism explains the authors’ hesitation. He wrote, “There is a strange kind of enigma associated with the problem of racism. No one, or almost no one, wishes to see themselves as racist; still, racism persists, real and tenacious.” That is, while young white Americans are clearly aware of interpersonal racism, they seem unwilling to address structural or implicit biases. It may be that racial progress will occur simply because there are fewer young whites relative to people of color.

Another hopeful development is that Americans, across all ages, are less racially biased than before. Studies show that the last four decades saw a general decline (PDF) of racial prejudice across all generations rather merely the young becoming more racially tolerant. However, both whites and blacks are less likely to attribute racial gaps to discrimination. Instead a growing number choose no explanation at all, suggesting what sociologist Tyler Forman calls “racial apathy.” Yet racial inequities still exist. And the millennial generation is still deeply segregated. Racial gaps in employment opportunity, income, education, incarceration and wealth are eitherstagnant or growing. If millennials remain utterly unaware of racial reality in America, the gaps will only grow deeper.

This piece originally appeared on Al Jazeera.

Millennials Are Less Racially Tolerant Than You Think

However frustrating the current state of race relations in the U.S., there is, according to various pundits and prognosticators, hope for the future: Millennials, they say, are the most tolerant, race-blind generation in human history. And when they grow up and constitute the bulk of the adult U.S. population, many of the problems that have plagued U.S. race-relations for centuries will simply melt away, relics of a less-enlightened past.

It’s a claim that shows up again and again. A 2010 Pew Research report trumpeted that more than two decades of research confirm that “the younger generation is more racially tolerant than their elders.” In the Chicago Tribune, Ted Gregory seized on this to declare millennials “the most tolerant generation in history.” David Burstein, the millennial author of Fast Futuresaid millennials are “more tolerant … than any generation before them.” Hannah Seligson, also a millennial, sounded a similar note in the Daily Beast, writing that research “reveals that we’ve emerged as the most diverse, tolerant, pioneering, educated, and innovative generation in history.” And it’s not just the pundits: A poll from Reason-Rupe shows that in every age bracket, a majority of respondents say that “tolerant” describes millennials “very well.”

Given that race-based gaps pertaining to employment opportunities, income, education, incarceration, and wealth are either persisting or growing, there’s a welcome sense that help is on the way in the form of a more racially enlightened populace.

The problem with these rosy sentiments is that they’re at least partly false. Those who claim that the rise of the millennials will usher in a new age of racial harmony are cherry-picking or misreading statistics. They’re doing so primarily in two ways: by lumping together all millennials when they report survey findings rather than breaking out white millennials views on racial issues, or by focusing narrowly on a small set of questions about explicit racial beliefs that don’t tell the full story. The fact of the matter is that millennials who are white — that is, members of the group that has always had the most regressive racial beliefs, and who will constitute a majority of U.S. voters for at least another couple of decades — are, on key questions involving race, no more open-minded than their parents. The only real difference, in fact, is that they think they are.

When it comes to certain surface-level statistics, it’s true that millennials as a group are more racially progressive than their parents. Pew data show they are more likely to support interracial marriage and dating and are more in favor of immigration. Nearly all agree that “everyone should be treated equally, regardless of their race.”

Dig just a few inches deeper, though, and there’s plenty of fodder for pessimism. Just ask Spencer Piston, an assistant professor of political science at Syracuse University. He examined the 2012 American National Election Studies racial stereotype battery, in which survey respondents are asked to rate whites, African-American, Hispanics, and Asians according to how hard-working or intelligent they are, and found something startling: Younger (under-30) whites are just as likely as older ones to view whites as more intelligent and harder-working than African-Americans (among the older cohort, 64 percent felt this way, and among the younger cohort the number was 61 percent — not a statistically significant difference). “White millennials appear to be no less prejudiced than the rest of the white population,” Piston told Science of Us in an email, “at least using this dataset and this measure of prejudice.”

