MONEY

Why Rich People Think the Poor Aren’t That Poor

two couples on a yacht
Mike Watson Images—Getty Images

And why they don't see much need for wealth distribution.

When Jacob Riis published his study of New York tenement life in 1890, he called it How the Other Half Lives, as if people really needed to know.

More than a century later, many of us are still suffering from the same type of myopia, at least according to a recent study by psychologists in the U.K and New Zealand and reported in The Washington Post Tuesday.

The study of 600 Americans, conducted over the Internet, found wealthy people tended to report particularly high levels of wealth in their social circles. While that may not be surprising, that cossetting seemed to lead in turn to wealthier Americans over-estimating average wealth among the general U.S. population — as well as assuming “greater perceived fairness” in the economy.

In other words, the rich still think the most Americans are doing okay– or should be — because they and their friends are.

The results certainly have political implications. The authors suggest the rich might be more open to wealth redistribution if they had a truer sense of America’s income inequality and how the economic landscape appears to the poor.

Students of behavioral finance might also see the new research as the flip side of a behavioral tick that has long bedeviled anyone struggling to keep a budget. It’s long been established that having wealthy friends and neighbors tends to shift your lifestyle expectations: We all want to keep up the the Joneses. But that’s not necessarily healthy for your budget or your sense of well-being.

Read next: Rich People’s Biggest Money Regrets

TIME On Our Radar

See the World Through the Eyes of the One Percent

A new exhibition looks at global inequality through the world of the one percent

Edward Steichen’s monumental 1955 exhibition at New York’s Museum of Modern Art, The Family of Man, was in essence about inclusivity. The 503 photographs by 273 prominent and unknown artists included in the show were curated from two million images, depicting life at its various moments to create a bigger picture of the human experience.

“That exhibit was a seminal work in the history of the medium,” says Myles Little, a TIME associate photo editor and the curator of a new traveling exhibition, One Percent: Privilege in a Time of Global Inequality. “It would be impossible for me to do something equal to it.”

Still, Steichen’s show became a stepping-stone for Little’s exhibit, which takes a stab at exposing the ecosystem of the rich through a more exclusive photographic journey. “I studied Family of Man, and wrote down what I saw as its themes: family, religion, work, and so on. Then I found images that speak to those themes, but in the world of privilege,” says Little.

Born in Ireland and raised in Charleston, S.C., Little’s experience working and living in New York City has inevitably exposed him to the jarring gap between the rich and the poor. “I catch little glimpses of both appalling poverty and breathtaking wealth,” he says. “Meanwhile, I see a lot of regular people in America celebrating the wealthy and referring to celebrities by their first names—as if they are friends. We over-identify with this group of people we don’t know and with whom we do not share common interests.”

After an inspiring conversation with Mexican-American curator Daniel Brena, Little spent two years curating the show, sifting through images online such as the archives of Magnum Photos, VII Photo and NOOR. To achieve a “visual cohesiveness” and “mirror the luxurious spirit of the show”, he eventually narrowed his 2,000-image selection down to 30 well-crafted medium format color photographs.

Some of them so blatantly point out the stark contrast of inequality, such as Juliana Sohn’s photograph of a gray-haired, legless man kneeling on the floor, shining a star on the Hollywood Walk of Fame. Some are more ambiguous, such as Jesse Chehak’s image of the High Line Park, built partially thanks to the contributions of wealthy New York patrons, which inadvertently spurred real estate development and brought tremendous value spike to the neighborhood that forced many to leave.

The exhibition goes beyond the boundaries of America as the Promised Land, examining how inequality and globalization have helped cripple developing countries. In Tanzania, as gold emerged as the country’s most valuable export, David Chancellor shows the image of an armed soldier guarding the North Mara mine from villagers living in the country’s most impoverished region. “The idea behind the project is to shine a light on an incredibly powerful, but often invisible or misunderstood, segment of the population,” says Little .

