With income inequality and social mobility in the air, two articles in the Economist challenge the conventional wisdom.
One is a report on a study conducted by economists at Harvard and Berkeley that concludes, in the Economist’s words, “Despite huge increases in inequality, America may be no less mobile a society than it was 40 years ago.” This study is based on a larger collection of data than any previous study —“over 40m tax returns of people born between 1971 and 1993.” Focusing on mobility between generations, the study calculated the chances that “a child born into the bottom fifth of the income distribution will climb all the way up to the top fifth.” None of the measures changed much over that time: “In 1971 a child from the poorest fifth had an 8.4% chance of making it to the top quintile. For a child born in 1986 the odds were 9%.”
Americans perceive stagnation in social mobility, the Economist suggests, because of “the soaring share of overall income going to the top 1% (from 10% in 1980 to 22% in 2012).” Yet, “the correlation between vast wealth accruing to a tiny elite and the ability of people to move between the rest of the rungs of the income ladder may be small—at least for now.”
Later in the issues, the magazine has a review of Gregory Clark’s The Son Also Rises, which takes an even longer view of social mobility and concludes that immobility is the norm. Using surnames as his principal evidence, and examining records from the Domesday Book to membership lists for the AMA, Clark concludes that “With surprising consistency across countries and eras, mobility is found to be painfully slow. Birth has predicted more than 50% of one’s income or education status, Mr Clark reckons. Erasing the legacy of past prosperity takes 10-15 generations rather than the three or four implied by sunnier estimates. So the shadow of 18th-century wealth still darkens income distributions today.”
Clark argues that there is little evidence that government policies can do much to change this: “Efforts to democratise education and eliminate discrimination over the past century appear to have had no discernible effect on mobility. And this leads him into controversial territory: “Mr Clark to conclude that mobility is strongly linked to underlying social competence—an ‘inescapable inherited’ trait. Only the intermarriage of people who are more prosperous and educated with those less fortunate will dilute the genetic resources of well-off families, slowly pushing them back towards the average and preventing the rise of a permanent overclass.”
Clark prescribes redistributionary policies: “Redistribution is sensible, he argues, not in order to boost mobility but because mobility is intractably low. The cream will rise regardless, and so paying extraordinary salaries to capable workers is unnecessary. If high rates of mobility are used to excuse or justify inequality, he suggests, then the reality of low mobility implies something quite different: that great inequality serves little purpose and redistributing income from the rich to the poor might raise overall welfare at little economic cost.”
This doesn’t seem to follow. If the cream rises, it’s not clear how redistribution will even things out. Perhaps Clark needs to read that Harvard/Berkeley report, since his analysis appears to assume that high inequality and low mobility are necessarily connected.