Structural Inequality in America
How Structural Inequality Stifles the America Dream
Structural inequality is a system of privilege created by institutions within an economy. These institutions include the law, business practices, and government policies. They also include education, health care, and the media. They are powerful socializing agents that tell us what we can achieve within the society.
Inequality is structural when policies keep some groups from obtaining the resources to better their lives. It prevents those who are discriminated against from realizing the American Dream. They do not have a chance to pursue their idea of happiness. The Founding Fathers knew that pursuit drove ambition and creativity. By legally protecting these values, they set up an attractive society to those aspiring to a better life. Structural inequality clouds this vision and limits economic growth for the whole society.
Structural inequality differs from the individual forms of inequality. That's where racism, sexism, and the like are exhibited by individual behavior. Many people think that all inequality is due to personal biases that can be overcome individually. They believe inequality would disappear if people “just stood up for themselves” or if others stopped oppressing them.
Structural inequality occurs even in a free market economy because of the laws and policies that form it. Those laws regulate government contracts, bankruptcy, and property. They create advantages for some and disadvantages for others. When the laws work against specific groups, inequality becomes part of the structure of the market.
Structural inequality seems to be worsening. Between 1979 and 2007, after-tax income increased 275% for the wealthiest 1% of households. It rose 65% for the top fifth. The bottom fifth only increased by 18%. That's true even adding all income from Social Security, welfare, and other government payments.
The 2008 financial crisis saw the rich get richer. In 2012, the top 10% of earners took home 50% of all income. That's the highest percentage in the last 100 years, according to a study by economists Emmanuel Saez and Thomas Piketty.
The chart below illustrates the discrepancies in household incomes by percentile, from 1963–2016.
Here are the six major forms of structural inequality.
Students in low-income neighborhoods receive an inferior education than students in wealthier areas. The research found that this accounts for 37% of the reason for lower math scores. One reason is that low-income schools have more underqualified or inexperienced teachers.
Within schools, tracking guides students toward different careers. Many claim this guides minorities and women toward less lucrative jobs. Others argue that tracking is needed to give gifted children the best preparation to excel.
Structural inequality exists where poor children must attend public schools while rich children can attend private schools. Before the 1950s, school segregation was allowed by federal law. Also during that time, females were guided toward home economics instead of math.
Municipal leaders can create systemic segregation through zoning. They zone for amenities like green space and large lots into wealthy white areas. They then allow apartment complexes and halfway houses in lower-income minority areas. Over time, these decisions create neighborhoods on the "wrong side of the track."
Under the New Deal, the Federal Housing Administration created loan programs to allow more Americans to buy homes. But the government redlined minority areas. It allowed banks to avoid lending to entire neighborhoods. From 1934 to 1962, 98% of home loans went to white families.
Between 2004 and 2009, Wells Fargo Bank steered 30,000 minority borrowers into subprime mortgages. They gave prime loans to white borrowers with similar credit profiles. Wells Fargo was ordered to compensate the minority borrowers for the extra costs incurred by higher interest rates and fees.
Health care inequality is correlated with income inequality. Those with good jobs have the best access to health care. Only America has a health care system that relies on private health insurance. Before the Affordable Care Act, almost 25% of Americans had little or no health insurance. As a result, over 101,000 of them died each year because they couldn't afford the high cost of health care.
Others found their savings were wiped out, they lost their homes, and incurred credit card debt. The economy suffered, since half of all bankruptcies were caused by high medical costs.
Racial structural inequality has its roots in U.S. slavery. That system legally allowed African-Americans to be treated as non-human property. Even though slavery was outlawed in 1865, Jim Crow laws enforced segregation in the south until 1964.
But the racial wealth gap still exists. Data from the 2010 Census confirmed that the racial disparity in neighborhoods persists. A 2010 study found that minority families with incomes above $75,000 are more likely to live in poor communities than white families with incomes below $40,000. Poor neighborhoods are less safe, and the schools are of a lower quality than affluent areas.
As a result, blacks in upper-income families are more likely to lose their status than whites. White children whose parents are in the top fifth of the income distribution have a 41.1% chance of staying there as adults. But for black children, it’s only 18%.
Research shows there are many structural gender biases in the workplace. For example, managers give women fewer challenging roles and less training compared with men. Female managers aren't given the high-level responsibilities needed for promotions. Men are more likely to be given leadership roles in both male-dominated fields and female-dominated fields.
In Citizens’ United v. FEC, the Supreme Court gave corporations the same rights as people. It protected corporate campaign contributions as a form of free speech. This decision allowed wealthy business-owners greater access to political advertising than poorer individuals.
How It Affects You
If you are a minority or woman, you already know how structural inequality affects you. As a minority, you may have been guided to certain neighborhoods by your bank. As a woman, you may have found out your male coworkers had higher salaries doing the same jobs as you even though you had more experience. Or you were denied a promotion or job opportunity because the hiring manager believed women aren't good at that job.
But even if you haven't experienced structural inequality, you have been adversely affected.
If you were a company that was not diverse, you may have lost sales. Research shows that diversity increases profits. Diverse public corporations were 24% more profitable than the S&P 500. They made up just 7% of the Fortune 500 but generated 22% of its total revenue.
Diversity drives profitability in three ways. First, a diverse workforce builds trust in your brand with a diverse target market. Second, valuing diversity cuts costs by reducing turnover. It gives the company the freedom to go after the most talented people, regardless of differences. Third, a diverse product development team can create new products that accurately target niche markets.
Diversity is an often-overlooked reason for Silicon Valley's success. The Valley attracts top engineers from around the world, especially India and China. As a result, immigrants founded more than half of its start-ups between 1995-2005.
The United States' ranking in education is falling. For example, U.S. students' math skills have remained stagnant since at least 2000. They are falling behind many other countries, such as Japan, Poland, and Ireland, which have greatly improved. U.S. test scores are now below the global average. That hurts America's comparative advantage in the global marketplace.
It also lowers economic output. The Alliance for Excellent Education estimates that the U.S. economy loses $329 billion per year. That's the lost annual income of the 1.2 million high-school students who drop out without receiving a degree.
The solution to structural inequality must address the structure that created it. For example, it's not enough to help an individual to move from the wrong side of the tracks to a good neighborhood. The zoning that created both communities must be changed. Both sides of the track must be zoned for large land lots and apartment complexes as well as green spaces and halfway houses.
The Community Reinvestment Act didn't do that. As a result, it was just a half-way measure. It helped deserving people buy homes in red-lined neighborhoods. But it didn't address the zoning that created those neighborhoods.
The government should ensure that all groups have equal access to the tools needed to improve their lives. That includes basics such as water, food, and safety. If society has the resources, it could also include universal health care and equity in education. This investment in human capital would bring everyone up to a basic standard. It's better than increasing welfare benefits, providing a universal basic income, or raising the minimum wage. But in the interim, the minimum wage should be raised.
Studies show that cities that have done so reduced poverty and reliance on welfare.