Inequality Piketty Doesn’t Examine Is U.S. Human Capital – Bloomberg 07-14-14

Salient to Investors:

  • Economist Thomas Piketty excludes human capital – an individual’s labor power, skills, training and abilities – from his analysis of wealth inequality because it cannot be owned or traded on a market, but recognizes it is key to understanding inequality.
  • Sean Reardon at Stanford said low-income kids have less access to many opportunities to develop their cognitive skills in the first few years of life.
  • Brookings found that high-quality preschool and home instruction for parents on how to be effective teachers can add over $89,000 to lifetime earnings for the average person, while costing $11,600 per child. Added to other programs in middle childhood and adolescence increases that to $205,200 at a cost of $21,100.
  • Robert Solow at MIT said equalizing the distribution of human capital through improving literacy and developing math and cognitive skills offers a more immediate way to lessen but not eliminate wealth inequality.
  • Betsey Stevenson at the Council of Economic Advisers said early education will raise the productivity and the wages of kids – every study shows it has an extremely high return.
  • The National Institute for Early Education Research defines high-quality pre-school as incorporating comprehensive early learning standards, a maximum class size of 20, teachers with at least a bachelor’s degree, provision of at least one meal, vision, hearing and health screenings and referrals, and support services such as parent education and home visits. Only Alabama, Alaska, North Carolina, Rhode Island, and one of Louisiana’s three programs met all 10 of theses benchmarks in 2013.
  • James Heckman at the University of Chicago and Lakshmi Raut at SSA say a public preschool program for disadvantaged children would increase future college enrollment by 3.6%, and reduce the poverty level – earning less than 70 percent of the average income – to 29 percent from 36 percent, while improving the ability of generations within families to move up the pay scale.
  • Sabino Kornrich at Emory said inflation-adjusted spending on children in the poorest households rose 17 percent from 1972 through 2007 versus a rise of 76 percent for the richest children. Kornrich said high-income households boosted outlays on education during the slump, while those lower down the income ladder tightened as unemployment jumped and incomes plunged
  • Anne Fernald at Stanford said that by age 2, infants from low-income families are 6 months behind in language and vocabulary skills the children in wealthier families.
  • Isabel Sawhill at Brookings said experiences early in life loom larger than those in say adolescence because it is hard to make up those shortfalls later in life.

Read the full article at http://www.bloomberg.com/news/2014-07-15/the-inequality-piketty-didn-t-examine-it-starts-in-womb-in-u-s-.html

Click here  to receive free and immediate email alerts of the latest forecasts.