Introduced by Noble Prize-winning economist, inequality expert, Joseph Stiglitz, and National Book Critics Circle Award-winning author, Geoff Dyer, the exhibition will be traveling to China, Nigeria, the United Arab Emirates, Wales, and Bosnia and Herzegovina, beginning in September. Little is also raising funds on Kickstarter to publish the photographs with German publisher Hatje Cantz.

Myles Little is an associate photo editor at TIME Magazine. One Percent: Privilege in a Time of Global Inequality is a traveling exhibition and book project.

Ye Ming is a contributing writer to TIME LightBox. Follow her on Twitter @yemingphoto and Instagram.

MONEY Economy

Would Hillary Clinton’s Profit-Sharing Plan Put More Money in Your Pocket?

Democratic presidential candidate Hillary Clinton speaks during a campaign town hall meeting in Dover, New Hampshire July 16, 2015.
Brian Snyder—Reuters Democratic presidential candidate Hillary Clinton speaks during a campaign town hall meeting in Dover, New Hampshire July 16, 2015.

It might. But it wouldn't address the bigger forces holding down wages.

Democratic presidential candidate Hillary Clinton on Thursday outlined a plan to encourage companies to share more of their earnings with workers. It’s a tax credit companies could get for two years if they set up a profit-sharing plan tilted toward the lower- and middle-income employees on the payroll. (The tax credit would phase out for higher-paid workers.) In an example used by the campaign, if an employee was paid $5,000 in a profit-sharing bonus, the company would get a tax break of up to $750.

At least at first, the plan has generally been interpreted as part of Clinton’s tilt toward the progressive side of the economic debate. “Veering left…” is how the insider political paper The Hill put it.

Clinton herself has fit profit sharing into her broader message about fixing economic inequality. Here’s a graphic from the campaign website that illustrates the story Clinton is telling about what’s driving inequality. Companies are doing great and getting more productive, but they haven’t haven’t been sharing those gains with workers:

SOURCE: hillaryclinton.com, based on data from the Economic Policy Institute

But even though profit sharing has the word “sharing” in it, it’s actually a pretty business-friendly approach. (The idea that the credit phases out for higher earners is the main way you can tell the proposal comes from a Democrat.) Lots of companies like the idea of paying their people more only when the business is doing well; the flip side is they can pay less in fallow years. In the jargon of human resources, other names for profit sharing are the much less warm and fuzzy sounding “pay-at-risk” and “variable pay.” Walmart, a company that’s famously tough about holding down its labor costs, used to be well-known for profit sharing.

At qz.com, writer Alison Shrager worries that more profit-sharing would just shift more pay out of steady wages and into up-and-down bonuses, adding another source of instability to the finacial lives of low-and middle-income workers. The Clinton campaign told Vox.com that companies would only be able to get the credit for profit sharing above regular wages—presumably meaning they couldn’t cut salaries and then get a credit for adding a profit-sharing plan. But over time, as companies gave out regular raises and made new hires, or as new firms started up, the mix of pay might still shift toward variable bonuses. Profit sharing eligible for the credit would be capped at 10% of salary.

If Clinton’s proposal became law, it would really be just one more of several tax policies that shape how companies structure their pay. If you get health insurance at work or a 401(k) match, that’s because the tax code makes it appealing for companies to pay you that way. You pay less tax on $1 of health insurance or $1 of a 401(k) match than you do on $1 of straight cash pay, so companies like to offer those benefits; similarly, it would be slightly cheaper for a company to give you $1 of profit sharing than to give you $1 of a raise. As an economist will tell you, the health insurance you get at work isn’t a free gift on top of your pay. It’s part of your overall compensation. If companies didn’t offer health coverage, they’d have to pay us more. (Of course, then we’d still have use that money to buy insurance.)

So perhaps Clinton’s plan would largely move money from one line in your pay stub to another. But it might be better than a zero-sum game. For one thing, it’s effectively a tax cut on pay, which the Clinton campaign says is worth $10 billion to $20 billion over ten years—not huge as these things go. Companies would get the credit directly, but to the extent that it encouraged companies to make more money available for profit-based bonuses, the tax break could flow through to workers. (Though the campaign says one purpose of the temporary credit is simply to offset the administrative costs of starting up a profit-sharing program.)

