economic opportunity definition
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Economic Opportunity
IYF breaks down barriers that keep too many of the world’s young people, including the most marginalized, from realizing their full potential. Our initiatives improve skills alignment and equip young people to get a job, effectively contribute to a workplace, thrive in self-employment, or succeed in an entrepreneurial venture.
What is economic opportunity?
The 1.2 billion young people in the world today represent a wellspring of energy, enthusiasm, and potential. Unfortunately, not all young people receive the same opportunities to unlock that potential and earn a decent living. Economic opportunity means young people can access the education, training, guidance, and connections required to successfully achieve economic security and independence.
An investment in youth builds our shared future.
In our rapidly changing world of work, no one knows for certain which jobs will become obsolete or emerge. What is clear, though, is the world’s young people are eager to secure livelihoods that will help them create the futures they want.
When young women and men have economic opportunities, they not only elevate themselves, but also their families, communities, and whole economic systems. Our future is a shared one.
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Improving Economic Opportunity in the United States
Opportunity Barriers and Their Causes
There is no fixed definition of economic opportunity, but most will agree that it corresponds to the realization of personal potential. If a child faces an inadequate school system, or a toxic environment, it will be much harder for her to realize her intellectual, and later, her economic, potential. If a parent lives in a community with an insufficient quantity of jobs, or jobs that pay wages that are too low to support a family, or jobs for which she lacks the necessary skills, both she and her family face opportunity shortfalls. Such barriers can meaningfully be extended beyond schooling and jobs to housing, nutrition, health care, and even infrastructure. For example, consider the fact that due to toxic infrastructure — lead leaching into water pipes — children in parts of our country may suffer brain impairments (though, importantly, such damage need not be permanent). This is a clear example of an opportunity barrier constructed by a public policy failure, one that should be unacceptable in an economy as wealthy and advanced as our own.
Given that framing of the problem, a clear role for policy in the opportunity space is to take down the barriers that get between people and the realization of their economic potential. The extent of the problem can be at least roughly measured through a set of proxies that indicate the existence of opportunity barriers.
Labor market barriers associated with income, race, and education. Federal Reserve chair Janet Yellen recently noted that unemployment rates “averaged 13 percent in low- and moderate-income communities from 2011 through 2015, compared with 7.3 percent in higher-income communities.” Chair Yellen also noted that in majority minority areas, the jobless rate averaged 14.3 percent between 2011 and 2015.
The share of 25-54-year-old (so-called “prime age”) workers in these areas was nearly 9 percentage points lower than in non-majority-minority communities. Racial disparities exist in unemployment rates even controlling for education. Among white people with terminal high school degrees, unemployment was about 5 percent in 2015. For black people, it is twice that. Black people with at least BAs have unemployment rates of 4.1 percent, compared to the 2.4 percent for whites with at least BAs.
Labor market barriers associated with rural areas. My own work has documented periods of slack labor markets and their negative impact on the earnings and income growth of low- and moderate-income working families. The Economic Research Service of the United States Department of Agriculture recently analyzed different trends in employment in rural (or nonmetro) labor market indicators versus those from metro areas.
The figure below shows employment growth in rural and metro areas, with both indexed to 100 in 2008q1. While employment levels fell about the same amount in percentage terms in both areas over the Great Recession of 2007-2009, metro employment has recovered much more quickly, as the gap at the end of the figure reveals. In the middle of 2016, rural employment was still well below its pre-recession peak.
Labor force participation rates have been particularly slow to recover over this expansion, and while part of that trend is driven by the retirement of baby boomers, and thus is not necessarily an indicator of weak labor demand, participation rates have yet to recover for prime-age workers as well. The next figure shows that the size of the labor force has significantly declined in rural areas, a trend all the more striking when compared to the labor force growth in metro areas during this same time period.
Part of the discrepancy is due to differential population growth rates – while population grew over this period in metro areas, it was flat in rural places – but the rural labor force grew even more slowly than the rural population.
Creating Economic Opportunity
The President’s plan builds on the progress we’ve made over the last four years to expand opportunity for every American and every community willing to do the work to lift themselves up. But there is no one-size-fits-all solution to the challenges we face. The following are a few of the tools that the Obama Administration is pursuing to build ladders of opportunity for America’s children and their families.
7 Elements of Economic Opportunity
1 We need to create a sound environment for growth. We need to get our fiscal house in order. We need to adopt and enforce a blueprint that will cut the defcit and build confidence in the private marketplace. Such a plan will undoubtedly require spending reductions, modernizing entitlements, and increasing revenue by reforming the tax code. It will also require investments in people, infrastructure, technology, and energy to help grow the economy.
2 We need a tax policy that encourages growth, which is progressive but not confiscatory. We need to overhaul the tax code to lower rates and eliminate costly loopholes. In closing loopholes, we should follow a simple policy of cutting and investing: We will invest in activities that help the whole economy grow but eliminate subsidies that go to individual industries, particularly subsidies to prop up dying ones.
3 We should eliminate the payroll tax—the tax on work—and replace it with a carbon tax on polluters. The payroll tax is a regressive tax, and it discourages employment. I know the argument that we can’t cut the payroll tax because it pays for Social Security. I believe it’s a phony argument. For decades, we’ve been borrowing from the Social Security Trust Fund to pay for the general operating expenses of government, basically using the trust fund as a piggy bank to fund the deficit. No single action we could take would create more jobs than cutting the tax on work and lowering payroll costs significantly for employers. And replacing the payroll tax with a green tax would be an effective, market-oriented way to improve the environment by putting a real cost on polluting. If a carbon tax or another green tax does not raise enough revenue to keep Social Security in the black, then we could supplement it with general revenues raised from a reformed and more progressive income tax.
4 We need to end the demagoguery on all sides and modernize entitlements. Fixing programs like Social Security and Medicare is necessary to save them. Avoiding needed reforms under the guise of protecting beneficiaries is a fool’s mission. If we do nothing, these programs will run out of money, and no one will receive benefits.
5 To equip all of our citizens with the tools they need to get ahead, we need a fundamental restructuring of our public school system, especially in the big cities. In the Information Age, what you learn is what you earn, and too many kids in inner city schools aren’t learning anything. America can’t afford to waste those human resources. I believe we need to follow the New Orleans model in every major city and make every school a charter school or charter-like school. Rather than have schools run by overstaffed, costly, and sclerotic school administrations, every school should be put on a five-year charter or performance contract.
6 We need to expand AmeriCorps into a universal system of national service. I believe every American should do a year or two of service either in the military services or in AmeriCorps. As citizens, we all have an obligation to give something back to our community or country. And we would benefit by having a common experience with our fellow Americans from all walks of life.
7 We need to make a national commitment, once and for all, that no one in America who works full time year-round to support a family should be poor. The earned income tax credit—or some other system of tax subsidies to people in full-time employment—needs to be expanded to meet that goal. If people work full time, they should not be poor.
