Among conservatives, a common rejoinder to anxieties over income inequality is that what really matters is income mobility — that is, how likely we are to climb the economic ladder from one generation to the next. The idea is that inequality is not such a bad thing as long as all Americans have an opportunity to better their lot. But is that really true? In an important essay in National Review, Scott Winship, a fellow at the Brookings Institution, does an excellent job of answering that question.
Winship contrasts two ways of measuring intergenerational economic mobility. The first is to consider upward absolute mobility. Do you earn more than your parents? The second is to focus on relative status. Are those born into a household in the bottom fifth of the income distribution just as likely to make it to the top fifth as someone who was born there?
It turns out that while upward absolute mobility is very common — a Pew Economic Mobility Project study found that when we adjust for household size, 80 percent of U.S. adults are better off than their parents at the same age — relative mobility is a different story entirely. Winship observes that 40 percent of those born into the bottom fifth stay there, and most of those who don’t stay there don’t make it very far. In contrast, 60 percent of those with parents in the top two-fifths of the income distribution in 1970 were in the top two-fifths themselves three decades later. Not only does the United States not have a high level of relative mobility — it actually has a lower level of relative mobility than most countries in Western Europe.
One reason America has less relative mobility than many other rich countries is that the gap separating the top fifth from the bottom fifth is very large. To illustrate, compare a four-person household in Denmark, which has a high level of relative mobility, to one in the United States, which has a low level.
In 2004, Danish households at the 10th percentile earned $25,500, considerably more than the $19,968 income of American households at the 10th percentile. Danish households at the 50th percentile earned around $45,340 against around $53,344 in the U.S. And Danish households at the 90th percentile earned around $70,838 against just under $113,474 in the U.S. Making it from $25,500 to $70,838 is, for obvious reasons, easier than making it from $19,968 to $113,474.
The income distribution in the United States is a bit like an accordion that keeps stretching out as the highest earners do better and better. The accordion is stretching out in most rich countries, but America, and a few other rich countries like Britain and Israel, is at the stretchier end of the spectrum. Though this stretchiness has troubled many observers, it is far from obvious that encouraging well-off Americans to earn less money would somehow strike a blow for social justice.
There are other reasons why Americans born at the bottom of the income distribution tend to stay there. For example, a Pew study found that past incarceration reduces annual incomes by 40 percent. This wouldn’t be a problem if the U.S. incarcerated very few people. But in fact, the U.S. has an extraordinary 715 prisoners for every 100,000 people, compared to 72 per 100,000 in Denmark. And these numbers don’t count the far larger number of ex-offenders who have served their sentences. Though we don’t have good data on the impact of having an incarcerated parent on a child’s future economic prospects, partly because incarceration rates really took off in the 1980s and 1990s, it is hard to imagine that the impact wouldn’t be considerable.
Perhaps the biggest reason why Americans at the bottom get stuck in relative terms is that those who are better off do everything they can to better the lives of their children and to protect them against economic risk. Increasing relative mobility doesn’t just mean that more kids at the bottom will work their way to the top. It also means that more kids at the top will tumble down the economic ladder. To prevent that from happening, affluent families invest heavily in educating their young, since education is seen as a hedge against economic risk. Moreover, parents who have achieved some success tend to be part of social networks that can give their children access to valuable economic opportunities. Even the most committed egalitarian won’t deny her daughter the opportunity to take an internship with a beloved friend and colleague just because other children won’t get the same leg up.
Interestingly, the Pew Economic Mobility Project has found that black children are much more likely to be downwardly mobile that white children. The New York University sociologist Patrick Sharkey attributes this to the fact that black families in the top three-fifths of the income distribution were far more likely than their white counterparts to live in high-poverty neighborhoods. Suffice it to say, it seems far more sensible to try to reduce downward mobility among African-Americans than to try to increase it among whites.
When you think about it, achieving a high level of relative mobility isn’t actually that attractive a goal. A society with a high level of relative mobility would be one in which no matter how hard you work to provide your children with every advantage in life, they’re just as likely to sink to the bottom of the heap as to rise to the top. We should instead focus on improving upward absolute mobility across the spectrum, and ensuring that households at the bottom are finding more opportunities to earn and save money.
