The Transformative Potential of the Build Back Better Act in Combating Income Inequality through Equitable Opportunity

Kiet Nguyen

Abstract:

This research paper critically examines the escalating issue of income inequality in the United States and makes a compelling case for the passage of the Build Back Better Act. The study scrutinizes household income disparities among different income groups, assesses the implications for the American dream and meritocracy, and explores the pivotal role of education in perpetuating or alleviating income inequality. Passing the Build Back Better program, spearheaded by President Joe Biden, represents a vital legislative initiative aimed at ameliorating income inequality by addressing educational disparities and providing essential support to vulnerable groups. By employing statistical analyses and insights from relevant literature, this paper advocates for the passage of the Build Back Better Act as a transformative step toward narrowing the income gap, fostering economic mobility, and cultivating a society grounded in equal opportunities.

Introduction:

Income inequality in the United States has worsened over the last decades. From 1989 to 2013, average income of the top 5 percent increased by almost 40% while that of the bottom 95 percent grew less than 10% (Yellen, 2016, p. 47). 

To tackle this problem, President Joe Biden proposed the Build Back Better plan. This legislative agenda includes providing universal pre-kindergarten education for children, affordable child care programs, paid medical leave for parents, and expanded Child Tax Credit. The objectives are to guarantee early education for children from the bottom of the income distribution and allow parents to have more money to take care and invest in children. By passing the Build Back Better, the government seeks to reduce the impacts of income inequality and increase economic mobility of children from disadvantaged economic backgrounds. 

In this essay, I will critically examine household income inequality of different income groups. Subsequently, I will present the educational attainment by income groups, and connect each with respective income outcomes. Finally, I will expose how the unequal opportunity prevents vulnerable groups from becoming better-off in income in the future and explore how the Build Back Better can tackle the problem of income inequality.

Limits of the American “meritocratic” Dream:

Figure 1: Average real household income, 1967-2013.

Source: Reeves, 2022.

Figure 1 describes the average real household income of the three different income groups from 1967 to 2013. During this period, average household income of the top 20 percent grew significantly from $108,669 to $185,206 while that of the middle 40 percent and bottom 40 percent stagnated. This figure points out the divergence in household income of the top and the rest of the population. The stagnation of income of the middle and lower groups raises questions about the reality of the American dream and the prevalence of meritocracy in America.

The American dream is the belief that the next generation will be better off in income than the previous generation and people have equal opportunity to achieve their goals based on their abilities regardless of genders, races, and wealth (Wolak & Peterson, 2020). It resonates with meritocracy’s idea of a society where people can earn success by their abilities and efforts rather than by their wealth and social status. However, these ideas can only register in a society where people come from an equal background that allows them to compete fairly and succeed according to their ability. As in the current situation of American society, these ideas can hardly be applied.

Leveraging income inequality through equal opportunity:

The American dream and meritocracy work only on the condition of equal opportunity. When rich people argue that they succeed because they try hard while others fail due to lack of effort, they are neglecting an important factor that leads to different levels of opportunities for success, “the birth lottery”. According to Braun (2016, p. 149), the birth lottery refers to “whether the gates to different opportunities are open or closed'' decided by “family structure and income”that children are born into.. Jacobs and Hipple (2018) support this idea arguing that in the U.S.,  “roughly half of a parent’s economic status is passed on to children” (p. 27). Richer families tend to invest heavily on their children’s education, thus equipping them with better skills and opportunities to find a high-wage job in the labor market. Children from poorer families do not enjoy the same opportunities to develop their skills and knowledge, which makes them more likely to fail in the job market competition. It is the difference in opportunities which perpetuates the income gap and impedes economic mobility for the economically disadvantaged. 

IV. The role of education in giving equal opportunity:

Education plays a crucial role in helping children to earn more in the future (Corak et al., 2011). However, not every child can get access to education, let alone finish K-12 or graduate education. The difference in educational attainments can unequally determine children’s income in the future, thus perpetuating income inequality. I will first discuss the cause of the discrimination in educational attainments across the income groups, then I will analyze how lacking education attainments create disadvantages in the job market.

Figure 2: Educational attainment by income, 2004-2006.

Source: Reeves, 2022.

Figure 2 depicts the educational attainment by three income segments from 2004 to 2006. While only 17% of people from the bottom 40 percent earn a college degree or higher, 37% of the middle 40 percent and more than half of the top 20 percent have the same educational attainment. This graph shows that higher education is correlated with better income.

