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Growth, mobility, inequality: Three policy experts write their own State of the Union

Published: Tuesday, Jan. 28 2014 8:40 a.m. MST

“The challenge for apprenticeships is that most people don’t think of these things as a modern system of training,” says Ben Olinsky at the Center for American Progress. He said that in Germany and the U.K., apprenticeships are becoming common — combining some postsecondary skills training with on-the-job career paths that offer income from day one. South Carolina has seen success with a far-reaching program called Apprentice Carolina, offering guidance and tax credits to employers. Iowa’s governor just included a related proposal in his State of the State address.

“It’s one way to combat inequality and build a stronger middle class,” Olinsky said. He has a list of other proposals he would push into the speech, all calculated to narrow inequality. They include universal pre-kindergarten education, an insurance program for paid family and medical sick leave, allowing low-income people to refinance student debt, and efforts to strengthen retirement security.

Economic growth

What can you do for those on the weak end of the recovery? “The answer is strong economic growth,” said Mitchell, which would lead to a tight labor market and higher wages. “Those on the left are so focused on how the pie is being sliced they overlook importance of growing the pie. If the pie is fixed or shrinking, you have a no-win situation. You just end up with rent seeking and influence peddling.”

Without stronger economic growth, there won’t be much to save or redistribute, said Third Way's Kessler. But he remains bullish on America. The wounds of the Great Recession haven’t healed, but the bleeding has stopped, he argued.

“We had a very good second half of last year. Right now, I’d rather be us than Europe or Japan,” Kessler said. “Businesses are making money and have cash on hand. We have an immigrant population that will bring new life to the economy. America still has a lot of its traditional strengths.”

But the deep structural challenges must be addressed, Kessler said. “In the past 13 years, we’ve only had two years with growth greater than 2 percent,” he said, “where in the previous 13 years we had nine, and in the 13 before that we had nine. We’ve had slow growth environment for two entire presidencies.”

Is Kessler right that the U.S. economy has been hollowed out and middle-class jobs no longer provide middle-class income? This is partially true, concedes Mitchell, adding that in a globalized economy “unskilled labor is less rewarded, and declining transportation and communication costs make it cheaper to find labor abroad.”

The real solution, Mitchell says, is not to artificially raise wages but rather to tighten the labor market, making unskilled labor more valuable. This has implications for immigration policy, Mitchell says.

Kessler’s growth agenda includes immigration reform, trade agreements with Asia and entitlement reform of Social Security and Medicare to free up more money for other social needs.

The key is mobility

Both inequality and economic growth are critical, agreed Brookings's Sawhill, but she prefers to emphasize economic opportunity and intergenerational mobility.

People think of the U.S. as the land of opportunity, she said, but the chances of climbing the ladder from one generation to the next today are not as high here as people like to think, and not as high as other advanced countries. “We may not be the land of opportunity anymore,” said Sawhill, a veteran of the Clinton administration whom Time called a “militant moderate.”

Veronique de Rugy at Mercatus disputes the notion that mobility has declined in the U.S., arguing that income mobility today is no different than it was 20 years ago. “We can say it is not what we want, but that’s different than saying that it has fallen in recent years or that it is not there at all.”

Three-legged stool

Sawhill’s agenda reaches well beyond monetary inequality, however. She views the problem more broadly to include gaps in education, family structure and parenting styles. A few years back, she coauthored a book titled “Creating the Opportunity Society,” in which she and Ron Haskins argued that if you do just three things, you will almost certainly not slip into poverty: “finish high school, work full-time, and don’t have kids until after you are married.”

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