Generational fairness has been a big theme of the austerity crusaders, whose most strident advocates tend to be financiers and business titans of substantial net worth. Yet their calls to radically reduce social investment out of a sense of generational equity diminishes the prospects of young people. The true generational injustice has little to do with the projected public debt and everything to do with the real crisis going on right now. Today’s young adults—especially 20- and 30-somethings with young children—face shrinking opportunity and growing insecurity.
The fate of today’s infants and toddlers is inextricably connected to that of their millennial--generation parents. Two-thirds of children under the age of 5 are raised by parents younger than 34. The true generational injustice is a threadbare to nonexistent social contract that has made it harder than ever before for the young to either work or educate their way into the middle class—and stay there if they’re lucky enough to arrive. The prolonged downturn intensified the struggle; state and federal budget cuts only deepened the damage.
More than three years after the official end of the recession, more than 5.6 million 18- to 34-year-olds want a job and can’t find one. An additional 4.7 million young adults are underemployed—they’re either working part time when they really want a full-time position, or they’ve simply given up on their job search. High unemployment is unlikely to abate anytime soon without much greater public investment, direct action to create jobs, or both. If we continue to add jobs at the current rate, it will be 2022 before the country recovers to full employment, and even under those conditions workers younger than 25 will face unemployment rates double the national average—and flat or declining wages.
While much media attention has focused on young college-educated grads who can’t find work or are working at jobs that don’t require their degrees, the greatest pain accrues further down the income and education ladder. Less-privileged young people are experiencing joblessness at levels not seen since the Great Depression. Young African Americans face joblessness at a rate double that of young whites, and the gaps between those with college degrees and high-school diplomas is even wider. Most children of baby boomers will not be able to achieve even their parents’ standard of living.
And Baby Makes Broke
The millennial generation is now in its peak childbearing years, and more than in any previous generation, the cultural and economic expectation is that both mom and dad will be in the workforce throughout their children’s lives. Compared to baby boomers and gen-Xers, millennials are much more supportive of policies that would make child care widely more available and affordable and that would provide paid family leave for new parents. With good reason: They earn less than their parents did at their age, they have more debt, and both men and women have come of age expecting to be full participants in both parenting and bread-winning. Our society is not meeting their needs—and as this sizable generation continues to progress through its childbearing stage, austerity measures are likely to make the child-care crisis even worse.
Compared to other rich nations, the United States spends considerably less of its national wealth on child care. The United States ranks 32nd out of 39 rich nations in spending on child care as a percentage of gross domestic product, which means that high-quality care is spectacularly expensive, and as a result, in short supply. Most public child-care spending is targeted toward single parents, delivered primarily through Head Start, Temporary Assistance for Needy Families, and the Child Care Development Block Grant. But none of these supports is fully funded, so the supply of available slots falls short of the demand for services. State and federal budget cuts have further shrunk the number of children and families who will benefit from early care and learning programs.
More than one in three young families lived in poverty in 2010, the highest share on record. The price of child care is rising faster than inflation, with average monthly fees for two children exceeding median rent in every state. Because of these high costs, professional child care is unaffordable for many families, and only a fraction of families with working mothers put their children in paid care. Lower-income families are increasingly turning to their own extended family—grandparents and other relatives—to watch their children while they’re at work. The quality is dramatically uneven, and lower-income children are much more likely to end up in less stable and developmentally rich child-care settings.
Single parents, mainly single mothers, have a particularly tough time. Without the benefit of a second income, they often have trouble making ends meet. Just as this generation is experiencing growing inequality in their pursuit of higher education, their ability to provide top-quality care for their young children depends greatly on where they fall in America’s increasingly skewed income distribution.
For low-income families who don’t have relatives to provide care, paying for child care takes a substantial bite out of their incomes. The national average for center-based child-care costs in 2010 was $8,900 for full-time care for an infant and $7,150 for full-time care for a preschooler. Families making less than $1,500 per month with children under the age of five that paid for child care spent more than half of their monthly income on child-care expenses. It’s not uncommon for young children to be bounced around between several different settings during their formative years as child-care subsidies decrease with their mom’s earnings or cuts in state funding result in longer waiting lists or loss of a subsidized slot due to tightened eligibility. Investing in the critical first three years of life has been shown to be essential for a strong cognitive and social foundation. Reaching vulnerable children at birth is especially critical in preventing early and persistent learning gaps. Yet our nation, unlike other advanced and wealthy nations, leaves this stage of life largely to chance.
In his State of the Union address, President Barack Obama made a commitment to ensure universal pre-kindergarten for four-year-olds. Given the enormous political pressures to continue cutting the federal budget, it’s a long shot that we’ll be able to achieve universal pre-K anytime soon, let alone make significant strides toward ensuring all infants and toddlers are provided with nurturing and developmentally appropriate care while their parents work. Indeed, the issue of child care more broadly remains at the margins of political debate, gaining prominence only when existing funding is threatened or cut.
