poverty is, to an important degree, self-perpetuating: the children of the poor start at
such a disadvantage relative to other Americans that it’s very hard for them to
achieve a better life.Economic Inequality
The United States is a rich country. In 2008, the average U.S. household had an income
of more than $68,000, far exceeding the poverty threshold. How is it possible, then,
that so many Americans still live in poverty? The answer is that income is unequally
distributed, with many households earning much less than the average and others
earning much more.
Table 78.2 shows the distribution of pre-tax income among U.S. families in 2008—
income before federal income taxes are paid—as estimated by the Census Bureau.
Households are grouped into quintiles,each containing 20% or one-fifth of the popula-764 section 14 Market Failure and the Role of Government
The Impeccable Economic Logic of Early Childhood Intervention Programs
One of the most vexing problems facing any so-
ciety is how to break what researchers call the
“cycle of poverty”: children who grow up with
disadvantaged socioeconomic backgrounds are
far more likely to remain trapped in poverty as
adults, even after we account for differences in
ability. They are more likely to be unemployed or
underemployed, to engage in crime, and to suf-
fer chronic health problems.
Early childhood intervention has offered
some hope of breaking the cycle. A 2006
study by the RAND Corporation found that
high-quality early-childhood programs that
focus on education and health care lead tosignificant social, intellectual, and financial
advantages for kids who would otherwise be
at risk of dropping out of high school and of
engaging in criminal behavior. Children in pro-
grams like Head Start were less likely to en-
gage in such destructive behaviors and more
likely to end up with a job and to earn a high
salary later in life. Another study by re-
searchers at the University of Pittsburgh in
2003 looked at early-childhood intervention
programs from a dollars-and-cents perspec-
tive, finding from $4 to $7 in benefits for
every $1 spent on early-childhood interven-
tion programs. The study also pointed to onefyi
program whose participants, by age 20, were
26% more likely to have finished high school,
35% less likely to have been charged in juve-
nile court, and 40% less likely to have re-
peated a grade compared to individuals of
similar socio economic background who did
not attend pre school. The observed external
benefits to society of these programs are so
large that the Brookings Institution predicts
that providing high-quality pre school educa-
tion to every American child would result in an
increase in GDP, the total value of a country’s
domestic output, by almost 2%, representing
over 3 million more jobs.U.S. Income Distribution in 2008Income group Income range Average income Percent of total income
Bottom quintile Less than $20,712 $11,656 3.4%
Second quintile $20,712 to $39,000 29,517 8.6
Third quintile $39,000 to $62,725 50,132 14.7
Fourth quintile $62,725 to $100,240 79,760 23.3
Top quintile More than $100,240 171,057 50.0
Top 5% More than $180,000 294,709 21.5
Mean Income = $68,424 Median Income = $50,303
Source:U.S. Census Bureau.table78.2