Inequality

Great News: Economic Mobility Has "Remained Remarkably Steady" For Decades

|

For all the talk about growing income inequality, it turns out that a far more important issue—the ability of individuals to move up the economic ladder—has "remained remarkably stable over the second half of the twentieth century in the United States." This is self-evidently good news in an economy that is dominated by bad news.

As the Washington Post puts it

Children growing up in America today are just as likely — no more, no less — to climb the economic ladder as children born more than a half-century ago, a team of economists reported Thursday.

That's according to Harvard's Raj Chetty and others, whose work is often used to bolster arguments that economic prospects are worse for people today than they were a generation or two ago. The paper is online here. While noting large variations in mobility based on geographic location and other factors, they conclude "a child born in the bottom fifth of the income distribution has a 7.8% chance of reaching the top fifth in the U.S. as a whole." They also note that "the strongest predictors of upward mobility are measures of family structure such as the fraction of single parents in the area."

Here's a chart laying out the odds of kids born in the lowest, middle, and top income quintiles of reaching (or staying at) at the top. The watchword is constancy.

This latest data should be surprising only to those who have ignored a steady stream of research that's been showing the same basic trend for a very long time (Matt Welch and I discussed this topic in The Declaration of Independents). For instance, former Pew and Brookings scholar Scott Winship, now at the Manhattan Institute, has found

that upward mobility from poverty to the middle class rose from 51 percent to 57 percent between the early-'60s cohorts and the early-'80s ones. Rather than assert that mobility has increased, I want to simply say — at this stage of my research (which is ongoing) — that it has not declined. If I include households that reported negative or no income, the rise in upward mobility I find is only from 51 percent to 53 percent, which is not a statistically meaningful increase. But the data provide absolutely no evidence that economic mobility declined, whereas the president said it had fallen by ten percentage points.

Don't expect the latest findings to make much of a dent in public discussions of economic policy. President Obama will talk about inequality as the defining issue of our time in his State of the Union address, and he regularly conflates growing inequality with reduced mobility. So do most observers, whether on the right or the left. 

That's because inequality is easy to grasp as a concept and ostensibly easy to rememdy. You just have take some money from one group and give it to another and the problem in solved, right?

A lot of Winship's work is gathered here [note: link is fixed]. He is right, I think, to argue that "we should wage a war on immobility instead of inequality" and that increasing rates of mobility has in fact proven very difficult. 

Reason TV taked with him a year ago about why scholars and pundits are slow to admit that mobility hasn't declined over time and the difficulties of increasing mobility rates for all Americans.


Advertisement

NEXT: State and Treasury Departments Reportedly Investigating Dennis Rodman's North Korea Trip

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. The story that ran in our local paper yesterday quoted one economist as saying that these results will be a “rorschach test” for those who read it. Indeed, so it has been with the responses I’ve seen. Here on Reason, it is positive news that the possibility of mobility is as good as ever. Other quotes have been very negative, saying that this proves no one who is poor ever has had a chance. And the most amusing interpretation was a quote in the AP story from former White House economic adviser Alan Krueger, who only saw that this study covered only the past. “My concern is that there may be less mobility in the future,” he said.

    1. Greetings, my friend. We are all interested in the future, for that is where you and I are going to spend the rest of our lives. And remember my friend, future events such as these will affect you in the future. You are interested in the unknown… the mysterious. The unexplainable. That is why you are here.

  2. I don’t know about this. My personal observational experience tells me it isn’t so. I have never, at any time in my life, known so many people out of work, on government assistance, adults moving back in with their parents, etc.

    Also, I don’t know anyone in the private sector who has been getting wage increases that keep pace with inflation for the past several years.

    It looks pretty bleak to me. And now we have a government that wants to ‘fix’ it. And we all know what happens when the government fixes things.

    1. Yes, we’re seeing a huge increase around us of people on welfare, including the exploding disability scam. And we shouldn’t see that much as upper-middle class folks, right?

      1. I have to wonder whether the upcoming devastation of TEAM BLUE that will occur in this year’s elections will potentially make the market and investors a little less wary. TEAM RED doesn’t deserve that kind of faith, but I have a feeling that people are going to prefer anything to the insecurity of TEAM BLUE having any Congressional power at all.

        1. There’s a LOT of money sitting around. Companies have been buying back shares to pump up some numbers, and other weird things have been happening due to an amazing lack of confidence in the economy.

