What We Know About Income Mobility Depends on How We Define It

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Jonathan Hopkin in the Harvard Business Review:

The US has long had higher inequality than other advanced democracies, although many Americans see this as part and parcel of the “American Dream” of rising living standards and social mobility.

But recent research by Harvard University’s Equality of Opportunity Project has opened up a new front in this debate. The authors establish that social mobility between generations has in fact remained quite stable in America over recent decades, by calculating the likelihood of an individual’s rank in the economic pecking order corresponding to their parents’. This means that “children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s.” For some commentators these findings refute the connection between inequality and mobility that President Obama and liberal economists have been invoking, and others even go so far as to claim it proves the uselessness of a variety of social interventions to promote mobility, such as college grants for minorities.

So what exactly does this study show, and how reliable is it? It depends on how you define “mobility.” If you think it is about relative positions in a stratified society, it has stayed roughly the same. But if you think it is about relative incomes, it has gotten worse. A married couple where each partner earned $60,000 a year would make it into the top quintile, not exactly the stuff of riches, given America’s high cost of living. But that is still considerably higher than the bottom of the spectrum, where the top of the lowest quintile caps out at a household income of about $27,000 a year.

And the Harvard researchers are quick to underline that although they find that mobility has remained stable, the rise in inequality over the last 40 years means that the consequences of immobility are far more serious than in the past.

More here.