None of this matters, you will often hear, because in the United States everyone has an opportunity to make the leap: Mobility justifies inequality. As a matter of principle, this isn’t true. In the United States, it also turns out not to be true as a factual matter. Contrary to popular myth, economic mobility in the land of opportunity is not high, and it’s going down.
Imagine yourself on the socioeconomic ladder with one end of a rubber band around your ankle and the other around your parents’ rung. The strength of the rubber determines how hard it is for you to escape the rung on which you were born. If your parents are high on the ladder, the band will pull you up should you fall; if they are low, it will drag you down when you start to rise. Economists represent this concept with a number they call “intergenerational earnings elasticity,” or IGE, which measures how much of a child’s deviation from average income can be accounted for by the parents’ income. An IGE of zero means that there’s no relationship at all between parents’ income and that of their offspring. An IGE of one says that the destiny of a child is to end up right where she came into the world.
According to Miles Corak, an economics professor at the City University of New York, half a century ago IGE in America was less than 0.3. Today, it is about 0.5. In America, the game is half over once you’ve selected your parents. IGE is now higher here than in almost every other developed economy. On this measure of economic mobility, the United States is more like Chile or Argentina than Japan or Germany.
The story becomes even more disconcerting when you see just where on the ladder the tightest rubber bands are located. Canada, for example, has an IGE of about half that of the U.S. Yet from the middle rungs of the two countries’ income ladders, offspring move up or down through the nearby deciles at the same respectable pace. The difference is in what happens at the extremes. In the United States, it’s the children of the bottom decile and, above all, the top decile—the 9.9 percent—who settle down nearest to their starting point. Here in the land of opportunity, the taller the tree, the closer the apple falls.
All of this analysis of wealth percentiles, to be clear, provides only a rough start in understanding America’s evolving class system. People move in and out of wealth categories all the time without necessarily changing social class, and they may belong to a different class in their own eyes than they do in others’. Yet even if the trends in the monetary statistics are imperfect illustrations of a deeper process, they are nonetheless registering something of the extraordinary transformation that’s taking place in our society.
A few years ago, Alan Krueger, an economist and a former chairman of the Obama administration’s Council of Economic Advisers, was reviewing the international mobility data when he caught a glimpse of the fundamental process underlying our present moment. Rising immobility and rising inequality aren’t like two pieces of driftwood that happen to have shown up on the beach at the same time, he noted. They wash up together on every shore. Across countries, the higher the inequality, the higher the IGE (see Figure 2). It’s as if human societies have a natural tendency to separate, and then, once the classes are far enough apart, to crystallize.
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| In this chart, the higher the number on the left hand axis, the lower inter-generational mobility. The label should read Inter-generational earnings elasticity (IGE) |
I strongly recommend that you read the original article in full. It's how quality journalism should be.
Also, if you haven't already, you should read F Scott FitzGerald's The Great Gatsby, which is an utterly brilliant masterpiece, and watch the the 1974 film by Jack Clayton. We are back in the 20s with income distribution, politics, and debt. Will it all end as badly as the 20s did ten and twenty years later, in war and genocide and millions of dead?
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