Asking people racially tinged questions directly can only get you so far, of course. Social scientists have known for a long time that there frequently exists a gap between how people respond to questions and how they really feel — people are swayed by the expectation of how they should answer. A favorite way around this is to measure implicit bias — that is, forms of bias that the holder might not even be aware of and that can manifest themselves in split-second decision-making. In the most common examples of so-called implicit association tests, words or images are briefly flashed, “priming” subjects to respond to subsequent stimuli — if you’re quicker to pair a black face with the word criminal, to take a hypothetical example, you’re exhibiting more implicit bias, and researchers think these effects extend out of the lab into everyday interactions.

If white millennials were, in fact, significantly more racially tolerant than previous generations, it would show up in implicit association tests. And yet they do no better than many of their older counterparts. For example, a study of 2.5 million voluntary IAT tests from between July 2000 and May 2006 shows very little difference across age groups, with the exception of those 60 or older. Other age cutoffs show a similar result: With the exception of the elderly, who do exhibit significantly more racial animosity, there is little generational difference in implicit bias. What does divide old and young is differences in the accuracy of their self-evaluation of racial bias. While older people underestimate their bias by an average of .38 points on a four-point scale, the youngest two brackets under-report their bias by an average of .52 points on average. Younger people, in other words, are simply more deluded about their own beliefs.

 

None of this has stopped white millennials from congratulating themselves for being so racially progressive, nor has it staunched their racial optimism. Tellingly, nonwhite millennials aren’t quite so optimistic. According to Pew data, when millennials are asked how well they think whites and African-American get along, just 13 percent of whites answer “Not too well/not at all well,” compared to 30 percent of nonwhite millennials. So there are some obvious disconnects here — both between what white millennials see when they look in the mirror and their real-life beliefs, and between how white and nonwhite millennials view the current pace of progress.

It’s true that America is becoming a more racially diverse place — as is frequently pointed out, it is likely that by sometime around 2050, whites will be in the minority. Hopefully, this diversity will bring with it more understanding. But many observers, appealing to stereotypes about millennials that have dubious empirical grounding, are creating a veneer of false progress. Millennials may eventually usher in a more racially enlightened age, but such a shift will require a deeper understanding of race and racism than many white millennials exhibit, rather than the self-congratulatory rhetoric of a postracial society.

This piece originally appeared on New York.

The unbearable whiteness of America’s donor class

The rise of money in U.S. politics has been widely discussed in the wake of two controversial decisions by the Supreme Court: Citizen’s United and McCutcheon v. FEC. However, the discussion has largely been framed along class lines — with the voices of the poor and middle class drowned out by theexplosion of donations and political activity by wealthy elites. While this is true, there is also an important racial element to the rise of big money in politics. For example, a recent report by Demos found that the dominance of money in politics has slowed racial and economic progress (PDF) in the United States.

Political donations are deeply racialized, with more than 90 percent of contributions above $200 made to presidential campaigns and super PACs in 2012 coming from majority-white neighborhoods. A recent analysis by the Brookings Institution found that all of the most politically active U.S. billionaires, with possible exception of eBay founder Pierre Omidyar, who is of Persian-American origin, are white. Similarly, the top 10 Republican and top 10 Democratic donors in 2012 appear to be white, according to Demos. There are scarcely any comprehensive data about the race of donors. A preliminary report on donors in New York City’s 2009 municipal electionsconducted by Public Campaign found that the lowest-tier contributions came from more diverse neighborhoods than the top-tier donations. Contributors from predominantly African-American neighborhoods accounted for 30 percent of donations of $10 or less but only 5 percent of donations over $2,500, according to the report.

For whites, the trend is reversed, with people from white neighborhoods accounting for 78 percent of donations over $2,500 and 38 percent of donations of $10 or less. The lowest-tier contributors were from neighborhoods where people of color make up 73 percent of the population, while those donating more than $2,500 lived in districts where people of color make up only 26 percent. Small donors lived in neighborhoods with a 17.14 percent poverty rate and a median income of $53,790, while the top donors came from communities with a 5.14 percent poverty rate and a median income of $111,170.

Race1

Campaign contributions facilitate access, influence legislative agendas and, of course, help get those agendas passed. The widening gap in the level of donations means that people of color will not be represented as well as whites. In their seminal work on political equality in the United States, John Griffin and Brian Newman found that “whites get what they want more often than do Latinos or African-Americans.” This lack of representation is not simply due to class differences. “This is true even beyond the effects of income differences between the groups and even when minorities make up a substantial proportion of a constituency,” according to Griffin and Newman.