The Generational Earnings Gap
While the cost of child care has nearly doubled since the mid-1980s, over the same time the typical earnings of young people—many of whom need to purchase that care—have failed to keep pace. Between 1980 and 2011, typical earnings for young workers declined for all but college-educated women. Everyone else either lost ground or stayed in place—failing to either match or exceed what their parents earned a generation ago. Overall, young men in their mid-twenties to early thirties are earning 90 cents for every dollar their father earned in 1980, while young women overall have pulled ahead, earning $1.17 in 2010 for every dollar earned by their mothers in 1980—a gain entirely driven by college-educated women.
But these averages mask large differences in the generational earnings gap that has occurred for non-college-educated young people. The typical inflation-adjusted earnings for young men with no education beyond high school are 25 percent less than in 1980, a loss of more than $10,000. Young women without any college credentials earn less too, but their loss is $2,500. The declines continue for young people with some college or an associate’s degree, though the drop in earnings power is less severe. It’s important to note that the generational decline in earnings power was well under way before the recession hit, and it shows no sign of improving in the absence of public policies to increase the minimum wage, enforce existing labor laws, universalize career paths in health-services occupations, and bolster the practical right to collective bargaining. There are millions of jobs that can’t be shipped overseas or replaced by robots—think home health-care aides, stockers, day-care workers, waiters, cooks—and these jobs will continue to be the largest source of new positions in the next decade. The only way to improve job quality for millions of workers in these occupations is through public--policy choices and collective-bargaining rights, aimed at professionalizing jobs and pay levels, improving working conditions, and providing pathways out of entry-level jobs.
In the meantime, going to college remains the best route to the middle class. It’s become a common refrain that a college graduate today will earn more than $1 million more in his or her lifetime than someone without a college degree. What’s less appreciated is that the so-called college premium isn’t due to the average college grad making out like gangbusters; it’s because everybody else’s earnings have taken a nosedive.
Some in the media have taken the job slump of recent college grads and their rising debt burdens as a reason to question whether a college degree is still worth it today. But that’s the wrong conclusion. The more appropriate question to ask in the wake of $1 trillion in college debt is whether our debt-for-diploma system is a good way to provide access to college and a real chance at upward mobility.
The Debt-for-Diploma System
What gets lost in the trendy conversation about whether college is really worth it is the radical nature of the current status quo. Today, two-thirds of college-going students borrow to help pay for the cost, graduating with an average of $26,000 in undergraduate debt. African Americans and lower-income students are much more likely to borrow, and at higher amounts, than their white and more privileged peers. Fully eight out of ten African American college students take on debt to pay for college (average graduating debt: more than $28,000), compared to just over six out of ten white students, who graduate with $4,000 less debt than their African American counterparts. Not everyone makes it to commencement, of course. Today, dropping out often means leaving the college gates with debt but no degree—a fate that befalls almost 30 percent of college students who take out loans, leaving them with less income to defray debt.
The path to our current debt-for-diploma system is the result of several overlapping trends. The first is a steady decline in public investment in state colleges and universities, down 26 percent per full-time equivalent over two decades. This, more than any other trend, fueled the tripling of public university tuition in one generation. Second, as tuition spiraled, the purchasing power of the Pell grant dwindled from covering about $70 out of every $100 in college costs to around $30 of every $100 today. In addition, many states and colleges shifted their aid programs to play the rankings game and attract the highest-scoring students, diverting scarce resources away from students with financial need. The result of all of this is a widening level of unmet need—the amount of money after all available aid that students need to either earn or borrow to pay for school. Students from modest backgrounds coped with the yawning gap between their resources and the cost of college by working more hours at part- or full-time jobs and piling on debt. Having to work while attending college reduces one’s chance of graduating within five years—or graduating at all. The whole system serves to harden class lines.
The debt-for-diploma system has distorted the way we think about the returns to a college education. Vanishing from our discourse is acknowledgment of the vital role higher education plays in a democracy or the vast public benefit we all derive from an open and affordable college system. The debt that is now required to attend college has essentially commoditized and privatized what has been since our nation’s founding a public good. Our national discussion about college has become dominated by business-speak. Major foundations and a growing cadre of public intellectuals have commandeered the dialogue to press for a greater return on investment by ensuring today’s college degrees have labor-market value. But in a debt-for-diploma system, “labor-market value” becomes harder to define or achieve. Has a teacher with $30,000 in student debt who is making $25,000 a year achieved labor-market value? What about the music-studies major who took out $15,000 in loans and makes a living teaching piano lessons to neighborhood kids and serving lattes, while performing in the all-volunteer community symphony? Does his degree produce defensible labor-market value? Does the answer change if we add to the analysis that the teacher is the first to go to college in her family while the Wall Streeter comes from a well-heeled family of Ivy Leaguers? How about the business major who takes out $60,000 in loans and lands a job on Wall Street making $150,000? No question her degree has good labor-market value. Does it make her investment better than the teacher’s investment? Suppose the Wall Streeter used her knowledge to enrich herself at the expense of her customers or helped crash the economy? The very premise of labor-market value presumes that markets accurately value social goods, of which education is a prime example. The fact that society needs tax-supported primary and secondary education in the first place is long-standing proof that markets do not value education correctly.
