One of the hottest topics around lately concerns the widespread effects of inequality. For example, evidence suggests that when inequality is very large, it can lower economic growth. But there's quite a bit of uncertainty about how this occurs. What are the pathways that connect large disparities in income and wealth to economic growth?
Recent research (summarized here) from UCLA's Fielding School of Public Health provides evidence that income inequality is associated with inequality in health. In particular, lower income is associated with "high levels of stress, exhaustion, cardiovascular disease, lower life expectancy and obesity." These factors alone could lead to lower economic growth than we would have if the work force were healthier.
Also important when thinking about the impacts on long-run growth are the potential intergenerational impacts. As Dr. Linda Rosenstock, the UCLA paper's senior author, noted, these health effects aren't limited to the parents -- children are also affected.
Does this matter for economic growth and intergenerational mobility? Some research says it does. Evidence from the Food Stamp program shows that healthier children contribute more to the economy later in life. In particular, children who had access to food stamps "grew up to be healthier and more productive than those who didn't, which means that they made a bigger economic contribution."
The authors also asked whether Affordable Care Act will reverse these trends, and found that the answer is uncertain. The rising number of people with health insurance due to Obamacare will lead to better health outcomes.
But at the same time, "early evidence suggests that the ACA is causing lower-income workers to have to pay more of the costs of care out of their cash compensation," which could lead to more stress and the negative health outcomes that come with it as lower-income households struggle to make ends meet each month.
Health inequality arising from income and wealth inequality isn't the only way inequality can affect economic growth and intergenerational mobility. For example, educational inequality may also arise from income and wealth inequality, and unequal educational outcomes can lead to even more inequality and falling opportunity to move from lower- to upper-income classes.
But health inequality does appear to have a significant impact on economic growth (not to mention quality of life). The implication is that doing more to help those at lower incomes afford the health care they need -- or at least help lower the share of their income devoted to health care -- may not be as costly as it first appears.
Healthier, more productive, better-educated workers tend to have higher incomes and pay more in taxes, partially offsetting the costs of doing more to help.
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