Building a more inclusive economy

A graduation ceremony at City College of New York, June 3, 2022. (Erik McGregor/LightRocket via Getty Images)

Over the past 50 years, the U.S. market-based economic system has delivered gains in well-being for people across the income distribution. The fact that it has also produced high levels of inequality and extraordinary rewards for those at the very top does not mean the system must be fundamentally altered. Efforts to promote economic security for those at the bottom should focus instead on eliminating barriers to opportunity and helping more people productively engage in, and benefit from, the existing economy. At the same time, a robust safety net is needed for those unable to earn sufficient wages, including the elderly, disabled, and children. 

While such a combination can deliver widespread prosperity, much more can and should be done to advance the well-being of vulnerable Americans. Building a more inclusive capitalist system requires investing in people, so that more of us can meaningfully contribute to and benefit from our dynamic economy. There are four areas in particular that demand heightened and sustained investment: boosting education and skills, building strong families, addressing individual barriers to success, and breaking the grip of childhood poverty.  

An engine of prosperity

The U.S. market-based economy delivers tremendous prosperity. By international measures, median disposable income in the United States is extraordinarily high. And despite claims to the contrary, the United States has made meaningful progress driving down rates of poverty over the past half-century. Since 1980, the share of Americans living in poverty has dropped significantly. Using a measure based on household income, poverty has fallen by over 50%. Using a different measure based on what people actually consume, poverty has fallen even more dramatically, by roughly 80%.  

The reduction in nonelderly poverty over the past four decades reflects both an increase in earned income and an increase in government assistance. The growth in earnings accounted for roughly three-quarters of the decline in overall child poverty and more than 86% of the decline in adult poverty. Single mothers have seen the largest reductions in poverty, in large part due to welfare reform and expansions of the earned income tax credit (EITC). Beyond explicit measures of poverty, other measures of economic well-being, like housing conditions, also show dramatic improvement in the lives of lower-income Americans. 

Taken together, these improvements show that efforts to promote work among working-age adults are generally a productive approach to advancing individual and family level economic well-being. It is important to note, however, that the positive effects on employment caused by welfare reform, along with those of the major expansions of the EITC, all occurred during the 1990s, when the economy was strong. That fact underscores the reality that efforts to engage more adults in the workforce must go hand in hand with efforts to bolster economic growth and the creation of well-paying jobs. 

Promoting work and advancing skills 

Full-time work remains a reliable path to economic security in the United States. In 2024, according to the U.S. Census, the poverty rate among working-age adults who worked full-time year-round was just 4.1% – compared with 7% among all working-age adults, 14.9% among part-time workers, and 30.4% among nonworkers. These numbers should remind us that although obtaining and sustaining full-time work is not necessarily easy, and jobs are not readily available to all, working is highly predictive of one’s likelihood of avoiding poverty. The figures also undermine claims that U.S. jobs are broadly exploitative or that people need access to a universal basic income (UBI) to keep them from economic misery. Rather, they underscore the need to help more people obtain full-time work.  

Education and skill-building are two of the keys to helping more people enter and thrive in the workforce. Despite growing public discontent with higher education in the United States, there is no denying that, in general, a higher level of education – in particular a college degree – continues to yield tremendous benefits in the labor market. In 2024, median weekly earnings for holders of a bachelor’s degree were $1,543, compared with $1,099 for those with an associate degree, $930 for high school graduates, and $738 for those lacking a diploma. Unemployment is also much lower among Americans with higher levels of education. Last year, the unemployment rate for workers with a bachelor’s degree was 2.5%, and it was 2.8% for those with an associate degree. For those with a high school degree, the figure was 4.2%, and it was 6.2% for those with even less education. 

Higher educational attainment not only correlates with higher earnings and lower unemployment; it is causally linked. In a simulation exercise I conducted with the economists Brad Hershbein and Luke Pardue in 2020, we found that even moderate increases in the attainment of college degrees would substantially reduce poverty and near-poverty rates.  

The key is to equip and incentivize postsecondary institutions to deliver high value to students and to help students pursue high value proposition programs and degrees, including those that boast high completion rates and labor market returns. Investing in skills need not be unaffordable or require high levels of student debt.  