The debt-for-diploma system has consequences of bigger import than whether it helps an individual land a job that makes going to college “worth it.” As debt financing has become the required gateway for attending a four-year university, we’re experiencing growing gaps by race and class in who enrolls and completes four-year degrees. Smart and passionate young people from modest or poor backgrounds are doing the best they can to avoid debt by enrolling part-time and working full-time—the two biggest factors for dropping out. Meanwhile, our nation’s most elite colleges are engaged in a battle of “who has more luxuries” so they can entice well-heeled students who will pay full price.
Until about the mid-1990s, state universities and colleges were affordable for middle-income households, with summer jobs helping fill any leftover financial need. Lower-income students could pay the bill with grants and part-time jobs. Debt was the exception, not the rule. Well-funded public universities and generous financial aid is what made America’s older population the most educated in the world. The debt-for-diploma system has made America’s younger population the 14th most educated in the world, while our older population ranks No. 1 in education attainment. Every year, millions of smart and passionate young people downscale or abandon their dreams because college has become so financially complicated. For those lucky enough to make it to graduation thanks to five-figure student loans, their monthly loan payments will exert a slow drag on their pocketbooks, slowing down their savings and ability to buy a home and even distorting key life decisions like getting married and starting a family. So the economic pain and diminished prospects of the parents will be reflected in the next generation.
Our nation has a long, rich history of expanding access to higher education through generous public investment—a path that has been abandoned in one generation. At the other end of the education spectrum, however, our system of early childhood education and care has overwhelmingly been treated as a private good, with access to high-quality care largely dependent on whether a family can afford to pay top dollar.
What Can We Afford?
Outlays on social goods such as child care or higher education have always drawn conservative opposition. But the struggle has intensified as the super-affluent have gained more power and influence over our political priorities and decision-making. It turns out that the rich, who have private options, also have different opinions than most Americans on key policies that shape opportunity and living standards. Because policymakers engage much more directly and routinely with this relatively small group of affluent Americans, their priorities and preferences are much more likely to shape the agenda and the terms of the debate.
A recent survey funded by the Russell Sage Foundation found that the policy preferences of those with average annual incomes of more than $1 million vary widely from those of most citizens. This survey found that the general public is more open than the wealthy to a variety of policies designed to reduce inequality and strengthen economic opportunity, including raising the minimum wage, ensuring jobs for all who want one, and protecting our most vulnerable residents.
But the affluent don’t just hold different opinions about public policies—they are much more able to convert those preferences into policy changes. In his recent book, Affluence and Influence: Economic Inequality and Political Power in America, political scientist Martin Gilens concludes that “the American government does respond to the public’s preferences, but that responsiveness is strongly tilted toward the most affluent citizens. Indeed, under most circumstances, the preferences of the vast majority of Americans appear to have essentially no impact on which policies the government does or doesn’t adopt.” Gilens shows that, in many cases, public-policy outcomes would have been quite different if Congress and the president had been equally responsive to all income groups.
The role that the donor class plays in both shaping and affecting the outcomes of policy is particularly critical on economic policy, notably high-income Americans’ stronger opposition to taxes (which are essential to affording anything) and corporate regulation. In his 2008 book, Unequal Democracy, political scientist Larry Bartels writes that “the preferences of people in the bottom third of the income distribution have no apparent impact on the behavior of their elected officials.”
Our nation is pulling apart—politically and economically—in a toxic, mutually reinforcing cycle that confers more political advantages to the privileged few, while the majority of Americans struggle under an economic system whose rules are written to increasingly reward only those at the top. The millennial generation is coming of age and growing into adulthood at the pinnacle of this inequality era—and all indications are they will be worse off than previous generations. Their children are likely to be still worse off. This is not because of happenstance, nor is it due to the ravages of the lingering downturn. The descent of this generation has its roots in political changes that began just when they were being born, when conservatives began their assertive and effective assault on our common good.
Privileges at birth were never supposed to define one’s life in America, and while this has always been more aspirational and mythical than we’d like to think, it is perhaps the idea that most defines us as Americans. Throughout most of our history, we’ve taken deliberate steps toward closing the gap between this idea and our actual lives. Today we are no longer on a path toward more equality of opportunity, and this generation’s challenges provide ample evidence of our retreat. There is nothing inevitable about this fate, but altering the prospects of young Americans and their own children will require drastically different politics and policies.