          I suspect the GOP landslide will free that up for a while, but it will depend very much on what they try to do and what they actually accomplish whether that will have any long-term effects.

          1. I have to assume the real surge will come in 2016 when the Moron-in-Chief is out. Because pretty much anyone and anything will reassure investors more than him. Even Hillary would cause people to breathe a sigh of relief that our first mongoloid president is finally gone.

            1. Hillary? Hillary?

              There’s only one woman who captures the soul of the Democratic Party. And isn’t it time for a woman president?

              1. Does she wear a hat and have a job and bring home the bacon?

            2. “Even Hillary would cause people to breathe a sigh of relief that our first mongoloid president is finally gone.”

              Well, you know, Hillary did become an expert on cattle futures merely by reading the Wall Strret Journal.

          2. if they want to be less the Stupid Party, it might be worthwhile to try the “do nothing” strategy and see what happens. The election will have constituted the doing of something. But the GOP has the other moniker for a reason.

            1. Yes, the smart thing to do would be to stab the government in the heart. But that is not happening. No way.

            2. “it might be worthwhile to try the “do nothing” strategy and see what happens. ”

              Can Calvin Coolidge be reincarnated?

    2. at the same time, people are moving and voting with their feet. Look at North Dakota, at Texas, at a few other states that have experienced influxes of new residents.

      None of this discounts what you have observed but it could be a case of there being no binary answer.

    3. Things are tough in Europe also. A few days ago we closed out my son’s college account (a special IRA type fund) to float some cash for my wife’s business.

      But this is just about mobility, moving up or down the economic scale, independent of how the scale is doing overall. I’m sure there are plenty of people working gov jobs that have moved up the economic ladder in relation to their dumb-ass neighbors who try to make a go in the private sector.

      1. I and my three siblings grew up in poverty. All three of my siblings are now rich. So three out of four of us went from the bottom quintile to the top quintile and one to a comfortable bit above the middle. How they do it? Highly marketable educations.

    4. Ah but that is the wonderful thing about income mobility and inequality.

      Since you are measuring statistical averages relative to each other the actual state of the economy is irrelevant. This is why the left loves to focus so much on both of these issues.

      Of course my life is proof that both measures are complete an utter bullshit.

      At one point when I was a child my parents were on welfare because they were both out of work for more than 6 months due to surgeries at the same time. Later on my parents owned 2 businesses had a net income right around the top quintile and could walk into any bank in the country and get an unsecured loan for a quarter of a million dollars.

      Was I rich or poor?

      In my adult life I have had multiple periods where I was literally less than 6 weeks from homelessness and did not earn more than 150% of the poverty line until I was 24 years old (most years prior to that were within 10% either way of the poverty line) yet today my income is more than 400% of the poverty line and right on the cusp of the top quintile.

      So am I poor or am I rich?

      1. What’s your address, and do you keep a lot of cash in your home? Jewelry? Guns?

        1. Lol while my income is high I’m broke.

          I have 4 kids and pay a premium to live in a rural area just outside of the 128 belt in Massachusetts that happens to have one of the best school systems in the State.

          If you were to take everything I owned, stick it in a storage locker and put it on storage wars, they’d have a hard time making a profit on it with just a $500 bid.

          1. I have 4 kids and pay a premium to live in a rural area just outside of the 128 belt in Massachusetts

            The fact that you can afford to pay that premium to live there means you’re rich as far as proggies are concerned. Now, surrender another 10% or more of your income. However much it would take to force you, your wife, and your four kids to have to move to a small cramped apartment in south Boston.

            1. Screw Southie, I’ll move back to the hellhole that is Lowell before I ever live inside the Boston city limits

      2. If you tell your story to a liberal the response will be:

        #1 You are an exception – a statistical outlier and that most people simply cannot do that.

        OR

        #2 You had all sorts of government help along the way and didn’t really earn it.

        OR

        #3 You got your wealth by cheating and/or stealing from “regular people” in some way or another – such as “not giving” which equals “taking”

        OR

        #4 All of the above

        1. “#3 You got your wealth by cheating and/or stealing from “regular people” in some way or another – such as “not giving” which equals “taking””

          And while I agree that they would say this it shows just how foolish their world view is.

