Politics & Policy

The American Dream Hinges on Family

(Photo: Iofoto/Dreamstime)
If Republicans want to improve working-class social mobility, they should pursue policies that put the family first.

Editor’s Note: This piece was written in partnership with the Annie E. Casey Foundation as part of their “Opportunity 2017: An Agenda to Increase Prosperity.”

One of the most troubling trends of our time is the decline in economic opportunity. From the early 20th century until the 1980s, children consistently out-earned their parents. Then the tide stopped rising and children’s odds of out-earning their parents became entirely random, as Stanford economist Raj Chetty has shown.

This sorry state of affairs persists today. If you’re born into a household earning $250,000 a year, it might not trouble you much. But children born into poorer households know firsthand the pain of declining economic mobility. Seventy percent of American children born poor will never make it to the middle class, according to a study by Pew Research. An invisible anchor tethers them in place, largely irrespective of their abilities or work ethics. For them, the American Dream has become a nightmare.

Perhaps surprisingly, the biggest cause of this opportunity gap is not education, segregation, economic stagnation, immigration, or income inequality. (Sorry, Senator Sanders.) To be sure, these are all contributing factors. But in the seminal 2014 study, “Where Is the Land of Opportunity,” Chetty and his colleagues found that the lack of upward mobility was most strongly correlated to family structure. Subsequent studies have confirmed the importance of stable families.

This creates an interesting challenge for Republicans, given their emphasis on increasing economic opportunity: How can a party that remains tentative about family policy get ahead of the curve?

The Changing American Family

The American family has undergone a dramatic transformation in the last 50 years. The number of single parents in America has increased threefold since 1960. Nearly one-third of households are now headed by single parents, most of whom are mothers, although the number of single fathers is on the rise. significantly, this transformation hasn’t occurred across the whole population; instead, it has disproportionately affected the low and middle-income households who can least afford to take an economic hit.

According to Chetty, the number of single parents in a community is the single biggest predictor of social mobility. More than four in ten single mothers live at or below the poverty line compared with one in ten married mothers. My former AEI colleagues Brad Wilcox and Robert Lerman found that if the rate of married parenthood had persisted from the 1980s to 2004, growth in median household incomes would have been 44 percent higher.

The shift in the structure of the American family was driven by a complex web of economic, social, and cultural trends that are not going away any time soon. The implications of that shift are, however, clear: The best way to increase economic opportunities for working-class Americans is to pursue policies that strengthen families and address the unique economic challenges that parents — especially single parents — face.

A Family-Friendly Agenda

What might a pro-family Republican agenda look like, then? To start with, it would involve reforms that reduce the government-imposed disincentives to marry, which are highest for low-income Americans.

Our tax and benefit systems are designed to benefit single-earner households above all else. We impose high effective marginal tax rates on married households in which both spouses work. In a recent report, economists Melissa Kearney and Lesley Turner show how a family headed by a primary earner making $25,000 a year will take home less than 30 percent of a spouse’s earnings under existing policy. This is essentially a flat 70 percent tax rate, far exceeding that imposed on a high-income household. Needless to say, it discourages marriage and spousal employment.

Of course, there are millions of parents around the country who wouldn’t be in a position to marry even if the structural barriers to doing so were eliminated. To adequately address the challenges of these working parents, Republicans will have to go further.

Congressional Republicans should pursue a set of family-friendly policies that directly address the major economic challenges working parents face, including the cost and availability of child-care and the lack of paid leave. To be sure, these challenges affect married and single parents alike, but their effects are disproportionately borne by those in the latter group, who often have no second source of income to rely on in periods when they are out of work and no one with whom to share child-care responsibilities.

Paid Leave and Child Care

A paid-parental-leave policy at the national level could fit squarely into a pro-family, pro-work Republican agenda. Only 5 percent of employees in the bottom quintile of earners have access to paid leave from their employers, according to the Department of Labor. As such, many low-income and single mothers either return to work within a week or two of giving birth or quit their job altogether — neither of which is good for a newborn, his mother, or her earnings.

A modest paid-parental-leave policy would counter these trends and increase mothers’ attachment to the workforce — an essential component of upward economic mobility, especially for single-parent households. A study of California’s paid-leave program found that low-income and minority women benefited the most from its institution, seeing a 10 to 17 percent rise in their weekly work hours and wages. Moreover, new mothers’ reliance on welfare programs decreased following the program’s implementation, probably as the result of increased workforce attachment.

Another family-friendly policy worth considering is child-care support. Child care is among the most expensive services families require, and its cost is directly and inversely related to parents’ ability to work. This is an especially big problem because the existing system of child-care credits and subsidies largely leaves out low- and middle-income parents, for whom employment is a necessity rather than a luxury.

Republicans should take the lead on converting the existing system into a refundable child-care tax credit linked to child-care costs and targeted at low-income households. Economists have consistently found that reducing child-care costs has positive effects on work. For example, David Blau and Erdal Tekin found that child-care subsidies resulted in a 13-percentage-point increase in the likelihood of employment for impoverished single mothers. This is particularly significant when the alternative is government welfare, something that conservatives (rightfully) tend to decry. Of course, child-care costs can also be offset indirectly — by, for example, increasing the value of the child tax credit — but this does not necessarily affect workforce participation, which is vital for increasing upward mobility.

Many families prefer that one parent stay at home to take care of the kids. But single-parent families — and lots of low-income dual-earner families — don’t have that option. Making it easier for these households to hold down a job is vital to improving their economic circumstances and upward mobility, and it should be just as much a conservative priority as other pro-work reforms.

An Uphill Journey

In an encouraging sign, the Trump administration has been supportive of family-friendly reforms. But support among congressional Republicans has been tepid, despite the majority of conservatives who want a paid-leave policy and the previous Republican administrations that expanded child-care subsidies. The overwhelming concern among Republican legislators on Capitol Hill seems to be the growth of government and spending, but that shouldn’t keep them from supporting these policies, which could be at least partially paid for by eliminating bloat elsewhere in the federal budget.

To ignore or deprioritize family-friendly policies, meanwhile, would be a grave mistake. The structure of families has undergone a dramatic transformation at the same time that upward mobility has stagnated. This is no accident. Republicans talk often about the importance of improving economic opportunity. But real improvement will require them to adopt a thoughtful, fiscally responsible, pro-family agenda.

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