Sep 10, 2011 at 9:46 am
Putting aside for a moment the short-term and the hurly-burly of Jobs-Act politics (I’ll get back to those later), I’ve been thinking about inequality and mobility.
Income (or wealth, or wage) inequality is the distance between income classes at a point in time. That distance has of course gotten much wider over time.
Income mobility is the rate at which people or families move across those distances, from one income class to another.
Think of the income distribution as a hotel (if you like the usual quintile analysis, think of it as a hotel with five floors). Inequality measures the distance between the floors; mobility measures how likely families are to move from one floor to another.
[One further nuance that I won’t reference here, but for aficionados —there’s absolute and relative mobility. “Absolute” mobility just measures how a person or family moves around the income scale in real income terms; “relative” measures examine how they move around relative to other families. The latter is most common because it links conceptually to inequality in a way I’ll emphasize in a moment. Also the “absolute” analysis is tricky because we expect a family’s income to rise as they age—every few years, someone writes a silly article about how things must be fine because if you follow families as they age, their income goes up. But the question is how fast relative to past generations?]
So why is this interesting? For one, because it’s such a key component of the American dream—working hard, getting ahead, a better life for your kids. If such mobility is threatened, if folks are truly beginning to worry that their kids won’t have the opportunities they had, as some recent polling and data suggest, that constitutes a foundational problem.
But I’d like to look at it from a different angle. What’s the relationship between inequality and mobility?
I became interested in this question years ago, when conservatives who wanted to downplay the increase in inequality cited mobility as a reason why that increase didn’t matter. Essentially, they argued that sure, the floors of the hotel are further apart but people move between them all the time so what’s the big deal?
Except they don’t. More than half of the families who start out in the bottom and top fifths of the income scale are still there a decade later. The correlation between parents and their kids’ income is about 0.5—such a correlation would be very low in a highly mobile society. (What do such numbers mean? One study, which finds a correlation of 0.6, points out that with that level of “intergeneration mobility,” it would take a poor family of four persons 9-10 generations—about 200 years—to achieve middle-class income.)
Another fundamental flaw in the conservative inequality/mobility dismissal has to do not just with the existence of inequality, but with its sharp increase over time. For mobility to offset the increase in inequality, the rate of mobility has to accelerate. It’s not enough to assert that “mobility exists”—the rate at which people switch floors in the hotel has to become faster, and there’s no evidence for that—if anything, the rate of mobility may have slowed in recent years (certainly this chart shows that, but other research finds no change—no research finds an increase).
Also, and this is one of the more remarkable findings from this literature, income mobility is actually higher in every other advanced economy with the exception of the UK (see here). It’s counterintuitive to some, given that we have fewer social protections and hew more to free market principles, etc…but it’s that finding that got me thinking:
What if the conservative dismissal is not just wrong…it’s backwards? That is, what if higher inequality creates new barriers to mobility?
As I noted above, with some exceptions, the research on the rate of mobility does not yet show significant declines in the rate of mobility, but such research depends on “longitudinal data”—data sets that follow people across time, and there’s a long lag with such data sets.
I predict that future research will find this slowdown, and I strongly suspect there’s a linkage between slower mobility and higher inequality.
The connections I’m thinking about here include disinvestment in public educational quality for lower income communities, as well as access to and completion of college education, as these are among the most well-documented correlates of higher mobility (the Obama administration has made useful inroads to improve college access).
But I’m also thinking of decent parks, libraries, food/nutrition, health care, and basic exposure to interesting, mind-expanding experiences when you’re young (some research suggests your income mobility future is determined alarmingly young, like around five, but I’m not yet ready to swallow such determinism without more evidence).
Which leads me to my last point—you know I had to go to the policy place with all this.
Many of the budget cuts we’re (pretty blithely) contemplating in what’s called non-defense discretionary (NDD) spending –as obfuscating a label as you’ll hear in DC—have mobility implications. Much of this spending has been shown to help lower mobility barriers, and in an era where inequality makes those barriers higher, we need more, not less of such investments.
Consider WIC— the Special Supplemental Nutrition Program for Women, Infants, and Children . It’s about a $7 billion program in which more than half of all newborns, and about one in four children under five, participate. It also provides nutritious food, counseling on healthy eating, and health care referrals to around nine million low-income pregnant and postpartum women and their babies.
Head Start is also part of this funding stream, as are many other education boosters for low-income families.
And all of these programs have been shown, in pretty extensive and consistent research, to be associated with lifelong advantages. They are, in short, tools to reduce mobility barriers.
As commenter DCS reminds me, this line of thinking also implies an explanation for the Euro/Scandinavian result–it shouldn’t surprise us that greater social protections are associated with greater economic mobility. Once again, it may well be the case that the classical economics model is backwards: such protections don’t incent laziness and stagnation, as the model argues…they reduce increasingly entrenched societal barriers and thus enable people to better realize their intellectual and economic potential.
So when you hear people talking about cuts to “non-defense discretionary spending” or even when the White House brags that under their watch NDD will be “the lowest as a share of the economy since the Eisenhower years” ask not for whom the bell tolls. It tolls for those whose futures depend on pushing back on the ever-rising barriers to income mobility. Or even more fundamentally, it tolls for the American dream.
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