The Economic Opportunity Index - Frequently Asked Questions

Q: Why is everything measured in dollars? I don't understand what a health sub-index value of $1,200,000 means.

A: Since we're trying to measure economic opportunity, the overall Economic Opportunity Index is measured in terms of lifetime income. (This is expressed relative to prices in 2007-the purchasing power of the dollar in 2007.) In order to compare sub-indexes or variables to the overall Index, we show them on the same graph, even though the dollar values really refer to the value of the overall Index. The best way to think about the value of a sub-index is "this is what the EOI would be if the health sub-index got 100% of the weight."

Q: What does "labor participation" mean and why does it get such a large weight?

A: Labor participation means either working, or looking actively for a job. The labor participation rate is therefore the percentage of people in a group who are working, or actively seeking to be employed. This gets a large weight in the Economic Opportunity Index because the principal source of income for most Americans is wage income-income from one's job. So if you're not looking for work, you're not going to have access to the principal source of economic opportunity in this country. (By the way, running your own business definitely counts as being employed!)

Q: Why are the weights for the Macroeconomic and Asset Ownership sub-indexes so low?

A: These two indexes are compromised wholly of "macro" indicators-indicators where the value is the same for both men and women and for all races. For example, the corporate tax rate does not have a different value for different racial/ethnic groups. Because there is no variation across groups, only over time, these indicators tend to have less variation than the other parts of the EOI. This means that they have a smaller role in the overall variation in economic opportunity. (If we estimated economic opportunity across countries, these variables would take on more importance.)

Q: Why are graduation rates from high school and college repeated in the Human Capital sub-index and in the Health and Social Services sub-index?

A: We included these twice to try to represent two different effects of education. The first effect is the one everybody thinks of-more education gives you more job-relevant skills and helps you earn more. This is the effect captured in the Human Capital sub-index. The second effect is more subtle. Recent research on health care suggests that people with more education are healthier, even after controlling for other obvious factors, perhaps because they follow healthier lifestyles or are more likely to get the appropriate medical help. This is the effect captured in the Health and Social Services sub-index.

Q: Why do marriage and divorce rates show up in the "Health and Social Safety Net" and "Human Capital Development" indexes?

A: Research has found that marital status has effects in both areas. Married men in particular tend to live longer, perhaps because their spouses take care of them and encourage them to mind their own health. As for human capital development, children of two-parent families have an advantage in terms of the time available for parental care and attention. (Of course, this is not to say that children from divorced or single-parent families cannot do well in many cases.)

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