And there’s at least some evidence that companies with profit sharing actually do pay more overall. An influential think-tank policy paper on “inclusive prosperity,” which the Clinton campaign is reported to be be drawing from, points to a study of the effects of profit sharing by the economists Joseph Blasi, Richard Freeman, and Douglas Kruse. Based on surveys of workers, it found that pay was generally as high or higher among companies that gave workers some kind of stake in company performance. That includes not just profit-sharing bonuses but employee stock options and other programs.

Why? Partly it may be because you have to give people a shot at higher total pay to compensate for the risk that they might not do as well in some years. Or, the economists write, it could be that people are getting paid more because profit sharing spurs them to be more productive. That looks like a win-win, but its not exactly money for nothing. Maybe profit sharing works because it improve morale, reduces employee turnover and gives people an incentive to worker smarter and more creatively. Or perhaps anxiety over losing a bonus scares people into working harder and faster.

But the wage stagnation of the past several decades isn’t mainly a productivity problem—just look at the Clinton campaign’s own graphic above. People with jobs these days are already working smart and working hard.

Profit-sharing tax credits might nudge some companies to share more of the gains from that productivity with people outside the C-suites. But the story of the last several years is that it’s taken employment a long time to climb back from the hit it took in 2008. One thing that really helps people get more pay—whether it’s in cash, bonuses, stock option, pensions, or insurance—is full employment and a hot labor market, where companies have to do everything they can to get the workers they need. That’s something Washington has had a hard time delivering.

MONEY

America’s Total Net Worth Just Hit a Record High

american-net-worth-high-united-states
PM Images—Getty Images

But that doesn't mean the average American is growing wealthier.

U.S. households saw their total net worth rise to a record level of $84.9 trillion in the first quarter of this year, the Federal Reserve reported Thursday. That’s compared to $80.3 trillion a year ago.

But this raw figure—which includes all assets including homes and stocks, minus debts—doesn’t tell you much about how the average American is doing.

It doesn’t account for inflation, or for the way wealth is distributed among different households.

Other data have been showing that most people in the U.S. have actually seen both their income and net worth decline, in inflation adjusted terms, in recent years. Gains have been concentrated among the wealthiest Americans.

In fact, the wealth gap between the rich and the merely middle-class is at a 30-year high, according to a recent Pew study. And once you account for the fact that most people have their net worth tied up in their homes, it becomes clearer why many Americans don’t have enough money for retirement.

Still, a more meaningful measure in the number released by the Fed today shows that there is promise for the economy. The ratio of household net worth to personal disposable income has risen to 639% from 629% a year ago, signaling that—at least in the aggregate—people might soon be ready to start spending more.

TIME Economy

Most Americans Say Wealth Inequality Is a Huge Issue

McDonalds Holds National Hiring Day To Add 50,000 Employees
Justin Sullivan—Getty Images A McDonald's employee prepares an order during a one-day hiring event at a McDonald's restaurant on April 19, 2011 in San Francisco, California.

Expect it to be a 2016 campaign theme

An improving economy has done little to distract Americans from an issue sure to be a the forefront of the 2016 presidential contest: inequality.

A new poll by The New York Times and CBS News found that a majority of respondents—66%—said wealth should be more evenly distributed. 67% percent of respondents said the gap between the rich and the poor was getting larger, and 65% said the divide needs to be addressed now.

A smaller chunk of respondents—57%—said the government should do more to close the gap between rich and poor, though they split sharply along partisan lines with one-third of Republicans supporting a more active government role, versus eight in 10 Democrats, according to the Times. When asked if they wanted to raise taxes on Americans who earn more than $1 million, 68% said they were in favor of such hikes.