          I have no wealth. My net worth is negative. What I do have is a very high income which I achieved by making more smart than dumb choices in my career and building a resume that makes tech recruiters salivate. So I can earn quite a bit of money but with 4 children my expenses match it and with my rent costing $2800 a month consuming over to 40% of my take home income I’m in the top quintile and living paycheck to paycheck.

      3. Finally relative to my parents, when I and my siblings were roughly the same age as my children are my parents combined income was slightly lower than my income alone after adjusting for inflation yet I am not able to afford anywhere near the same level of leisure/luxury goods as they were.

        Net result, while it is true I can buy things they could never dream of becuase they simply did not exist and some luxury items have come down in price so much that they are far more affordable (for example, the atari 2600 would have been nearly $2000 after inflation, my parents were easily able to buy us one for christmas when the first came out $2000 is more than our entire christmas budget) inflation has made affording basic living costs MUCH harder for almost everyone.

        So science and technology has given us the illusion for a long time that inflation is low by continually cutting the costs of luxuries relative to basic living expenses and while some basic expenses have also fallen in price (food takes up the smallest portion of our budgets ever) others, especially taxes have reached the point where they are eating up all of the savings.

        All of this is easily explained by excessive debt (not just national debt, all debt) because basically a huge percentage of all new value created is being diverted to pay off the loans of the past rather than to fund our lives today or invest in the future.

      4. So am I poor or am I rich?

        Depends. Do you have any disposable income, defined as money to spend on anything other than food, clothes, and basic housing (a small modest home or apartment, not a huge mansion) after taxes? If so, then you’re rich and should have your taxes increased until you no longer have any disposable income. For the Greater Good. /DERP

    5. “I don’t know about this. My personal observational experience tells me it isn’t so. I have never, at any time in my life, known so many people out of work, on government assistance, adults moving back in with their parents, etc.”

      Income mobility is usually a RELATIVE measurement. That means for every person moving up, another will be moving down (by definition), so your observations probably would suggest that mobility has increased.

  3. Can we conclude then that the fifty year “War on Poverty” has had no overall impact on upward mobility even with trillions spent?

    1. in fact, we can conclude that this war did the exact opposite of what was intended. Who knew that rewarding bad behavior through govt checks would result in more bad behavior?

      1. I would even posit that as the folks on government checks remain poor, the people who now demonstrate mobility are the ones who get jobs for the government working in programs to help the poor.

        1. If you want less of something tax it. If you want more subsidize it.

    2. The lack of success in the War on Poverty proves that we must double, triple, perhaps even quadruple down on it.

  4. As far back as I could remember, I always wanted to be a capitalist…

    But both my parents, my father in particular, rose upwards and have much more than compared to when they were my age.

    I imagine most people who don’t become criminals or get into substance abuse experience some sort of rise or stay the same.

  5. Id like to see a comparison of what it would costs in government fees, licenses, and regulations for George Jefferson to start a dry cleaning business compared to what it would cost back then. Movin’ on up. Not that he wouldn’t be successful today due to his work ethic. But would be interesting to see.

  6. If capital gains and corporate taxes were eliminated, the problem of job creation would be solved.

    After some googling, I see that the Fed collects about 100 billion in cap gains taxes, and Federal Education. outlays are 107 billion. http://economix.blogs.nytimes……-spending/
    So, that was easy.

    Corporate taxes account for about 160 billion in Fed revenues. We spend about 700 billion on national defense. Pre Iraq/Afghanistan, we spent about 400 billion in 2001 money.

    Done and done.

  7. The constancy of these probabilities is striking, yes, but even more striking to me is that 30% number. If you’re born in the fifth quintile, you only have a 30% chance of ending up there.

    That’s lower than even I would have expected, and I bet your typical progressive thinks it’s closer to 100% (and nearly 0% for those born in the first or third quintiles).

  8. Is this chart showing the probability of ending up in the top quintile at retirement, or at some other age, or being there for some period of time during a career. And what are we measuring for the starting point? Where the kid’s family was on the day he was born? Or when he graduated HS? Or some average? I’m pretty sure my family moved between at least one quintile, if not two, between the time I was born and the time I graduated HS. And I myself have moved between quintiles as I’ve gotten older. I doubt I’m atypical as most family’s/people’s earnings go up from age 25 on.

  9. Well I suppose that’s good, but not great. In all honestly, technology should be making prospects better.

Please to post comments

Comments are closed.