As Becker notes, recent research indicates that social mobility (how much a person rises or falls in the income distribution relative to his or her parents) in the United States has remained constant, albeit at a low level by comparison with other wealthy countries (for a partial summary of this research, see Raj Chetty et al., “The Equality of Opportunity Project,” www.equality-of-opportunity.org/) at the same time that inequality of income in the United States has risen, and now far exceeds that in the other wealthy countries.
A striking finding by the researchers is the high geographical variance in mobility. The probability that a person whose parents were in the bottom fifth of the income distribution will rise to the top fifth is roughly twice that for persons living in the northeast or on the west coast than for for persons living in the south and the midwest—about 10 percent versus 5 percent. This is probably related to the pattern of immigration, the quality of schools, and the fact that educated and ambitious people tend to find the northeast and far west culturally more congenial than the south, the border states, and the midwest, with their religiosity, conservatism, gun mania, Confederate nostalgia, higher crime rates, and greater poverty.
The fact that mobility has not declined during a period in which inequality of incomes has grown may seem paradoxical, but is not. Imagine that all incomes were close to being equal. Then social mobility would be close to zero because there would be so little to gain from getting a better job or working harder. And by the same token social mobility might be very great in a society yet income inequality also be very great. For suppose that whether one had a high or a low income was almost entirely a matter of luck. Then the children of rich and of poor families would be quite likely to changes places in the income distribution, regardless of how skewed that distribution was.
But while social mobility and income inequality can thus move together, I am surprised that social mobility does not decrease as income inequality rises. The wealthier a family is, the more likely its children are to be secure against dropping significantly below their parents’ rank in the income distribution. One reason is that wealthy people (unless they are sports or entertainment figures) are apt to have high IQs, especially now that, with the decline of discrimination, there is more assortative mating than there used to be. Another reason is that the children of wealthy people have a better shot at admission to the best schools and colleges. This is partly because the kids tend to be smart, partly because the parents provide positive role models for the children and also can invest heavily in tutoring and other aids to their children’s education, and partly because colleges and universities tend to favor the admission of rich kids, who can be expected to become generous donors. And finally the children of the rich receive excellent nutrition and medical care, hence tend to be healthier than the average child.
One reason social mobility seems not to have been significantly affected by the rising inequality of income in the United States is that much of the growth in inequality is a result of increased incomes of the wealthiest 1 percent of the population, whose share of national income has grown from 13 percent in 1982 to 22 percent today, and whose after-tax income has increased almost threefold in that period. Even if one percent of the population can immunize itself from downward mobility, overall mobility should not be greatly affected. This is so even though if the top 1 percent have become richer, the bottom 99 percent have become poorer. But becoming poorer needn’t make a person likelier to climb out of poverty, since the poorer one is, the harder the climb.
There are several reasons for encouraging social mobility, and this should make us resist complacency about the fact that it hasn’t changed much despite the increased inequality of incomes, and focus rather on the fact that it’s much lower than in our peer countries. One reason for trying to increase mobility is to stimulate ambition and effort. If people born into families who are low on the income distribution sense few opportunities to rise, they will have little incentive to try to better their lot. A related reason is that many highly successful people had humble beginnings; and we would like our educational and social welfare systems to discover and assist and encourage these people when young. A further reason for trying to increase mobility is to discourage people from seeking betterment of their lot through crime or gambling, activities that can be attractive to people who despair of improving their lot by lawful work rather than crime and by effort rather than luck.
And finally, although the fact that social mobility has not fallen as income inequality has risen may seem to imply that reducing inequality would not increase mobility, that may not be correct. Social mobility may not have fallen, I have suggested, only because the rise in inequality has been so skewed in favor of a small fraction of the population. A significant redistribution of wealth to the poorer part of the population might, by improving nutrition and family stability, generate increased upward mobility.
It's hard to accept all this "social mobility" talk at face value. However the bell-curve of social position looks, it seems that for every increase in position of a person or persons, there is a corresponding decrease in position of others. In income, in wealth and in social position.
I imagine that what needs to be encouraged is meritocracy, which implies that those more meritorious will advance while those less meritorious will decline. This would amount to an increase in the upward position of the meritorious and a decline in the position of the slouches, by whatever measure.