Democrats are trying to capitalize on Americans’ belief that the economic recovery has been uneven, benefiting high-earners the most. But inequality is far from a partisan issue. The Times reports inequality is a concern for almost half of Republicans and two-thirds of independents, which suggests it’s an issue that will persist through and beyond this election cycle. Considering these findings, it’s no surprise that both Democratic and Republican politicians are exercising their populist muscles.

TIME Economy

Here’s the Secret Truth About Economic Inequality in America

Mmmmmoney: Get a grip; it's just paper
KAREN BLEIER; AFP/Getty Images

Once you look at the issue this way, it's hard to think of it any other way

We all know that inequality has grown in America over the last several years. But the conventional wisdom among conservatives and even many liberals has always been that inequality was the price of growth–in order to get more of it, we needed to tolerate a bigger wealth gap. Today, Nobel laureate Joseph Stiglitz, the Columbia professor and former economic advisor to Bill Clinton, blew a hole in that truism with a new report for the Roosevelt Institute entitled “Rewriting the Rules,” which is basically a roadmap for what many progressives would like to see happen policy wise over the next four years.

There are a number of provocative insights but the key takeaway–inequality isn’t inevitable, and it’s not just a social issue, but also an economic one, because it’s largely responsible for the fact that every economic “recovery” since the 1990s has been slower and longer than the one before. Inequality isn’t the trade-off for economic growth; rather, it’s both the cause and the symptom of slower growth. It’s a fascinating document, particularly when compared to the less radical Center for American Progress policy report on how to strengthen the middle class, authored by another former Clinton advisor, Larry Summers, which was widely considered to set out what may be Hillary Clinton’s economic policy agenda.

While the two have some overlap, the Stiglitz report is bolder and more in-depth. It’s also a much more damning assessment of some of the policy changes made not only during the Bush years, but also during Bill Clinton’s tenure, in particular the continued deregulation of financial markets, changes in corporate pay structures, and tax shifts of the early 1990s. During a presentation and panel discussion on the topic of inequality and how it relates to growth (I moderated the panel, which included other experts like Nobel laureate Bob Solow, labor economist Heather Bouchley, MIT professor Simon Johnson and Cornell’s Lynn Stout, as well as pollster Stan Greenberg), Stiglitz made the point that both Republican and Democratic administrations have been at fault in crafting not only policies that forward inequality, but also a narrative that tells us that we can’t do anything about it. “Inequality isn’t inevitable,” said Stiglitz. “It’s about the choices we make with the rules we create to structure our economy.”

One of the big economic questions in the 2016 presidential campaign will be, “why does inequality matter?” The answer–because it slows growth and thus affects everyone’s livelihood–is simple. But the reasons behind it are complex and systemic. Senator Elizabeth Warren and New York Mayor Bill de Blasio were on hand to help connect the dots on that front, with de Blasio calling for more social action in order to “move to a society that rewards work over wealth,” and Warren re-iterating a hot button point that she made last week about inequality and the trade agenda; she believes that Fast Track trade authority for President Obama would allow big bank lobbyists on both sides of the Atlantic to further water down financial reform that could combat inequality, which led the President to call her ill-informed (he didn’t elaborate much on why). Warren noted that the trade deal was being crafted in conjunction with 500 non-governmental actors, 85 % of whom are either industry lobbyists or from the big business sector.

Warren’s mantra about how America’s economic game “is rigged,” ties directly into two of the key takeaways from the Stiglitz report; first, that inequality is all about the political economy and Washington policy decisions that favor the rich, and secondly, that it’s not one single decision–Dodd Frank, capital gains tax, healthcare, or labor standards–but all of them taken together that are at the root of the problem. “Our economy is a system,” says Stiglitz, and combatting inequality is going to require a systemic approach across multiple areas–financial reform, corporate governance, CEO pay, tax policy, anti-trust law, monetary policy, education, healthcare, and labor law. It might also involve revamping institutions like the Fed; Stiglitz and Solow both agreed that the Fed needs to start tabulating unemployment in a new way, perhaps focusing not on a particular number target, but on when wages actually start to go up, which Stiglitz said is the best sign of when the country’s employment picture is actually improving.

