Reuters online recently began a series it calls The Unequal State of America. http://www.reuters.com/subjects/income-inequality/washington The first article in the series asserts that an increase in government spending has increased income inequality by enriching Washington’s government contractors without reducing poverty levels in DC.
The article fails to zero in on the true causes of inequality and the remedies implied. The causes boil down to failure in two arenas: education, and entrepreneurship.
Naturally a booming industry in any economy will make some people wealthy. In our economic system those people will be business owners, and the skilled, educated workers who command relatively high salaries. Why has a booming contracting industry not resulted in better jobs for the worker bees? Because many of them do not have the skills or training to get the high paying jobs and are stuck on low level clerical positions.
The interim steps that enable one to work their way up the ladder are not there, largely because technology has made many of these jobs unnecessary. Some of the low level work is probably being done overseas though overseas outsourcing is not the main culprit in this case and is barely mentioned in the Reuters piece. No, the problem here is that too many workers do not have the skills that employers need. That is a failure of education. Our schools have failed to train students for the jobs that are in demand.
The article also does not say much about the people at the top. Who are they and how did they get there? These are people who through some combination of their family background, education, career networks, and their own internal drive were in position to see an unmet need, and start (or buy) a company to fill it. Why can’t some of the people mentioned in the article scratching and clawing to make $9 an hour start companies to get some of the contracting pie—or sell to someone getting a piece of the pie. They would build wealth for themselves and jobs for others in their community, but they need to be shown a way in.
Two things need to happen for this economy to work for more people than it currently does: First, on the education front, school systems need to tailor their curriculum to teach the skills that employers want. But that’s not all. What employers want will change over time and we cannot predict how or when they will change. We must therefore teach not only skills, but how to acquire skills—i.e. how to adapt to changing demand in the labor market.
Second, the path to business ownership has to be made a lot clearer to a lot more people than it currently is. Necessary steps include the obvious such as access to capital, and technical assistance to teach management basics like accounting and budgeting. What may not be so obvious to some, is the need to instill the possibility of owning a business at an early age. The good news is that we have a robust infrastructure well positioned to tackle the problem, from the Kaufman Foundation to the National Minority Supplier Development Council to a variety of local and national small business assistance organizations, it’s simply a matter of having them reach a wider audience.
While both the education and the entrepreneurial fronts are fairly obvious, making them true poverty reduction strategies has been difficult. The incentives do not always point us in the right direction. However, if we do not take action, we will continue to see significant number of our fellow citizens left behind, and one way or another, we’ll all feel the effects.