What is then so great about social mobility? What makes it different from meritocracy? And there's the greater question: why the hell do we fight and sacrifice to maintain public mis-education, which mainly succeeds in hammering down the nail that sticks out?
Posted by: jim kirby | 02/02/2014 at 09:02 PM
John D. Rockefeller started dirt poor and amassed the largest fortune in American history. The single reason this feat is unlikely to ever be repeated is that he did it back when there was very little in the way of government meddling to prevent his success.
Bill Gates climbed perhaps from the bottom of the top 20% to the absolute top - still impressive, but not nearly as unthinkable.
There are people in this country who have decided to exercise their inalienable rights to life, liberty, and the pursuit of happiness by trying to make a lot of money. Some of them, it turns out, also have a lot of talent in that arena. Somebody who is good at something and dedicates his or her life to working at it is likely to have outsize success in whatever he or she happens to be pursuing. The result is, we have some very very rich people. As the collective wealth of the country has been increasing in recent decades, most of the increase has fallen into the hands of these people. Stated another way, if you add up everything that individual Americans produce and the rewards they receive therefor, the bottom 99% produce about as much today as they did 30 years ago. (Maybe they produce more goods, but they produce about the same VALUE.) The top 1% are the ones who have increased their reward because they are the ones who give a crap about having even more money and have made it their mission to acquire same, by producing more value and servicing demand in new and better ways.
The lazy communists would suggest that nobody should be able to buy a ride to the space shuttle unless everybody can. Constraining our best performers does nothing to help the poor - it just makes the non-performers, such as those who make whole careers out of complaining about it, feel better to vilify those who have roundly outperformed them. The top 1% didn't win by cheating; rather they followed the rules scrupulously: doing the necessary work to gain entry to top schools, earning degrees in the right fields, taking jobs in the right industries at the right firms, performing well, moving up, maybe starting new companies to enact their visionary ideas, etc. Their story is irrelevant to the question at hand. Too many discussions of the failures of the poor are nothing more than thinly disguised sour grapes upon the successes of the rich.
No matter at what level you start, achieving (or maintaining) tier 1 success requires consistently doing things right, over a whole career. If you're a pothead or a womanizer or you can't spell or add two-digit numbers in your head, you probably do not have what it takes to succeed at that level. They aren't shoveling coal, but these are extremely focused and hard-working people. Consider New Jersey's Governor, who did a lot of things right to rise as he has, and now suddenly will be undone by one mistake - regardless of whether it turns out that mistake was ordering a political payback, or having the poor character-judging skills to hire someone who would order a political payback.
The way to improve the lot of poor people is to put a floor under us and not a ceiling over us. Perhaps there is some social value in fostering mobility from the 0-20 bracket to the 20-40 and maybe even to the 40-60 bracket, but once people are average they can decide for themselves if they want to do the work to rise even higher on their own, so they too can be despised by those who once claimed to want to help them.
Posted by: Terry Bennett | 02/02/2014 at 11:20 PM
Posner really gets this one right and after zooming in on some of the causes of lessening mobility:
"This is partly because the kids tend to be smart, partly because the parents provide positive role models for the children and also can invest heavily in tutoring and other aids to their children’s education, and partly because colleges and universities tend to favor the admission of rich kids, who can be expected to become generous donors. And finally the children of the rich receive excellent nutrition and medical care, hence tend to be healthier than the average child."
........... along with the geographical aspect (yes a HS educated realtor can earn $5 million in NY and hardly be noticed, the same is not likely in midwestern towns and small cities)
And Posner offers suggestions for improvement:
"A significant redistribution of wealth to the poorer part of the population might, by improving nutrition and family stability, generate increased upward mobility."
Let's take a closer look at what he he is saying. In the top paragraph, whether brighter, more talented or ambitious than the average or not, these kids get what they need to maximize their potential, plus the additional welcome mat at the better colleges and a few social connections thrown in for good measure.
