- In key areas of social policy, the United States has made little progress over many years:
(i) The earned income of the bottom 40 percent of the population is almost unchanged since the late 1970s, after adjusting for inflation.
(ii) The average reading and math achievement of 17-year-olds has not increased since 1973. More than one-quarter of 12th graders now score below basic competency in reading and more than one-third score below basic competency in math.
- Government has launched many well-intentioned initiatives to address these problems. The fundamental flaw in these efforts is that policymakers are guessing at the solutions— i.e., launching major new initiatives based on what sounds like a good idea.
- Guessing doesn’t work for a straightforward reason: Most guesses—that is, most new programs and policies—are unfortunately found not to produce the hoped-for effects when rigorously evaluated.
- But rigorous evaluations have also identified a few programs that are effective, producing sizable gains in education, earnings, and other important life outcomes—thus illustrating that success is possible.
- To address major national problems such as educational failure and stagnant income will require fundamental reinvention of government so that evidence, rather than guesswork, becomes the central defining principle in what gets funded.
The United States has been known as the land of opportunity, a country where the rising tide of economic progress lifts all boats—not just those of people born into good circumstances, but low and moderate-income Americans, the middle class, everyone. This portrayal of our country is, of course, aspirational, but for many years it was true in an important respect. From the end of World War II to the late 1970s, all segments of the income distribution from poor to wealthy saw rapidly rising living standards and, for low and moderate income Americans specifically, their average incomes more than doubled over those three decades after adjusting for inflation. It is an amazing story that many Americans (not all) can see in our own family histories, having parents or grandparents who were born into poverty but who rose into the middle class in the mid-20th century.
But something changed, starting in the late 1970s. Low and moderate-income Americans, who had seen their incomes more than double in the 30 years after World War II, now saw the following, much grimmer trend (depicted by the blue line):
Average income of bottom 40% versus top 60% of U.S. families, 1977-2017
Source: U.S. Census Bureau
Income Amounts are inflation-adjusted (2017 dollars).
As the graph shows, since the late 1970s, the earned income of the bottom 40 percent of American families is almost flat. This is in contrast to wealthier Americans—the top 60 percent (orange line)—who have seen continued growth in their incomes. To put it bluntly, for nearly half the American population, this is not a story of progress; this is four decades of stagnation.
Stagnation extends beyond economic well-being to the important area of education. U.S. Department of Education long-term trend data show that the reading and math achievement of 17-year-olds—who are the end product of our K-12 system—has not improved since the early 1970s:
NAEP Long-term Trend: Reading and Math Scores of 17-year-olds 1973-2012
Source: U.S. Department of Education, Institute of Education Sciences, National Center for Education Statistics, National Assessment of Educational Progress (NAEP), various years, 1973–2012 Long-Term Trend Reading and Math Assessments.
We have been stuck, and not in a good place: The data show that, currently, more than one-quarter of U.S. 12th graders score below basic competency levels in reading and more than one-third score below basic competency in math.
This is not what America is about. How is it acceptable that nearly half of American families have not seen a meaningful pay raise, on average, in 40 years? How is it acceptable that year after year, our high schools graduate millions of young people who cannot read competently and cannot perform basic math, and therefore will face huge obstacles when they seek to earn a decent living and make it into the middle class? These things are not acceptable. Nor, we believe, are they sustainable. You cannot expect to have a healthy society when four decades go by with no meaningful gains for the bottom 40 percent while the rest of the population gets even wealthier. It is a recipe for resentment and division and anger, and it may go a long way toward explaining the current state of American society and politics.
Why haven’t we been able to solve these problems? It hasn’t been for lack of trying. In education, for instance, there have been many well-intentioned efforts by Democrats and Republicans to improve U.S. schools. These efforts include the creation of the U.S. Department of Education in the 1970s, the effective schools movement of the 1970s and 80s, the school choice movement—including vouchers, charter schools, and magnet schools—that emerged in the 1980s, the enactment of No Child Left Behind and the school accountability movement in the 2000s, and many other initiatives. But the needle is unmoved.
The central problem, we believe, is that our country’s approach to solving problems in education, workforce policy, and almost all other policy areas is fundamentally flawed. Specifically, policymakers are guessing at solutions. To coin a phrase, the current system is “government by guesswork.”
