World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
The US “Underclass” in a Booming Economy
Richard B. Freeman
World Economics, June 2000

The main failure in the US economy in the 1980s through the mid 1990s was its inability to distribute the gains of economic growth to the bulk of the population. The traditional “rising tide lifts all boats” link between economic growth and poverty seemed broken, creating a large seemingly permanent underclass. To the surprise of many, however, the late 1990s boom has substantially improved the well-being of the disadvantaged and reduced underclass behaviour. Full employment has been a successful anti-poverty policy. But the US is taking a huge risk in placing all of its social policy eggs in the single employment basket. When there are no nuts squirrelled away for winter, one can only hope that the good times will keep rolling.
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