Family Economics, Public Policy, and Inequality: Diverging Family Fortunes and the Risk to the US Economy

Abstract

This chapter describes income inequality since the mid-1800s, and the public policies that lessened it. These include the redistribution of income through New Deal and War on Poverty policies such as AFDC, unemployment and disability insurance, and food stamps. Private businesses’ attempts to divert public policy measures with welfare capitalism, including private provisioning of health insurance, pensions, and other social benefits, are described. The chapter outlines the economics of the intergenerational transmission of inequality. It then turns to public policies that have worsened family inequality, including discriminatory housing policy, incarceration and criminal justice policies, and the lack of universal health insurance. It describes worsening inequality and the risks to the US economy, and proposes education, income transfer, and tax policies that would be important to reducing family inequality.