According to Young (1958) as cited by Reeves (2022, p. 79), high IQ men and women, who are usually rich, will marry and have high IQ children. In a labor market that highly values scores and academic achievement, they will invest more money in education at an early stage for their children to meet these standards. They will then guide their children to attend a good high school, acquire a good SAT score, and eventually join a top, selective college. By going to a selective college, these children have almost secured a position in the top of the income distribution in the future (Braun, 2016, p. 141). On the contrary, the entrance to college for lower income children is not feasible since their parents do not have as much money to invest in them as parents coming from the top. Hence, the difference in educational attainment between the top and the bottom of the income distribution will maintain. 

In a market that highly measures merit through education, the income inequality gap will grow wider through the education gap. Children who earn a college degree or higher will have more opportunities to succeed in a degree-biased market while those without a bachelor’s degree will stay in the bottom. This problem stretches the income gap between the two groups and again, raises the question of opportunity inequality. Without the opportunity to attend college, the opportunity for people at the bottom to have a higher income will reduce, thus affecting their economic mobility. Education is exactly what Build Back Better aims to help the poor people.

How the Build Back Better Act can help closing the income gap through early education intervention and paid parental medical leave:

The Build Back Better can help narrow the income gap between the rich and the poor by intervening in the early stages of education of children, especially those coming from families at the bottom. The Build Back Better aims to provide universal pre-kindergarten, affordable child care programs,  paid medical leave programs, and expanded Child Tax Credit. Its main goals are to ensure early education, health care, and increase the parents’ money invested in children. The pre-kindergarten and child care program are essential for the brain development of children because their brain grows at the fastest rate under the age of 5 (Fox et al., 2010). By going to pre-kindergarten and being taken care of regularly, children will have early exposure to reading, teamwork, and problem solving activities which will help children perform better academically (Braun, 2016, p. 152). This will prepare children better for lower and higher education.

From the Figure 2’s analysis, lack of education investment results in lack of opportunities for vulnerable children. In a highly competitive and ability-biased market, college degrees can break the barriers for these children to climb the income ladder. However, it is not financially feasible for them to achieve it. Let’s think of the college degree as the ticket to become rich but only the rich are able to buy while the poor can hardly ever afford it.  This opportunity inequality is a barrier for many, and Build Back Better was proposed by the Biden-Harris administration to eliminate it.

Additionally, supporting parents financially through the paid medical leave program has a positive impact on children’s outcomes (Van Niel et al., 2020). Parents with low income jobs do not usually have the privilege of paid medical leave, especially low income mothers who have to go back to work only a few days after giving birth. Funding this program will guarantee a better health condition for parents and give them more time to take care of children. Together with the expanded Child Tax Credit, which gives parents a fully refundable tax credit for families with qualifying children, families will have more money to invest in their children’s education, thus allowing them to compete for a place in a prestigious college. By enacting these programs, the Biden administration is trying to give poor and vulnerable children a more equal start when compared to children at the top through Build Back Better and they believe that this legislative agenda will narrow the income gap, and help the poor to have better equal opportunities.

Conclusion:

Build Back Better not only helps poor children from suffering income inequality but also plays a role in reviving the American dream and the idea of meritocracy. Having identified the three most vulnerable groups that lack investment and opportunities in education, the legislative agenda not only allows these children to have a more equal start to education, which will open up more opportunities to higher income, but also encourages parents to invest more in them by allowing paid medical leave and expanded Child Tax Credit. By giving them equal opportunities, Build Back Better grants them more equal chances to compete for jobs and social status, and the qualified people will receive what they deserve. This perfectly matches with the definition and goal of meritocracy and encourages healthy competition. When even children coming from poorer income ranks can climb up on the income ladder, the belief of people on the American dream will revive. People stemming from rich and poor backgrounds can experience income rise through equal opportunities on ability evaluation. Over time, the income inequality gap between rich and poor will decrease, thus making people optimistic about their future and also their children’s upward economic mobility thanks to equal opportunities. These are the reasons why the Build Back Better is essential to reduce income inequality, allow equal opportunity, and revive meritocracy and the American dream.

Hence, the Build Back Better plays an important role in reducing opportunity inequality and increasing opportunities for people at the bottom. By lifting the poor from the bottom of income distribution, the income gap between the rich and the poor can decrease. From this point, the American dream will be revived as future generations have more opportunities to move forward and meritocracy will benefit everyone due to equality in opportunities.

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