So........ as a society if we did what Posner suggests in his last lines we'd likely gain by providing more of the success factors to those of lower incomes and "unstable" families. As (often silly) arguments about "poor education" in our nation rages on, it seems obvious that "doing what it takes" to bring the bottom up is the low hanging fruit of increasing overall averages. If, that take more pre-K "Headstart" or a few extra positions as a school to mentor, tutor, inspire, those most at risk of failing or dropping out, that is what we should, perhaps must, be doing.
It's too easy and rhetorically common in these discussions to think of "producers" and the opposite. Here I'm remember my fairly brief time in the military. While some of us shot Expert and some were smarter or could run faster, on the much more common patrol or forced march the company was only going to travel at the speed of the the least.
In teaching us various skills, say tearing down a rifle for cleaning, they taught until the slowest learner could do the job. We seem to have forgotten that much of our society and economy works the same way. If our front runners succeed and become employers, or a 2nd LT looking for a team and our team players aren't there or able, the front runners are going to be walking and hoping.
Posner mentions "options" being so miserable that some, often clever and with lots of drive and energy are drawn to crime. What a waste to society when that happens. First the negative "economics" of the criminal endeavor, then often costly court expenses, and more than many could earn being spent on lock up and perhaps a family left to welfare or other poverty.
Upward mobility: Sometimes this sounds like the dog eat dog world of one guy moving past the other which is surely part of it, but the crucial thing is that when, as is the case today, there is a growing pie that all see some benefit.
JFK said it about right with his hopes of "a rising tide lifting all of the boats". Yep, the guy in the skiff doesn't mind that the yacht is being lifted as long as he gets some bit of lift too. Both for the actuality of making a bit of progress but even more so for not feeling left out.
Posted by: Jack | 02/03/2014 at 04:31 AM
Jim: I think encouraging a meritocracy is what it's all about.
Ha! I used to chuckle about pre-Thatcher era England being a place where the lords and bankers didn't work because their position was assured by their rigid class system, meanwhile at the lower level the kids starting in the factory KNEW they were going to top out at foreman, if that, late in their careers so they may as well stay out all night at the disco and pretend to work the next day. I don't know what the upward mobility in the UK was in those days, or today, but I'd bet it had a leading decimal point.
How does is a meritocracy different from upward mobility? The U-M should be the result of the meritocracy. I guess the best example with be the coming Winter Olympics. Soon we're going to know the name of just about the best Bi-athalon guy in the world. His gold medal will be just about 99% pure meritocracy.
At the other extreme I guess you have a lot of "People Magazine" celebs, say Paris Hilton? who has surely done something other than inherit a huge family fortune and join the glitterati set, but w/o the fortune it's not likely her name would be a household word on merit.
Ha! you mention rewarding the energetic while the "slouches" decline. Here's a question for you and the Prof: Given stagnant wages for MOST income levels, from where comes the reward for those struggling in the trenches but not quite making the quantum leap to the much narrower part of the pyramid 10 or so percentiles higher?
On the second graph down note the leap it would take for the meritorious to increase his income by $10,000/year
http://lanekenworthy.net/2008/03/09/the-best-inequality-graph/
Posted by: Jack | 02/03/2014 at 04:55 AM
I don't think we have the slightest idea how to stir the ambitions and develop the talents of people in the bottom fifth of the income distribution. But taxing the rich to increase the dependency of the poor seems to me to be least plausible suggestion yet.
Better, perhaps, to decrease the amount of social blather encouraging the false belief that wealthy people are responsible for keeping everyone else "down." But then the First Amendment stands in the way of that.
It may be worth reflecting, instead, on the fact that people living on $34,000 a year are already in the 1%, if the relevant population is the entire world, not just the U.S.
Posted by: Thomas Rekdal | 02/03/2014 at 06:53 PM
Ahh Yes... The "Gilded Age" meets the "Bell Curve" or "Normal Distribution Curve". We handled and somewhat corrected the excess's of the Gilded Age by a dynamic, progressive, social attitude and policies that "raised the boats" of most everyone except a small percentage. Now we're confronted by the "Bell Curve". As for solving this problem, we need to discover the root causes of this statistical anomaly and deal with them in the same dynamic and progressive manner in which we dealt with the "Gilded Age".
Hope always springs eternal...