And guessing does not lead to progress for a straightforward reason: Most guesses—that is, most new programs and policies, even those that sound like really good ideas—unfortunately, don’t work. We know this because when rigorous studies—particularly “gold standard” randomized controlled trials (RCTs)—are carried out to evaluate new programs and policies, the studies sometimes find that the program produces the hoped-for improvements in people’s lives, compared to usual practice. But more often (typically 80 percent of the time or more) the studies find that the people who participate in the new program do little or no better over time than those who don’t. In previous Straight Talk reports , we have described this pattern as an 800-pound gorilla that stymies efforts to make progress across many fields (e.g., social policy, medicine, business):
The bottom line is that it is harder to make progress than commonly appreciated…. The pattern of disappointing effects for most rigorously-evaluated programs—along with findings of important positive effects for a few—is compelling and transcends multiple fields. It needs to be taken seriously.
In short, a key lesson of past evaluations is the need for humility in our beliefs about which strategies are effective. And in the case of government, the findings make clear that the standard operating procedure of Democrats and Republicans of launching major new initiatives based on what sounds like a good idea—i.e., guesswork—is unlikely to solve major national problems like stagnant wages, educational failure, and poverty.
There is a better way. The path to progress, we submit, is to reform government programs so that spending decisions are made not on the basis of guesses, but on the basis of actual evidence about what is effective and what is not. This evidence-based approach to government starts from the insight that some programs, when rigorously evaluated, are found to produce important improvements in people’s lives. Examples in workforce policy and K-12 education, shown effective in large, high-quality RCTs, include the following:
- Career Academies in low-income high schools, rigorously shown to increase long-term annual earnings by $2,500 per person, eight years after high school completion.
- Per Scholas job training for low-income, low-skilled workers, rigorously shown to increase workers’ earnings by about 30 percent, or $4,000-$5,000 per year, two to three years after program entry.
- KIPP public charter schools for low-income, minority students, rigorously shown to increase reading and math achievement in elementary and middle schools by five to 10 percentile points, two to three years after enrollment.
- New York City’s Small Schools of Choice in mostly high-poverty communities, rigorously shown to increase four-year graduation rates by six to 10 percentage points, and graduation with academic proficiency by four to six percentage points, at the four-year study follow-up.
These programs actually work; they produce important positive effects and if implemented effectively on a national scale could make a major difference starting now in the lives of millions of low and moderate-income Americans.
How then do we as a nation build the number of these programs with demonstrated effectiveness (as there are now relatively few)? And how do we get government to focus funding on them as opposed to others that are not effective? We have previously proposed specific policy reforms to achieve these goals, several of which have been enacted into law and policy over the past 10 years. But to meet the great challenge of our time—ensuring that all citizens regardless of background can share in the American dream of rising economic and social well-being—will require a much larger, more systematic reinvention of government to make evidence, rather than guesswork, the central defining principle in what gets funded. Such an effort is the topic of our next Straight Talk report.
We believe the appropriate way to think about income trends for low and moderate income families is to focus on income they earn from the economy, without having to rely on government safety-net programs such as food stamps or housing or earnings subsidies. Thus, our graph shows Census Bureau data on “money income,” which primarily consists of families’ earned income. In our view, families’ use of safety-net programs is a symptom of the problem that they are not earning enough from the economy to support themselves, rather than a sign of progress. While it may be desirable to prevent severe economic hardship, such reliance on government assistance is not what most people (including President Lyndon Johnson in launching the War on Poverty) would view as a long-term answer to the problem of low and stagnant incomes.
But we would also point out that careful analyses that do count such government assistance as income, and make other appropriate adjustments (e.g., for federal, state, and local taxes, family size, work expenses, out-of-pocket medical expenses, and employee fringe benefits, depending on the analysis), tell a similar story—namely, weak overall progress for low and moderate income Americans since the late 1970s. See, for example, Picketty, Saez, and Zucman 2018 and the Census Bureau’s National Academy of Sciences-based, anchored poverty measures (see Center for Budget and Policy Priorities 2018,p. 19).
 We do not mean to imply, here or elsewhere in the report, that the same families comprise the bottom 40 percent over time. There is mobility of individuals and families over time, including movement up as well as down the income distribution. Our point is merely that the bottom 40 percent of the population (whose composition is somewhat fluid) has seen little improvement in average income over 40 years.