Winship contrasts two ways of measuring intergenerational economic mobility. The first is to consider upward absolute mobility. Do you earn more than your parents? The second is to focus on relative status. Are those born into a household in the bottom fifth of the income distribution just as likely to make it to the top fifth as someone who was born there?
It turns out that while upward absolute mobility is very common — a Pew Economic Mobility Project study found that when we adjust for household size, 80 percent of U.S. adults are better off than their parents at the same age — relative mobility is a different story entirely. Winship observes that 40 percent of those born into the bottom fifth stay there, and most of those who don’t stay there don’t make it very far. In contrast, 60 percent of those with parents in the top two-fifths of the income distribution in 1970 were in the top two-fifths themselves three decades later. Not only does the United States not have a high level of relative mobility — it actually has a lower level of relative mobility than most countries in Western Europe.
One reason America has less relative mobility than many other rich countries is that the gap separating the top fifth from the bottom fifth is very large. To illustrate, compare a four-person household in Denmark, which has a high level of relative mobility, to one in the United States, which has a low level.
In 2004, Danish households at the 10th percentile earned $25,500, considerably more than the $19,968 income of American households at the 10th percentile. Danish households at the 50th percentile earned around $45,340 against around $53,344 in the U.S. And Danish households at the 90th percentile earned around $70,838 against just under $113,474 in the U.S. Making it from $25,500 to $70,838 is, for obvious reasons, easier than making it from $19,968 to $113,474.
The income distribution in the United States is a bit like an accordion that keeps stretching out as the highest earners do better and better. The accordion is stretching out in most rich countries, but America, and a few other rich countries like Britain and Israel, is at the stretchier end of the spectrum. Though this stretchiness has troubled many observers, it is far from obvious that encouraging well-off Americans to earn less money would somehow strike a blow for social justice.
There are other reasons why Americans born at the bottom of the income distribution tend to stay there. For example, a Pew study found that past incarceration reduces annual incomes by 40 percent. This wouldn’t be a problem if the U.S. incarcerated very few people. But in fact, the U.S. has an extraordinary 715 prisoners for every 100,000 people, compared to 72 per 100,000 in Denmark. And these numbers don’t count the far larger number of ex-offenders who have served their sentences. Though we don’t have good data on the impact of having an incarcerated parent on a child’s future economic prospects, partly because incarceration rates really took off in the 1980s and 1990s, it is hard to imagine that the impact wouldn’t be considerable.
Perhaps the biggest reason why Americans at the bottom get stuck in relative terms is that those who are better off do everything they can to better the lives of their children and to protect them against economic risk. Increasing relative mobility doesn’t just mean that more kids at the bottom will work their way to the top. It also means that more kids at the top will tumble down the economic ladder. To prevent that from happening, affluent families invest heavily in educating their young, since education is seen as a hedge against economic risk. Moreover, parents who have achieved some success tend to be part of social networks that can give their children access to valuable economic opportunities. Even the most committed egalitarian won’t deny her daughter the opportunity to take an internship with a beloved friend and colleague just because other children won’t get the same leg up.
Interestingly, the Pew Economic Mobility Project has found that black children are much more likely to be downwardly mobile that white children. The New York University sociologist Patrick Sharkey attributes this to the fact that black families in the top three-fifths of the income distribution were far more likely than their white counterparts to live in high-poverty neighborhoods. Suffice it to say, it seems far more sensible to try to reduce downward mobility among African-Americans than to try to increase it among whites.
When you think about it, achieving a high level of relative mobility isn’t actually that attractive a goal. A society with a high level of relative mobility would be one in which no matter how hard you work to provide your children with every advantage in life, they’re just as likely to sink to the bottom of the heap as to rise to the top. We should instead focus on improving upward absolute mobility across the spectrum, and ensuring that households at the bottom are finding more opportunities to earn and save money.