Posted by: Neilehat | 02/04/2014 at 09:06 AM
This focus on "social mobility" is pure nonsense. What we want to promote is a meritocracy--a society in which the cream can rise unimpeded, unfettered by rules regarding nobility, wealth of parents, college degree, occupational licensing, color, race, sex and so on.
In distant times, Amerikans like Franklin, Washington, Ford, Carnegie, Wright Bros, Edison, Firestone and numerous others did not have to have college degrees or be licensed to practice a profession. Nowadays, you can't cut somebody's hair without a license.
Social mobility would serve meritocracy nowadays in allowing the cream to rise and the milk to sink. It would be a positive thing. Social mobility is of no use, and would indeed be negative, if we did have a meritocracy.
I would be useful to list those things that nowadays do work to impede the social mobility we need in pursuing a meritocracy: public education, backward parenting, religion, licensing, restriction on immigration, and censoring of speech.
Posted by: jim kirby | 02/04/2014 at 02:59 PM
Thomas? A full tap dance in support of the soaring wage-wealth inequality that IS a hefty extra drag on our entire economy?
I see the "even our poor are well off by comparison to the worst off in the world thingy from time to time, but not all that often these days. Do you post it in support of "Buying Chinese?" or profitably (for the corpies) MORE offshoring of what were once OUR jobs?
Ha Neil~ A few things I recall of the venerable Bell Curve. One being that of their being few at each end of the curve, thus, NOT all that difficult to bring that lowest 20% up to a decent std of living including the free or affordable access to H/C of Canada and other more civilized nations.
Then there was the symetrical shape of the famous curve, you know with most of the sample being within a std deviation or so from the average. Trouble with our "bell curve" of income is that of it looking more like half a dozen books slumped against one book-end.
"Funny thing" a "meritocracy" made up of folks who tend to fair into the old symetrical bell curve while the "curve" of wage-wealth is so heavily skewed.
What do folks here think about, say, the income of a tradesman like...... say a cab driver the craft and duties of which haven't changed much during the doubling of per capita income? On the one hand it would seem that as he hauls increasingly productive (and wealthy) folks to the airport or their jobs that he'd benefit by at least SOME trickle down. On the other we could say "Well cabbies are a dime a dozen and new ones are slipping in from Pakistan every week", let them slip below the poverty line and become eligible for gov bennies to make ends meet.
Jim? Do you read the responses? Or is your "deal" more that of misspelling Amerika? for some reason?
Geez........ I told you above that it's all about meritocracy and why said merits are not floating the skiffs and day boats up toward the yachts of the one percenters whose upward mobility increases day after day -- even when the companies they run (and pillage?) are paying huge fines for their negligence....... and worse.
As for past super stars not having college et al.......... much the same could be said for those of little fame who succeeded well beyond the level and even hopes of their parents. Without the rungs on the ladder being available many will still have the "merit" but perhaps lack the will to repeatedly bang into a glass ceiling and opt to just go home early or chuck it all in favor of a more lucrative career in satisfying America's seemingly infinite demand for various vices.
Posted by: Jack | 02/05/2014 at 07:52 PM
Jack, I post to assert the modesty of what we know--with respect to social mobility and the effects of economic inequality. Nothing Posner has said so far moves the needle, so far as I can see.
Please focus more in your responses, or tell me what you are drinking. One of us is having too much fun.
Posted by: Thomas Rekdal | 02/05/2014 at 08:15 PM
Thomas... sure!
"This focus on "social mobility" is pure nonsense. What we want to promote is a meritocracy--"
........ so we both favor something akin to a meritocracy (while knowing that a capitalist (or other) economy can't cut that fine)
Now..... let's define upward mobility as that of "doing better than one's parents", OK?
Now, in a static model with only merit being rewarded the only way to "do better" (upward mobility) than the parents would be that of garnering more merit. For example say a Bill Clinton having done quite a bit better than his car salesman stepfather. More seriously under a static model with no population growth or techno change it would be tough for the sons to outdo their parents, kinda the reason small farmers were prone to be small farmers for generations.
Bu! instead of a static model we have one of lots of techno change and with productivity doubling in not much longer than one of today's generations. So..... with that kind of tailwind surely MOST should outdo their parents if measured by either productivity or income.