In his book “Uneasy Alliances: Race and Party Competition in America” Paul Frymer found that Democrats ignore the preferences of African-American voters, a “captured minority,” in order to win over white voters. Since blacks have chosen not to defect to the Republican Party, they struggle for representation by the Democrats. “All too often the Democratic Party has taken the black vote for granted, and all too often the Republican Party has written it off,” Jack Kemp, then a Republican nominee for vice president,said during a campaign stop in Harlem in 1999. In a study comparing voter preferences on government spending levels to presidential budget proposals from 1974 to 2010, Griffin and Newman found that “presidential requests are much more responsive to the budget preferences of whites and the wealthy.” They found that the gap for African-Americans is smaller when a Democrat is in office than when a Republican is.

This has important effects on legislation, as whites and people of color differ strongly on many issues, particularly those related to class. As the chart below shows, the differences on preferences about redistribution between whites and people of color (14 points) are stronger than the differences along class lines (10 points). A 2012 Washington Post/ABC News poll found that differences on whether the government should spend money on jobs versus reducing deficit are similarly strong along race lines (23 points) compared with class (11 points). On issues relating to race, recent polls show huge racial gaps on the perceptions of major American institutions.

Race2

The funding gap between black and white communities also makes it difficult for candidates of color to raise money. Candidates of color raised 47 percent less money than white candidates in all 2006 state legislative races and 64 percent less in the South. This is an important barrier for potential candidates who already face discrimination by voters. The lack of diversity in candidates is problematic, given the importance of descriptive representation (in which politicians share salient qualities such as race with their constituents) for substantive representation where candidates share their constituents’ policy preferences. “Descriptive representation independently improves the relative representation of minorities” and in some cases leads to political equality, according to Griffin and Newman. In a 2012 study in the American Journal of Political Science, Eric Juenke and Roper Preuhs found that candidates of color represent constituents of color better than white candidates do. However, as Jason Zengerle notes in The New Republic, black representatives, particularly in the South, are increasingly in the minority as white Democrats fall to coordinated campaign money from big donors. At all levels, big money politics stifles the representation of people of color.

The lack of representation has had major effects on people of color, as Adam Lioz documents in a series of case studies. For instance, the private prison system has lobbied extensively to maintain the carceral state, which primarily affects men of color. At the same time, the financial system has engaged in blatant racism, aided by lax regulatory policies. According to a study by the Center for Responsible Lending, among borrowers with good credit, people of color received a high interest rate loan three times as frequently as white borrowers. Reports also show racist lending practices by bank employees. “Employees had referred to blacks as ‘mud people’ and to subprime lending as ‘ghetto loans,’” according to a 2009 report by The New York Times. Such acts were possible because of lax regulation because of themassive political power of the financial sector.

There are several ways to fight the big money bias. For one, public financing has proved effective in eliminating the big money bias in the political system. A 2012 study published by The Election Law Journal found (PDF) that New York City’s donor-matching program has shifted the class and racial diversity of donors. It empowered small donors (a pool more diverse than large donors) and increased the absolute number of campaign contributors. Second, to limit the influence of big money in U.S. elections, we need policies that could boost voter turnout.

However, as Griffin and Newman point out, there are limits to the strategy: The benefits of representation are not as strong for blacks and Hispanics as for whites. In other words, African-Americans who vote aren’t that much better represented than those who don’t. This points to the importance of electing people of color to office, which does more to increase the representation of people of color. Still, a public financing program to reduce the influence of money in politics, sane lobbying reformssame-day registration, an end to felony disenfranchisement and increased descriptive representation could go a long way to thwart the influence of big money in our politics.

This piece originally appeared on Al Jazeera.

On Income Inequality: An Interview With Branko Milanovic

Branko Milanovic is a World Bank economist and development specialist. He’s currently a visiting presidential professor at CUNY’s Graduate Center and a senior scholar at the Luxembourg Income Study Center. His book, The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality, examines—as the title suggests—income inequality. Milanovic and Demos Research Assistant Sean McElwee recently discussed Milanovic’s research and the major shifts within the inequality research field.

