Marx and Piketty and the Driving Impact of Poverty on Income and Wealth Inequality

May 18, 2014

Marx predicted growing class polarization and the disappearance of the middle class in societies based on a market economy. For more than a century the growth of the middle class and for a considerable period the narrowing of inequality 
proved that thesis wrong. Times are changing. We are becoming more bi-modal in income than at any time in the last hundred years. 

Piketty asserts that there will be a continuing greater return on capital than on labor, this driving further inequality. 

Driving this trend further is what is happening in education, the pre-cursor to what a person will earn in his/her career.

Children from wealthy families go to quality pre-K schools in far greater numbers than children from poor families do. These children enter kindergarten far more ready to learn with a far larger working vocabulary and up to an 18 months head start.
From that flow the likelihood of reading on grade by the end of the third grade, high school graduation,etc.

Now, in the last 24 hours I encounter these data:


-About 25% of children born into the bottom half of the income distribution will have a bachelors degree by age 24.

-In contrast 90% of children born into families in top quartile will have the degree by age 24.

-And it is not just a question of basic ability. The graduation rate for students having about an average SAT score of 1,000-1,199 is 20% for students in the bottom income quartile and 67% in the top income quartile. 

-About 63% of students born into the bottom income quintile will move up to one of the top three quintiles (about 20% in each)  if they have a college degree. If they don't have a college degree
only about 33% will move up and with only about 5% in the top quintile. 

-40% of American students who start at a 4 year college haven/t earned a degree after 6 years. Rich kids tend to finish. Poor kids tend not to. 

If we are to have the best educated and prepared work force in the future, which we must it we are the country we need to be,  we must make transformational funding interventions to support poor families and children.

1. Government (federal, state and local) funded pre-K for all children. Government funded home visiting for those in highest need.
2. Greater aid for college students.
3. Greater use of 2 year community and technical colleges. Four year college is not for all. 

As we have seen separately, the investments to provide these interventions all pay back multi-fold.


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