Yet! our Profs are not sipping champagne over great stats indicating high mobility, but are trying to cling to "mobility being maybe the same as a prior age" if tweaked here and there. For the individuals of a society that's NOT very good.
And especially not if we zoomed out and looked at the nation as a whole. Yep! The first year student would cry, "Look at that US go! They've worked hard and wisely to double their productivity in less than 30 years and have done the same with doubling GDP! Everyone must be ecstatic about so outpacing their parents!"
But the novice was only seeing the average, as we see in these two graphs (and more if you like) such is not the case and all too many are scrambling hard just to maintain parity with the parents despite the strong tailwind of soaring productivity and increased GDP.
Now! if you could clearly explain your thesis statement:
his focus on "social mobility" is pure nonsense. What we want to promote is a meritocracy--
http://lanekenworthy.net/2008/03/09/the-best-inequality-graph/
Posted by: Jack | 02/05/2014 at 11:35 PM
As has been said, "With great wealth comes great responsibilities", including Socio/Economic development and improvements. Something Andrew Carnegie (one of the top out of sighters) of the Gilded Age recognized when he penned the "The Gospel of Wealth", which was to become one of great philanthropic and social programs of the U.S.. Unfortunately, we no longer see such social attitudes and beliefs by the top tiers of the Socio/Economic stratum. Hence the rise in the belief, "Get your hands off my stack - it's mine, mine, mine!" And so a coruupted Congress responds in kind... Although there are exceptions, like Warren Buffet and Bill Gates...
Posted by: Neilehat | 02/06/2014 at 09:49 AM
Jack, thanks for your elaboration. You do convince me (if I needed it) that social mobility in America stinks. I am just not sure what to do about it. I do, however, fully share your skepticism about promoting meritocracy. It seems to me that the market is doing the job well enough. I do not understand why "merit" consists in providing ever more convenient ways for inane people to communicate their inane thoughts with other inane people, but there is no doubt that those who are good at this are getting very, very rich. Upward and Onward.
Neilehat puzzles me with his observation that our modern stars of philanthropy (such as Buffet and Gates) cannot begin to compare with such Gilded Age saints as Andrew Carnegie (and maybe Milton Hershey?), who gave us the seeds of so many public libraries, most of which are now mausoleums of a dead technology. Sic transit Gloria mundi. The consequences of the Gates and Buffet gifts are yet to be determined, but at least they will save a lot on estate taxes.
Posted by: Thomas Rekdal | 02/06/2014 at 04:33 PM
Tom, once again you misread and misinterpret. Use your brain for something other than keeping the inside of your head warm... As for Buffet , Gates et al., they are the modern equivalent of the "Gilded Age" Philanthropists. As for Carnegie's Libraries and other Public Institutions (that "raised everyone's boat")developed by Philanthropy; they have become the victims of a failed Tax base due to tax cuts to placate the greed of others along with Congress's complicity. And we wonder why we have problems breaking the slavery imposed by the "Bell Curve"... "ignorance is no excuse".
Posted by: Neilehat | 02/07/2014 at 08:27 AM
Neilehat: OK, I acknowledge my failure to recognize in Buttfet and Gates as the modern exemplars of the "Gospel of Wealth." But I am still inclined to believe that the nobility of Carnegie's intentions were defeated by technology, not the machinations of those who manipulate the tax code. (What more can you expect from the mentally deficient?)
Posted by: Thomas Rekdal | 02/08/2014 at 06:39 PM
Recently many people have latched on to the idea that raising the minimum wage will help to lessen inequality. The President has made a lot of noise with this "populist issue" declaring it only fair. Unfortunately raising the minimum wage will make America less competitive and it will reduce opportunities by giving employers less incentive to hire. It will cause small businesses to cut hours and reduce the number of employees working at any one time. Shorter hours and a drop in service will add to the reasons that small businesses often fail to compete and are forced to close their doors. I content the link between minimum wage and inequality is very weak in the post below and it is a distraction to take our eyes off more important issues.
http://brucewilds.blogspot.com/2014/02/minimum-wage-weak-link-to-inequality.html
Posted by: B Wilds | 02/10/2014 at 06:23 AM