Thinking in these more holistic terms would be a big shift for lawmakers used to tackling each of these issues alone in their respective silos. But as Stiglitz and the other economists on the panel pointed out, they are often interrelated–consider the way in which pension funds work with shareholder “activists” to goad corporations into over-borrowing to make large payouts to investors even as lowered wages and profits kept in offshore tax havens mean that long-term investments aren’t made into the real economy, slowing growth. Or how continuing to tie worker’s healthcare benefits to companies makes them virtual slaves, decreasing their ability to negotiate higher wages, not to mention start their own businesses.

It’s a huge topic, and the Roosevelt discussion was part of the continuing campaign on the far left to try to make sure that presumptive nominee Hilary Clinton doesn’t continue business as usual if and when she’s in the White House. Progressives are looking for her to do more than talk about minimum wage and redistribution; they want her to make fairly radical shifts in the money culture and political economy of our country. That would mean a decided split from the policies of the past, including many concocted by her husband’s own advisors, ghosts that Hilary Clinton has yet to publically reckon with.

TIME society

Why Education Alone Won’t End Income Inequality

coin-stacks-table
Getty Images

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

We must address the dynamics that encourage companies to extract from, rather than invest in, their employees

We live in a paradoxical time of historically high income and epic wealth inequality. Academics, politicians, business leaders and religious leaders are all concerned about it. Indeed, the extreme level of inequality we now face is often cast as a moral challenge and a threat to the ideals and values of our society. The ideal of the American Dream — the idea that through hard work and individual effort Americans can create a better life for themselves and their families — is confronted by a reality of stagnant incomes, growing numbers of working poor, evidence that economic mobility in the U.S. is elusive, and rising concern that things will be worse for future generations.

This challenge is broadly recognized, but agreement on solutions is hard to find — with one big exception: education. That the route to a good job must pass through higher education is almost universally embraced. Political leaders from both parties as well as a host of academics, foundations and others promote postsecondary education as a silver bullet for ending poverty and inequality. How to achieve or pay for ever greater numbers of post-secondary degrees is a matter of sharp debate, but the idea that improved education is somehow the solution to poverty, economic disenfranchisement and inequality seems to have broad purchase. Alas, it almost surely — on its own — will not work.

First, let’s try this thought experiment. Imagine that every poor person suddenly has successfully completed a rigorous course of study and has earned a bachelor’s degree. Do we then no longer need child care workers, home health aides, landscape workers, security guards, food servers, office cleaners and retail sales associates? Or will companies employing workers in these occupations suddenly decide that, since these workers now have bachelor’s degrees, they should be paid more than $11 or $12 per hour? Will these corporations now decide that these workers should have regular or at least predictable schedules and a predictable income? Or that they are due at least a modest amount of paid sick leave and the opportunity to save for retirement?

It seems unlikely that either the demand for these workers or their wages and working conditions will change as their education levels increase. Indeed that has been the experience to date. The truth is that we have more bachelors’ degreed workers than ever. Some economists find there is an excess of college graduates who are competing for jobs that don’t require a degree. The New York Federal Reserve found that 46 percent of recent college graduates, and 35 percent of college graduates overall, are employed in jobs that do not need a college degree.

In addition, while the rate of growth of jobs that require post-secondary skills is high, it is still the case that most jobs do not requires post-secondary credentials at all—of any type. The U.S. Bureau of Labor Statistics reported that in 2012 only about one-third of jobs required any post-secondary credential. And while the rate of growth for jobs requiring post-secondary credentials is faster, America will still create more jobs in the next decade that don’t require anything beyond a high school diploma. No one can deny that it’s heart-warming to see an individual come from difficult circumstances, get an education and achieve economic security. But we should not imagine that inspiring story for an individual provides a solution for the masses.

