Barack Obama

Obama Is Wrong: Income Mobility Has Not Declined Over the Past 50 Years


Obama at CAP
White House

In December, in a speech at the Center for American Progress, President Barack Obama asserted that "we've seen diminished levels of upward mobility in recent years," further declaring that "a dangerous and growing inequality and lack of upward mobility" is "the defining challenge of our time."

The president is wrong about "diminished levels of upward mobility" according to a new study by economists from Harvard University and the University of California, Berkeley. Parsing data from the 1950s and 1970s, the researchers involved with The Equality of Opportunity Project find that…

…measures of social mobility have remained stable over the second half of the twentieth century in the United States.

In 2012, President Obama's former chairman of his Council of Economic Advisors, Alan Krueger, introduced the concept of the "Great Gatsby Curve." Krueger compared income inequality and income mobility across countries and found that …

…children from poor families are less likely to improve their economic status as adults in countries where income inequality was higher – meaning wealth was concentrated in fewer hands – around the time those children were growing up."

In other words, as income inequality increases income mobility decreases: the poor stay poorer and rich stay richer.

The new study reports that it can find no evidence for the existence of a "Great Gatsby Curve." Instead the researchers find that income inequality has indeed increased in the United states, which means that "the rungs on the income ladder have grown further apart," nevertheless, "children's chances of climbing from lower to higher rungs have not changed."

MIT economist David Autor is surely right when he tells the Washington Post that the new results will serve as…

…"a sort of Rorschach" test that will support many economists' preconceived notions about the effectiveness of government programs in providing opportunity.

Some could view the results as a failure of programs such as Pell grants, Head Start and nutritional supplements for children that are intended to promote mobility. Or, he said, "you can view this as: Social policies have fought market forces to a draw."

What factors do retard upward income mobility? Among other things, being located in the Southeastern United States, greater residential segregation by race and ethnicity, poor public schools, residing in areas with lower social capital, and living in neighborhoods with higher percentages of single-parent families.

For example, the researchers report…

…the strongest predictors of upward mobility are measures of family structure such as the fraction of single parents in the area. As with race, parents' marital status does not matter purely through its effects at the individual level. Children of married parents also have higher rates of upward mobility if they live in communities with fewer single parents.

As Brookings Institution analysts Isabel Sawhill and Ron Haskins pointed out more than ten years ago, if a person wants to stay out of poverty and move up the income brackets, do three things: graduate high school, get married, and then have kids. My Rorschach blot test tells me that expanding welfare programs have barely made up for the deleterious social and economic trends they have exacerbated over the past 50 years.

For more background, see my recent column, "Why President Obama is Wrong on Inequality."