U.S. community colleges and regional universities can and should play a large role in national efforts to boost the widespread attainment of skills and education. These institutions are affordable and offer career and technical training tied to local economies, as well as pathways to four-year degrees. Despite their promise, however, many community colleges and regional universities face financial constraints, which impede their ability to offer high quality programming and robust supports to their students. Several years ago, a number of Aspen Economic Strategy Group colleagues and I made the case for increased federal funding to such schools.  

We should also be scaling up other programs with track records of success. Sectoral training programs are one important approach. Unlike traditional job training programs, sectoral programs focus on industries with strong growth potential. They also provide recognized credentials and incorporate job placement and professional skills support. Evaluations of several such programs, including Per Scholas (which focuses on the information technology sector), Year Up (which aims at finance and IT), and Project QUEST (which focuses on health care) have shown that they lead to sustained gains in earnings.  

We should also invest more in comprehensive student service programs that are designed to address multiple barriers to college success – academic, financial, and personal. Such programs deliberately integrate services and proactively assign students advisors who provide individualized help navigating school and life challenges. Such programs have proven effective at increasing educational attainment for low-income students enrolled in college. Rigorous evaluations of initiatives such as the City University of New York’s ASAP program, Catholic Charities Fort Worth’s Stay the Course, and Chicago’s One Million Degrees show that these programs significantly increase participants’ completion of associate degrees. 

One Million Degrees Scholar Awards ceremony at Chase Auditorium in Chicago, Tuesday, June 21, 2016. (One Million Degrees via Flickr)

Beyond cash alone

Investing in people’s ability to productively participate in today’s economy is more effective than simply giving people money – an approach favored by proponents of UBI or guaranteed-income schemes. While cash can alleviate immediate hardship, it rarely addresses the underlying causes of persistent poverty.  

Recent studies of guaranteed-income programs confirm these concerns. A major evaluation of a large-scale, three-year guaranteed-income program in which low-income adults were given an unconditional monthly cash transfer of $1,000 found that the cash payments led to a reduction in hours worked and a decline in total individual income (excluding the transfers) of about $2,000 per year. The researchers also found that recipients increased the amount of time spent on leisure but did not invest significantly in education, training, or family care. Nor did they report better job quality or improved health.  

As an extraordinarily prosperous country, the United States should not be satisfied with either a society where a few talented people earn high incomes and a large share rely on government redistribution, or a society in which a few talented people have high-paid work and a large share are required to toil in misery to make ends meet. The goal should be to maximize the share of Americans able to support themselves productively with dignified work.

Building strong families  

Family structure profoundly affects economic security. Single-adult households typically have much lower incomes and much higher rates of poverty than two-adult households. This is true for all major race and ethnic groups in the United States and it holds within education groups as well. Since 1980, American adults with college degrees have seen their earnings rise and have continued to get married at very high rates, often to others with college degrees. Meanwhile, adults without college degrees have experienced less growth in their earnings and they have become less likely to get married, resulting in lower household income and less economic security. These divergent trends have exacerbated income inequality and undermined the economic security of noncollege educated adults and their children. 

Helping more Americans create stable, healthy marriages and two-parent households would therefore improve economic security and be an important step toward addressing household-level income inequality and closing class gaps. Strong families are critical not only for the current generation, but for breaking the intergenerational persistence of poverty. As I highlighted in my 2023 book, “The Two Parent Privilege” research shows that children in households with married parents are more likely to avoid poverty, complete college, and earn higher incomes as adults, even after controlling for other factors that might explain the result. Boys, in particular, face worse outcomes when raised without fathers. Community-level research shows that increases in the percentage of married-parent households and present fathers are linked to greater upward mobility. 

For all these reasons, a policy agenda aimed at reducing poverty and promoting economic prosperity should prioritize building strong families. To be sure, programs that provide income support to vulnerable families, including Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and the EITC, are critically important to bolstering the material resources of single-mother families. But our country’s approach to improving economic security should not just be to expand and maintain transfer programs that alleviate the immediate material need of single mothers and children. We also need to address the reasons behind the high number of economically vulnerable single-mother households and reduce the prevalence of this vulnerable family type. Doing so will require fostering conditions for stable marriages and strong families.  