Next, let’s look at what keeps people from succeeding in education right now. One of the leading indicators that children and young adults will do poorly in school is their economic status: poverty correlates with poor education attainment. In particular, for young adults in post-secondary school, Public Agenda found that the main reason these students leave college without completing is the need to work and make money. In fact, the students who leave college report that, even if they had free tuition, they would still need to work to support themselves and would be unlikely to go back to school. This leaves us with a bit of a catch-22: to escape poverty one should get an education; but poverty is likely to prevent a person from succeeding in education.

Education is a wonderful thing, but it is not costless and it is not a silver bullet to address poverty. One factor glaringly absent from all the celebratory discussions of education is the changing condition of work. The reason it remains a good idea for most individuals to at least try to get a college degree is not because today’s jobs require college level skills. Rather, it’s because employment options available to people without a college degree are terrifyingly awful. And in a country that purports to value work, we ought to consider why we are so unwilling to pay for it. We should ask ourselves why the people who care for our children and elderly parents or grandparents, the people who prepare and serve us food, the people who clean our homes and secure our office buildings — why do all of these people deserve poverty-level wages?

It is undeniable that investing in education is a good thing. But if we want the masses to get “good jobs” so they can support themselves through their work — and not just the lucky few who can get ahead of their peers through education — then we need to look much more carefully at the nature of work and the kind of opportunity a job offers. Businesses have choices about the ways they structure work just as surely as individuals have choices about pursuing education. Our society is unlikely to address the inequality we face by encouraging an arms race among people desperate to gain access to shrinking opportunities for decent work. We must address the dynamics that encourage companies to extract from, rather than invest in, their employees. We need to raise our expectations of the rewards of work and improve the quality of opportunities available to people willing to work hard. If we want people to climb the economic ladder through education, then we need to ensure that ladder rests on a stable foundation of work that pays enough to live on.

Maureen Conway is the Executive Director of the Aspen Institute Economic Opportunities Program.

This article originally appeared in the Aspen Journal of Ideas.

More from the Aspen Institute:

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Innovation

Why Food From Forests Could Help Feed the World

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

These are today's best ideas

1. Education alone won’t end income inequality.

By Maureen Conway in the Aspen Journal of Ideas

2. Here’s why ISIS is so successful at recruiting young people.

By Jesse Singal in the Science of Us

3. Are there moral limits on free speech? (What if it gets someone killed?)

By Noah Feldman in Bloomberg View

4. Could food from forests help feed the world?

By Bhaskar Vira in the Conversation

5. Use data, not nepotism, to deliver aid to Nepal.

By Ravi Kumar in Time

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Economy

Low Wage Workers Are Storming the Barricades

Activists Hold Protest In Favor Of Raising Minimum Wage
Alex Wong—Getty Images Activists hold protest In favor of raising minimum wage on April 29, 2014 in Washington, DC.

A few weeks back, when Walmart announced plans to raise its starting pay to $9 per hour, I wrote a column saying this was just the beginning of what would be a growing movement around raising wages in America. Today marks a new high point in this struggle, with tens of thousands of workers set to join walkouts and protests in dozens of cities including New York, Chicago, LA, Oakland, Raleigh, Atlanta, Tampa and Boston, as part of the “Fight for $15” movement to raise the federal minimum wage.

This is big shakes in a country where people don’t take to the streets easily, even when they are toiling full-time for pay so low it forces them to take government subsidies to make ends meet, as is the case with many of the employees from fast food retail outlets like McDonalds and Walmart, as well as the home care aids, child caregivers, launderers, car washers and others who’ll be joining the protests.

It’s always been amazing to me that in a country where 42% of the population makes roughly $15 per hour, that more people weren’t already holding bullhorns, and I don’t mean just low-income workers. There’s something fundamentally off about the fact that corporate profits are at record highs in large part because labor’s share is so low, yet when low-income workers have to then apply for federal benefits, the true cost of those profits gets pushed back not to companies, but onto taxpayers, at a time when state debt levels are at record highs. Talk about an imbalanced economic model.

