Suffer the Children

While investors are celebrating brighter prospects, the news from the hinterlands continues in a much darker vein. The Wall Street Journal reports that wages for a broad swath of the labor force have taken a “sharp and swift” fall to an extent rarely seen since the Great Depression. Between 2007 and 2009 more than half of workers who lost jobs and then found new ones reported wage declines, with more than a third of them reporting declines of 20 percent or more. Experts say it will be years, if ever, before their wages return to pre-recession levels.

This — and the fact that real unemployment in the U.S. continues well above 10 percent — should be setting of alarm bells for anyone worried about the nation’s future. Research shows that children whose parents lose jobs and eventually find new ones at lower wages suffer from lower wages themselves. The Panel Study of Income Dynamics (PSID) tracked the progress of people who, as children, lived through the post-war recessions that began in 1973 and 1980. Kids whose parents suffered layoffs end up with lower earnings when they became adults. The impact was concentrated in kids from lower-income families, presumably because parental unemployment posed a larger threat to things that were critical to family sustenance. It was especially pronounce for children who were the youngest during the recessions. The researchers conclude that:

“… children who fall into poverty during a recession will fare far worse along a range of variables than will their peers who did not fall into poverty. They will live in households with lower incomes, they will earn less themselves and they have a greater chance at living in or near poverty as adults. They will achieve lower levels of education, and they will be less likely to be gainfully employed. Children who experience recession-induced poverty will even have poorer health than their peers who stayed out of poverty during the childhood recession.”

We already know that poverty has been rising in the U.S. for decades. The latest Census Bureau data show the gap between rich and poor to be the widest on record. The ratio of earnings between the top and bottom is about double what it was when the Census Bureau began tracking it in 1967.

Confronting this threat to the nation’s future well-being with investments in high-quality early childhood education would help secure their future.  Yet early education is not a high priority among the policy solutions we see being put forth to address our long-term rise in poverty. It’s encouraging to hear some suggest federal aid to the states. A portion of this should be dedicated to competitive federal grants to the states for high-quality early education.

Children are not able to vote and households with children are a declining percentage of American households. Yet they represent 100 percent of the nation’s future well-being. As we view our policy solutions, we should apply the cold calculus any successful business uses in making economic decisions. If we do that — and take even a rudimentary look at the returns to be had by investing in early childhood education — it should rise to the top of the policy priority list.

Steve Barnett

Co-director, NIEER