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Income inequality: understanding the limitations and psychology of disadvantage

Although the war on poverty has stolen the spotlight, effective policy strategies and a vision for a better economy can only be achieved by understanding poverty.
Photo by Alex Wong/Getty Images

Fortunately, the political class is embracing the long-time need to address growing economic disparity and poverty, but the war to save the American Dream and US economic supremacy is a long and difficult one that offers no assurance of victory. There are reasons our political elite have avoided dealing with the underlying economic issues that have been driving America’s financial problems since the 1970s when America’s prosperity started to falter. There are reasons economic advisors have avoided dealing with economically depressed regions like Detroit and Philadelphia by advising the most talented of workers capable of moving to follow the jobs while focusing on the successes of Wall Street instead of Main Street.

One of the largest reasons is that the influential elite of our society do not comprehend the psychological of the disadvantaged and disenfranchised well enough to recognize what limitations the growing poor classes must overcome, so they can help develop solutions that actually address these roadblocks, which often seem trivial to the more advantaged. The views of the more elite socioeconomic classes are built on a series of intellectual exercises, thus they understand economic disenfranchisement only in pieces and lack the intuitive understanding needed to offer a comprehensive vision of how to address the issues of those who are limited by their circumstances and the thinking their circumstances instill.

On the other hand, the perpetual poor do not necessarily know how to intellectualize the limitations and psychological issues that come with a lack of sufficient income. That is, they do not know how to break down what they intuitively know to be their needs in terms that would allow them to help policymakers develop effective anti-poverty strategies. After all, the poor tend not to be adequately trained in law, economics, accounting, business etc. Even if they do have a grasp of these subjects, they likely lack the resources and opportunities to overcome seemingly nonsensical barriers to voice their views. As for many of those who have ascended the economic ladder from nothing, there is a tendency to superimpose their path to prosperity onto others, thus they can only offer limited insights, while there are many who do not understand the circumstances of others and still others who resent those who need help to succeed.

Our Nation has spent two generations throwing massive amounts of money at the poverty problem with weak results that are now being rapidly undermined by growing economic disparity. It is because few have a comprehensive enough understanding of the issues to offer a vision for the future and the effective strategies we need to move forward. On the Left, there is too much reliance on education and subsidies, i.e. public assistance, tax credits, etc. On the Right, there is too much reliance on misguided faith in market forces, i.e. markets do not do what we want or need them to do; they do what they are set up to do, and problem avoidance via the abuse of concepts like personal merit, personal responsibility, and choice.

The word choice, for example, is a powerful term that can be grossly misleading while it is not well understood by the advantaged who often use it as an excuse to avoid their positional responsibilities as social leaders. People of privileged backgrounds have the ability to make near instant and direct choices; whereas, the less affluent must correctly make a series of smaller choices to achieve the end result of the one choice that the more affluent individual has had the opportunity to make. Because these choices cost in terms of resources, including money, time, missed opportunities, energy, and emotion, the disempowered can quickly become exhausted when dealing with seemingly minor barriers, thus they are essentially set up to fail by circumstances and they will most likely fail.

Furthermore, there is also generational bias and bad thinking in play that prevent the in-power generations from properly addressing the interests of younger generations. Baby Boomers and their children experienced the advantage of prosperity as they entered an era of decline; whereas, the current generations must overcome an era of decline to achieve prosperity, just as America’s Greatest Generation did. For Baby Boomers, simply trying meant the difference between success and failure, or less success, while their children struggled or thrived depending on their successes and failures. The current generations, whether advantaged or disadvantaged, face a world of ever intensifying, often self-destructive, competition where failure is becoming a more likely scenario while exhausting oneself may only be rewarded with less failure. Sacrifice was an option that meant temporarily giving up something you want for something else you want more. More and more, it is no longer a question of sacrifice; it is a choice between little and nothing.

Meanwhile, the views of older generations on education, as one example, are outdated. Where elder generations were taught specific skills, unless they acquired broader skill as they approached the doctoral level, and repertoire of information, younger generations have benefited from growing trends that inadvertently favored a focus on “learning to learning” where students are taught how to acquire highly dynamic skills sets, how to acquire new skill sets on their own, and how to acquire, derive, process and apply massive amounts of data. In other words, good students of the younger generations do not need to take a lengthy class to learn a new piece of software or understand the basics of a complicated subject like economics. The thoughtful individuals of the younger generations can learn anything they need to learn, if given the opportunity and some timely guidance from an expert. As such, more education is not so much needed as education needs to focus more on teaching children how to learn to learn. More importantly, employers need to start recognizing this shift in human resource capacity, i.e. the skills of the unemployed or inappropriately employed are not necessarily perishable while on-the-job training has renewed merits.

For non-technology and non-scientific oriented fields, further educating our population will do little except drive degree inflation. Degrees do not mean jobs; requiring someone to have a masters degree to do a job that a high school graduate can do does no one any good. Relying too heavily on education to address growing economic disparity only drives degree inflation while it is an economic strategy that best reflects the needs of small countries. At the same time, the slow shift toward assessments tools that evaluate the skills of potential workers are only useful if there are well-paying, working class jobs in the United States, which means outsourcing must be addressed more aggressively with improved trade agreements and tax policies that incentivize innovation.

For technology and scientific fields that drive innovation, researches and creators need resources, which are often very significant, to pursue their novel ideas, which means we need to build an economy for innovators while we also need platforms for marketing any products that might come from research and a consumer base with sufficient income to support those products. It is also important to recognize only a certain segment of the population is capable of pursuing these fields and an even smaller segment has the will to pursue these fields while the incentives to do so are lacking due to too much competition for fewer underfunded opportunities and a payoff worth far less than the struggle. Unfortunately, research and innovation are returning to an elitist hobby when we need an economy driven by innovation and wealth generated from intellectual capital. In other words, America needs to put money in the hands of individuals who can give our economy what it needs and empower those capable of changing our society for the better, but we must start by recognizing the challenges facing the economically disenfranchised.

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