A higher federal minimum wage is inevitable, given that numerous states have already raised theirs and most economists and even many Right Wing politicos are increasingly in agreement that potential job destruction from a moderate increase in minimum wages is negligible. (See a good New York Times summary of that here.) Indeed, the pressure is now on presidential hopeful Hillary Clinton to come out in favor of a higher wage, given her pronouncement that she wants to be a “champion” for the average Joe.

But how will all this influence the inequality debate that will be front and center in the 2016 elections? And what will any of it really do for overall economic growth?

As much as wage hikes are needed to help people avoid working in poverty, the truth is that they won’t do much to move the needle on inequality, since most of the wealth divide has happened at the top end of the labor spectrum. There’s been a $9 trillion increase in household stock market wealth since 2008, most of which has accrued to the top quarter or so of the population that owns the majority of stocks. C-suite America in particular has benefitted, since executives take home the majority of their pay in stock (and thus have reason to do whatever it takes to manipulate stock price.)

Higher federal minimum wages are a good start, but it’s only one piece of the inequality puzzle. Boosting wages in a bigger way will also requiring changing the corporate model to reflect the fact that companies don’t exist only to enrich shareholders, but also workers and society at large, which is the way capitalism works in many other countries. German style worker councils would help balance things, as would a sliding capital gains tax for long versus short-term stock holdings, limits on corporate share buybacks and fiscal stimulus that boosted demand, and hopefully, wages. (For a fascinating back and forth on that topic between Larry Summers and Ben Bernanke, see Brookings’ website.)

Politicians are going to have to grapple with this in the election cycle, because as the latest round of wage protests makes clear, the issue isn’t going away anytime soon.

Read next: Target, Gap and Other Major Retailers Face Staffing Probe

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MONEY Viewpoint

Taxpayers Should Stop Subsidizing “Country Club” Colleges

An education policy expert argues that it's time for more elite colleges to open their doors to low-income students.

For years, Washington University in St. Louis has held the dubious distinction of being the least socioeconomically diverse college in the country.

Just 85 members of its freshmen class entering in the fall of 2012 (5%) came from families with incomes low enough (typically below $50,000 a year) to qualify for a federal Pell Grant. (That’s the most recent year with federal data available.)

Washington University’s proportion of low-income students is remarkably tiny, considering more than a third of all full-time undergraduates qualify for the need-based Pell Grants. It’s also low for schools with tough academic standards. Other elite colleges maintain top reputations while providing many more opportunities to the non-rich: About a third of the students at the University of California-Berkeley—generally considered one of the top universities in the world—qualify for Pell Grants, for example. And more than 20% of students at elite schools like Amherst College and Columbia University come from low-income families.

Adding financial injury to this insult: “country club” private colleges that bar the door to the poor—thus reinforcing socioeconomic inequality—are receiving large tax subsidies from you and me, in part because of their tax-exempt status.

But there finally may be a little good college opportunity news on the horizon. Perhaps in response to the growing criticism of taxpayer subsidies of such country club colleges, some schools like Washington University are starting to at least inch towards providing more opportunities.

This January, Washington University announced a plan to double the proportion of Pell Grant recipients that it enrolls by 2020. Under the plan, Wash U. will spend at least $25 million a year for five years to increase the share of students who qualify for Pell Grants.

“Improving the socioeconomic diversity of our student body is not just important; it’s critical to our success as a university,” Holden Thorp, the university’s provost and executive vice chancellor for academic affairs, said in a news release.

Four other private colleges that currently have low-income populations of only about 10% tell me they are also now working to recruit more low-income students.

Some of the colleges say the problem—and solution—boils down to money.

Officials at Whitman College in Walla Walla, Wash., for example, say one key reason their student body is currently only 10% low-income is that the financial crisis of 2008 reduced their endowment, which is used to fund financial aid. They are now trying to raise more money for scholarships so a more diverse group of students can afford to attend the school. “We have a responsibility to increase access wherever we can,” says school president George Bridges, who is leaving Whitman at the end of the school year to become president of The Evergreen State College in Olympia, Wash.