Sean McElwee: You’ve been researching inequality for a long time. Inequality as a topic, for a while, was very unpopular. How has the way that inequality is discussed changed in the last decade?

Branko Milanovic: Well, yes, I’ve been researching inequality, income inequality to be precise, for many years. One could even argue that since the late 1970s to early 1980s it was a topic that had no particular appeal to economists. That is, until five to six years ago.

SM: So then, what happened to change this?

Branko Milanovic: What happened is, I think, first and foremost, the recession. Secondly, the mainstream economics became discredited, not because it could not predict or prevent the crisis, but because it was actually saying, until the very last moment, that the crisis cannot and will not happen.

Plus the realization by many people, when the crisis hit and they could no longer borrow as before, that their incomes had not grown in many years, is what really brought up the issue of inequality. Like, “how is it that some people’s incomes have increased a lot and my income stood still?” It was, of course, known by those few who dealt with income distribution before, but it never penetrated much into the economics profession nor into people’s consciousness. Then, with the crisis, things suddenly changed.

SM:  One of the things that I thought was most interesting about your work is this idea of the citizenship rent.

You said something like 60 percent of your income is determined at birth and then 20 additional percent by how rich are your parents. I was curious if we included race and gender in that, what percentage of your income do we know before you even begin your pre-K.

Branko Milanovic:  Global inequality studies were made possible by two events that occurred at about the same time, in the mid-1980s. First, for the first time ever we had income distribution data for most of the countries in the world. Before, you didn’t have household surveys from the Soviet Republics, China and most of Africa. That changed around mid 1980s/late 1980s.

The second thing that changed was, of course, globalization, the inclusion of China and formerly Communist countries in the world market, and thus much greater awareness of the large income gaps between countries and peoples, and of course greater competition.

The graph (for year 2008) shows on the horizontal axis a person’s position in their own country’s income distribution, and on the vertical axis, a person’s position in global income distribution. Thus, the poorest Americans (points 1 or 2 on the horizontal axis have incomes that put them above the 50th percentile worldwide). Note that 12% of the richest Americans belong to the global top 1%.

It turns out that—depending on the year and how detailed your data are—some 50 to 60 percent of income differences between individuals in the world is due simply to the mean income differences between the countries where people live. In other words, if you want to be rich, you’d better be born in a rich country (or emigrate there). You can see that in the figure here, where very poorest people in the United States have an income level which is equal to that of the middle class in China or even upper middle class in India.

So that’s very striking. At least half of your income is determined by where you live, which for most people is where you were born. Then about 20 percent is due to the income level of your parents. So, your citizenship plus your parental background explain around two-thirds or even 70 percent of your income.

Then, obviously, if I had data for gender, race, ethnicity and other things, which are similarly exogenously “given” to an individual, that percentage would go up, perhaps to more than 80 percent.

Sean McElwee: So it’s at least 80 percent, possibly more?

Branko Milanovic:  I am quite confident that if you were to add other things which, I underline, you did nothing to deserve or to be penalized for, you would go, probably, over 80 percent of your income being thus determined.

The lion’s share of that is due to citizenship, or for the individuals like myself who are just residents of rich countries and still get all the benefits, to the residency. This is what I call “the citizenship premium” or “citizenship rent.”

SM: There is more or less a way to deal with inequalities within countries, but how do we deal with inequalities across countries, especially given the way there’s the borders? The fact is, if we’re worried about the rich controlling the U.S. political system, the rich nations, very much control the international political system.

Branko Milanovic: For global equality there’s no mechanism, there are no clear tools, because there is no global government.

Essentially if you think of global inequality, you might say that you have, other than aid, two other tools. One is increase in the growth rate of the poor countries. And this is how, interestingly, you end up in a very curious position, from having started to worry about inequality ending up worrying primarily about economic growth of poor countries.

The second thing is migration. Migration reduces overall inequality on the assumption that when people from poor countries go to rich countries, their incomes go up.

