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Management in Practice

Can Cross-Sectoral Collaboration Reverse the Trend toward Income Inequality?

Income and wealth inequality in the U.S. has become a topic of widespread concern and discussion. A recent panel of Yale SOM alumnae posited that action from the federal government is unlikely. But the panelists found reason for hope in examples of the public, private, and nonprofit sectors collaborating to address the nation’s wealth gap.

  • Tony Sheldon
    Senior Lecturer in the Practice of Management & Executive Director of the Program on Social Enterprise
  • Colleen Briggs
    Vice President of Financial Capability and Consumer Initiatives within Global Philanthropy, JPMorgan Chase & Co.
  • Sameera Fazili
    Senior Policy Advisor, National Economic Council
  • Andrea Levere
    President Emeritus, Prosperity Now

Income inequality used to be an elephant in the room—an issue few people acknowledged. It’s now an 800-pound gorilla—widely acknowledged and discussed. A recent Federal Reserve survey showed that between 1989 and 2013, the share of U.S. wealth controlled by the top 3% of earners rose from 45% to 54%, while the share controlled by the bottom 90% dropped from 33% to 25%.

No single solution will turn around that trend, said the panelists in a recent Yale SOM webinar. Rather, what’s needed is a multitude of approaches, drawing on—and bringing together—the public, private, and nonprofit sectors.

At the webinar, titled “Addressing U.S. Income and Wealth Inequality: It Takes All the Sectors,” the private sector was represented by Colleen Briggs ’13, vice president of financial capability and consumer initiatives in JPMorgan Chase’s Global Philanthropy division; the public sector by Sameera Fazili LAW ’06, until recently a senior policy advisor at the National Economic Council; and the nonprofit sector by Andrea Levere ’83, president of the Corporation for Enterprise Development (CFED), a nonprofit aimed at expanding economic opportunity. The March 24 event was moderated by Tony Sheldon ’84, executive director of Yale SOM’s Program on Social Enterprise.

Levere emphasized the complexity of the problem, saying, “It’s not just what you earn, but also what you owe.” She cited a measure CFED created called “liquid asset poverty”—meaning a household without enough liquid assets to subsist for three months if its main income source is disrupted. The organization found that 44% of American households fit that definition. Though “incredibly distressing,” Levere said, “what this data has done is change the conversation—it’s not just about ‘those poor people,’ but it’s about half of us.”

Yet, given the political gridlock in Washington, D.C., it seems unlikely that meaningful solutions will come through changes in federal law. Fazili noted that “our retirement system is very upside down right now—it helps the highest-income people save but not lower-income people.” But, she said, “in the current environment it’s going to be difficult to achieve what we all know are really important policies, like a savers’ credit.”

That’s where cross-sector collaboration comes in. While the federal government may not be able to change the tax code right now, Fazili said it does have “a unique power to lead and manage...public, national conversations.”

And when such conversations take place, things happen. Briggs noted that “some of the most innovative programs I’ve seen have come out of the nonprofit sector—that’s where we see the really risky, early-stage innovations occurring.” At the same time, businesses are increasingly stepping up to the problem rather than sidestepping it. Briggs observed that JPMorgan Chase’s CEO “has said income inequality and the lack of access to economic opportunity is not only a moral issue, but it’s a significant concern for our company and our country.... Capital markets can and must be part of the solution.”

The panelists described a number of small-scale innovations that could have an impact, including: Asking employers to rethink job credentials—so rather than reflexively requiring a four-year degree, they seek what Fazili called a “better proxy for the true skills needed.” Using income tax filing time as a “teachable moment,” said Briggs—to help people make effective use of their refund, “one of the largest lump-sum payments that many low- to moderate-income consumers receive every year.” Promoting matched savings accounts, which match the deposits of low- and middle-income people. Levere said a CFED demonstration project had a “stunning outcome.... People with the lowest incomes saved the highest proportion. When they were asked by the researchers why...they said that was the price of hope.”

Fazili said the collaborative spirit evidenced by the panelists is not anomalous. “It’s not just that all of us have drunk the SOM Kool-Aid. It really is the way the world works today—all sectors working together.” Briggs agreed, noting that “this next generation of business leaders...really are more socially concerned and committed—as employers and consumers and investors.”

Levere observed that “CFED has been working on wealth inequality for 35 years, and for most of that time it’s been a lonely, lonely slog.” But the tide has turned. “Who’d have thought that a 700-page economics book [Thomas Piketty’s Capital in the Twenty-First Century] would become a bestseller?” Or that the New York Times would have a full-time reporter on inequality, she added. “Just people saying ‘This is an issue that’s important’ huge.”