Is it really all about the income gap?
Democratic presidential candidate Bernie Sanders and many others on the left argue that severe inequality of incomes and wealth is the most important economic issue facing America. Millions of progressives apparently agree, seeming to view the mere existence of a big gap between the 1 percent and everyone else as evidence enough of a big problem — full stop.
Of course, that's more of a value judgment than an economic one. Which is perfectly fine. Moral considerations should obviously inform policy. Yet before answering their inequality alarm with a dramatic policy response — 70 percent tax rates! A basic income for all! — it's reasonable to try and determine what the harmful real-world consequences of income inequality actually are, if any.
For instance: Are high levels of income inequality in and of themselves bad for public health? The answer might seem obvious to Team Feel the Bern, even self-evident. As they see it, inequality makes pretty much everything worse. It's a universal bad.
A blockbuster new study, however, suggests otherwise. To be sure, the Health Inequality Project — a team led by well-known economists Raj Chetty and David Culter — did find big differences between rich and poor. The richest American men live 15 years longer than the poorest men, while the richest American women live 10 years longer than the poorest women. The richest Americans have gained approximately three years in longevity since 2000, while the poorest Americans have experienced no gains.
So income inequality is a killer, right? Case closed!
Not so fast. Turns out the researchers failed to find a strong correlation between income inequality and life expectancy. Indeed, poor Americans who live in some of the country's most unequal places, such as New York and San Francisco, have some of the best outcomes. Or to put it more generally: Lower-income Americans appear to fare better in cities with lots of high-income college grads, more immigrants, and high levels of government spending. What's more, the study notes, much of the variation in life expectancies in different regions looks like it can be explained by differences in behavior, such as smoking and exercise. (But not, interestingly, differences in access to health care.)
These are hardly the only findings to suggest humility when making the case about the possible harm from historically high levels of inequality. Earlier research by Chetty found that, despite a big jump in high-end inequality over recent decades, upward mobility hasn't really changed. Like his more recent work, Chetty found geography to be key. Areas with more two-parent households and less sprawl saw more mobility.
One takeaway from all this is that if you're concerned about the poor, it's just as important to focus directly on their problems at the local level as working to affect big-picture measures of inequality. One group of ideas suggested by the findings relates to individual behavior: smoking bans or restrictions on trans fats or taxes on sugary drinks. These are the kinds of policies found in cities where the poor are living longer. And while some in Washington would like bullet trains to span America, a more immediate concern would be to improve public transit so low-income people can more easily get to where the jobs are.
Another idea: Make it easier for lower-income Americans — and the middle class — to afford to live in some of the pricier, higher-longevity cities. The researchers speculate that "low-income individuals who live in high-income areas may also be influenced by living in the vicinity of other individuals who behave in healthier ways." Economists on the left and right have begun to deeply examine how zoning regulations and other regulatory barriers artificially inflate home prices in some high-income cities such as New York and San Francisco.
No one is saying we shouldn't mind the gap. But we probably shouldn't obsess over it.