Obviously, migration, while needed to reduce both global poverty and global inequality is not a panacea. Not everything is rosy: first, it could be that the incomes of the people that stay behind are reduced if most skilled people emigrate. This may still reduce global poverty and inequality but it does raise moral issues since we may end up with some countries that would, in the era of globalization, have to disappear: everyone will be better off if they migrated.

And there is a political issue of absorption of migrants in the recipient countries. Still, migration today, despite much attention it receives, has been relatively stagnant and small. In the last quarter of century, the percentage of people who live in the countries where they were not born has been stable at between 2 and 3 percent. Or to go back to your previous question, for 97% of the people in the world, half of their income is decided at the moment when they are born.

SM: Catherine Rampell in her New York Times review of your book, noted income mobility, and I think it gets at this distinction you like to make between good inequality and bad inequality. 

Branko Milanovic:  The bad or undeserved inequality would be the one that arises from the factors over which you have no control: what was the income level of your parents, whether you were born male or female, what is your race, and things like that.

The good inequality is inequality of effort, work, luck and so on.

SM: Okay. So let’s talk about your paper. There’s been a lot of recent research on GDP growth and inequality and it’s actually kind of shifted almost to the left, it sounds like, with more inequality leading to lower GDP growth. You find that actually it is a little more nuanced than that.

Branko Milanovic: I think that with the paper you mention, which I did in collaboration with Roy van der Weide from the World Bank, the novelty is that we “unpack” both growth and inequality.

In the past, the use of these two aggregate and “unnuanced” measures like GDP per capita and Gini coefficient, regressed on each other across countries, yielded the results that were all over the place: from a positive relationship between high inequality leading to higher growth to a negative relationship, to a very weak or non-existent relationship.

We thought of unpacking both growth and inequality. What does it mean? We don’t look at the growth of the mean only; we look at the growth rate at different points of the income distribution, we look at the growth rate of the very poor, say bottom 20 percent of people, we look at the rate of growth of the median, or among the top 10 percent or 5 percent, or top 1 percent.

Then, similarly, [we] disaggregate overall inequality into inequality among the poor, among the rich.

I think our most interesting finding—based on the U.S. data from 1960 to 2010, huge micro-censuses, conducted once every ten years and which include one percent of the U.S. households—is that if you look at income growth of the bottom 20% or bottom 40% of the population in period  “t+1″, that income growth is negatively correlated with inequality which existed in period “t”.

Let me put it in simple terms. Let’s suppose I’m a guy who is poor. I live in Massachusetts in 1990. Then the rate of growth of my income between 1990 and  2000, would be negatively correlated with income inequality that existed in Massachusetts in 1990. So we do it across all fifty U.S. states. Obviously, overall growth rates have declined over the last 50 years; also the shape of the growth rates across various income levels (the poor, the middle, the rich) has changed, as you can see here in the graph, but the negative correlation between inequality and subsequent real income growth of the poor remains.

It used to be that the U.S. growth was pro-poor, in the sense, that the growth rates among the poor were higher than amongst the rich. Now it’s the opposite. But that particular relationship between inequality and growth of the poor, we find it throughout the entire period. We can only speculate what are the reasons that make inequality be so bad, pernicious even, for the growth at low levels of income.

GrowthRate

Now, when you move to the top of income distribution, the story changes. Inequality may not be bad for the rich; actually, it’s positively correlated with their growth rates. So if you’re really a rich person in Massachusetts in 1990, then your growth rate, between 1990 and 2000 is going to be positively correlated with inequality which existed in Massachusetts in 1990.

In other words, the bottom-line is that we believe is evidence there to show that the rate of growth of the poor people is negatively affected by high inequality.

SM: The argument by many people who are center-left has been, “Oh, we now know that inequality is bad for growth, so the rich should get behind measures to reduce inequality,” but if you’re correct they actually do not have that political incentive.

Branko Milanovic: That’s a very good point, that’s your point, we don’t make it in the paper, but it’s very true. If you take what we find in the paper, that the growth coefficient on inequality for the rich is positive, then they don’t have an incentive to fight inequality. For their growth rate, inequality is good. It undermines the case for a sort of self-interest of the rich to be more accommodating.

This interview originally appeared on Policyshop.