A critical part of the way to do that is to strengthen the economic position of men without college degrees. There is ample evidence that the widespread weakening of the economic situation of many such men has contributed to the decline in marriage and the rise in the share of children living with their mother only. Beyond addressing the economic struggles of less educated men, programs are also needed to effectively promote engaged fatherhood and healthy coparenting. Figuring out how to help more men – many of whom did not grow up with positive father role models – be good dads is crucial to breaking the intergenerational cycle of family disadvantage and to promoting upward mobility. 

Graduating high school seniors hear about technical training opportunities through Per Scholas during the OneGoal Texas Student Summit in Houston on March 25, 2025. (Kirk Sides/Houston Chronicle via Getty Images)

Helping people as individuals

Helping people advance in education, work, and family life requires tackling other individual obstacles. These might include housing insecurity, domestic violence, untreated mental illness, addiction, criminal records, and/or a lack of access to child care or transportation. Because circumstances differ, one-size-fits-all and one-dimensional approaches are unlikely to succeed.  

Recognizing the complexity of people’s lives, the most promising poverty-reduction interventions would be comprehensive, coordinated, and individualized. Such holistic programs tend to employ case managers who help clients navigate services across multiple domains and design individualized service plans with concrete goals. These service plans may include helping clients apply for government benefits, connect with community resources, and refine their résumés and job applications, while also providing thorough planning and structured monitoring of their progress. These types of programs have been applied in community colleges and workforce training, as mentioned above, but also (more recently) in the area of general poverty alleviation. One such example is the Padua program run by Catholic Charities Fort Worth. A recent randomized controlled trial evaluation of this program found that clients who were offered comprehensive case management services were subsequently significantly more likely to work full-time. These results show the promise of customizing services to meet people where they are and helping them overcome the most immediate barriers they face. 

Scaling up such programs will be costly and time intensive, and workers in the antipoverty nonprofit sector often suffer high rates of burnout. But the evidence is increasingly clear: Helping people address their particular set of obstacles with individualized, holistic services is a promising way to advance economic self-sufficiency and security.  

Investing in children 

Breaking the grip of poverty on children through targeted public spending on children from economically disadvantaged backgrounds leads to long-term improvements in their economic outcomes and is fundamentally a pro-market approach to alleviating poverty and advancing economic prosperity. Spending money to alleviate the burdens of poverty for children today is an investment in children and our country’s future.  

Research has consistently found that programs that bolster the household income of children from lower-income families and that boost those children’s nutrition, health care, early childhood education, and housing quality lead to improved economic outcomes. We see this in causal studies of the effects of the EITC on children’s outcomes; of the Food Stamp Program, now called SNAP; and of Medicaid. There is also ample evidence of the long-term benefits of Head Start and other early childhood education programs and spending. Evidence similarly shows that helping families with children move to a low-poverty neighborhood positively impacts the life trajectory of those children.  

Targeted spending on children from families with low incomes should not be considered a giveaway, nor should it be set at deliberately meager levels based on the notion that reducing material hardship might discourage parents from working. Evidence-based, targeted spending on America’s youth should be considered a smart investment in producing a healthy, skilled, and productive next generation.  

Unfortunately, and to our country’s detriment, current public spending patterns are not aligned with this priority. The allocation of public spending in the United States today is dramatically tilted toward the elderly. On a per capita basis (based on 2019 figures), the federal government spends roughly $5.20 on each elderly American for every $1 it spends on each young person. If you add in state and local spending, the ratio falls to $1.77 on the elderly per $1 on children – less severe, but still heavily skewed.  

This imbalance ignores the high returns that investments in children can bring. Reallocating resources toward young Americans would reduce intergenerational poverty and strengthen future economic growth.  

The U.S. economy is resilient and dynamic, and it continues to generate advances in income, wealth, and opportunity. But inequality remains high, and millions struggle to make ends meet. The solution is not to abandon capitalism, but to invest in people so that more of us can productively participate and share in capitalism’s rewards. This will require boosting education and skills, strengthening families, addressing personal barriers, and investing in children – all while sustaining macroeconomic growth and job creation. By pairing a dynamic market-based economy with intentional investments that broaden participation, we can reduce persistent poverty and advance widespread economic prosperity. Should we fail to do so, the siren-song of populism will grow – and the dangers that populist solutions pose for the U.S. economy will grow with them.