Likewise, Elon University, in North Carolina, is in the middle of a 10-year campaign to double the amount of need-based institutional aid that it awards. “Elon must not become a gated community open only to those of privilege,” the college states on its website, “and our classrooms and campus life will be much richer when we recruit more students from diverse backgrounds who challenge and lead us by sharing their own life stories…” Because of the difficulty of raising the large sums needed, however, Elon is making “slow progress” in increasing the proportion of Pell students it enrolls, says President Leo Lambert. “We are digging hard into this issue of access, because it makes a big difference in the quality of the kind of community we aspire to be,” he says.

Other colleges are combining fundraising with new recruiting efforts. Colorado College is raising more money for financial aid and partnering with nonprofits such as QuestBridge to recruit low-income historically underrepresented students. “We are really diversifying the pool of highly qualified low-income students that we enroll,” says president Jill Tiefenthaler.

And Kenyon College, in Gambier, Ohio, is increasing its diversity in part by changing its application. In 2013, Kenyon simplified its admissions application, removing extra essays that the school found discouraged first-generation students. It seems to be working: For next year’s incoming class, Kenyon admitted 408 minority students, up 9% from last year, and 128 first-generation college students, the second most the college has admitted in the last decade. “It’s clear to us that we can do better than where we are and where we’ve been in recent years,” says Sean Decatur, Kenyon’s president.

But this battle is far from won. There are still plenty of other colleges that aren’t making an effort to provide opportunities to more than a handful of lucky low-income students. “Just trying to increase the number of Pell Grant recipients might be good for PR, but may be bad policy for our college,” says Randy Helm, the outgoing president of Muhlenberg College, a private college in Pennsylvania where only 8% of the students come from low income families.

Part of the reason is financial. Washington University can afford to spend more on financial aid, since its endowment equates to about $500,000 per student. Muhlenberg’s endowment equates to one-tenth of that: $50,000 per student.

Helm, who is retiring in June, doesn’t think it would be healthy for Muhlenberg to make a concerted effort to recruit and finance substantially more Pell-eligible applicants. If it did, the school would have to spend its entire $36 million financial aid budget supporting them, and wouldn’t have any aid left for middle-income students who are also struggling to pay the school’s $55,000 annual cost of attendance.

“We’re not going to be a school that serves the very, very rich and the very, very poor,” he says. “I don’t think that would be fair to middle-income students, the college, or the country.”

Another reason for the lack of college opportunities may be the pursuit of prestige. Muhlenberg, for example, devotes a significant share of its institutional aid to the pursuit of high-achieving students, who often come from well-to-do families.

A page on Muhlenberg’s website, entitled “The Real Deal on Financial Aid,” acknowledges that the college and many of its competitors often use institutional aid as a “recruiting tool.” “It used to be that you could try for that reach school and if you got in, you didn’t have to worry because everybody who got in, who needed money, got money,” the college’s financial aid office states. “Today, however, as colleges are asked to fund more and more of their own operation with less and less assistance from government, foundations, and families, they are increasingly reluctant to part with their money to enroll students who don’t raise their academic profile.”

Muhlenberg provides “merit aid”—which is not based on financial need—to about 32% of its freshmen, with an average award of nearly $12,500 per student, according to data the college reports to magazines that publish college rankings.

Higher education researchers, the news media, and even the White House have been putting colleges on notice that they must do a better job serving low-income students. It’s encouraging to see that this pressure has been pushing some of the biggest laggards to make progress in this area. Those colleges that continue to hold out, however, deserve additional scrutiny. At a time of growing inequality, we can no longer afford to subsidize colleges that cater to the rich at the expense of the poor.

(Here are Money’s lists of the Most Generous Colleges and the 25 Best Colleges You Can Actually Get Into.)

Stephen Burd is a senior policy analyst with New America’s Education Policy Program. This story was produced by The Hechinger Report, a nonprofit, independent news website focused on inequality and innovation in education.

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