Income inequality is a hot issue theses days–and rightfully so. I came across articles in both the NY Times and in Crain’s on the subject this morning. This is an important and disturbing trend, but again, no mention of economic mobility…. Until I discovered an article in the Washington Post (of all places), entitled “The Economic Debate we Should Be having.” Michael Gerson made a few important remarks:

We provide food stamps to relieve hunger or vouchers to make housing more affordable. But social equality is not achieved through redistributing cash. “Our research,” argue Isabel Sawhill and Ron Haskins of the Brookings Institution, “shows that if you want to avoid poverty and join the middle class in the United States, you need to complete high school (at a minimum), work full time and marry before you have children. If you do all three, your chances of being poor fall from 12 percent to 2 percent.”

Economic inequality can be justified as the reward for greater effort – so long as there is also social mobility. In the absence of mobility, capitalism becomes a caste system. And this is what America, in violation of its self-image, threatens to become. The United States has less upward economic mobility among lower-income families than Canada, Finland or Sweden. Americans who are born into the middle class have a roughly equal chance of ascending or descending the economic ladder. But Americans born poor are likely to stay on its lowest rungs.

…

Well stated. It’s time to get to work.

In the last week I read a press release from Mayor Bloomberg’s office and a Policy Brief published by the Community Service Society (get the gist of the 16 page brief here via this recent NY Times Economix blog post).

Both pieces spoke to the city’s unemployment problem.

Mayor Bloomberg lays out six critical strategies to tackle unemployment–highlighting expanding “job training” through city supported workforce centers as one of the strategies to mitigate the current problem.

CSS’s brief tells the story through a rigorous statistical analysis that the recession has had a disproportionately adverse effects on young black men.

Both pieces left me wanting of a little more. Yes, unemployment is high. And certainly disproportionately high for people of color. But neither piece spoke to another very real issue that low-wage workers face: underemployment.

Underemployment is usually defined as the number of people who are either unemployed or working part time but wanting to work full time.  Some definitions include the caveat that an underemployed person is one who is working in a job that does not fully utilize their skills. Underemployment nationally is at 19% according to a recent Gallup data.

Q: How does underemployment impact the unemployed population?

A: In the simplest terms, reducing unemployment means less work hours to go around. Therefore, you have a larger workforce (and lower unemployment), but individual earnings also likely are reduced.

Job training centers that provide general technical skills for disconnected youth, young adults of color, or laid off workers is not the only answer to our current unemployment problem in the short or long term. In fact, moving this demographic into l0w-wage jobs perpetuates the cycle of generational poverty that many of these individuals face because the majority are unable to move up the hierarchical ladder within these companies.

While it is true that low-wage workers prop up sectors–like the fast food industry–and any broad wage increases to put the entry level workers over the living wage threshold (~$11.50/hour in NYC) are unlikely, working as an entry level employee should not be the end of any substantial career growth. This is not a popular issue to contend with, largely because focus is on those who are without work. But there are many more people in NYC that are stuck in jobs that do not tap into their inherent potential, leaving them stranded on the fringes the economy, frustrated and disempowered.

We need to address this problem by strengthening the pipelines for economic mobility for three reasons:

1. Moving people up the economic ladder creates more space to get unemployed people jobs

2. Improving the capacity of low-wage workers introduces more competition in higher level management positions. This means that, for example, fast food restaurants will have a larger pool of qualified candidates to tap into and that the galvanized new workforce will be better equipped to train and cultivate entry level workers to eventually replace them as they continue to move upwards.

3. As people more individuals move up the economic latter from low-wage positions, they decrease their dependency on public assistance programs. Ideally, those vacant lower wage positions are then filled by younger workers who are still living with their families and not yet on public assistance.

There is no single solution to unemployment and we need to consider the notion of economic mobility as a legitimate mechanism to create more jobs.



We’re excited to announce that Hector Negroni, Managing Director at Goldman Sachs, has joined our Board of Directors. Providing access to better jobs for hard working individuals resonates with Hector and he is already hard at work (during non-trading hours) in helping Champion Access expand its impact. Welcome, Hector!