The Mirage of Income Mobility

A recent study by Raj Chetty and several co-authors suggests that income mobility has not greatly changed over the last generation. It is still as easy to move up the income ladder as it once was, contrary to the premise of many politicians who want to justify new government programs to increase income mobility. But why should we care about the degree of income mobility in society? Would greater churning improve society, such that, in every generation, the children of the poor would become rich and the children of the rich would become poor? This merry-go-round would open up prospects for the current poor but could also mean more conflict, as the rich would redouble efforts to use the law to keep their children on top.

Perhaps the focus on income mobility serves as a proxy for concern about social structures that prevent people from rising to the heights their talents warrant. And certainly if such structures are backed by the force of law, they are very bad and should be eliminated.  Titles of nobility, for instance, are to be condemned but fortunately the United States Constitution already forbids them.   Other state-forged manacles impede the rise of the talented.  For instance, lousy K-12 education supported by the taxpayer dollars hurts the poor in particular and is in urgent need of reform.

But changes in income mobility, even if they were demonstrated, are poor proxies for gauging the existence of such barriers, let alone their root causes. A society that dismantles legal barriers to mobility and becomes more meritocratic may well have less income mobility once the barriers are eliminated than during the transition, when people without merit but with connections sink toward the bottom. Moreover in a meritocratic society, people tend to marry people of comparable ability. Such assortative mating almost certainly decreases income mobility, because it makes it more likely that children of smart and high-earning parents will also be smart and high-earning. Yet it seems unlikely that any liberal society wants to interfere with marriage decisions.

Sometimes the concern is that families in the upper echelon will use their wealth to pass on advantages to their children. Greg Mankiw recently did some back of the envelope calculations that cast doubt on the centrality of such expenditures to maintaining income ranks. But even if such intergenerational transfers did provide lasting aid, should they be discouraged? Helping one’s children is a great good, at the core of human flourishing. And in a free market amassing wealth to achieve that goal generally helps unrelated people as well, as the necessary labor creates innovations or ways of financing and distributing them.

By all means improve education to help children shoot for the stars and repeal laws that prevent people from reaching their full potential.   But stop focusing on the mirage of income mobility.

 

John O. McGinnis

John O. McGinnis is the George C. Dix Professor in Constitutional Law at Northwestern University. His recent book, Accelerating Democracy was published by Princeton University Press in 2012. McGinnis is also the co-author with Mike Rappaport of Originalism and the Good Constitution published by Harvard University Press in 2013 . He is a graduate of Harvard College, Balliol College, Oxford, and Harvard Law School. He has published in leading law reviews, including the Harvard, Chicago, and Stanford Law Reviews and the Yale Law Journal, and in journals of opinion, including National Affairs and National Review.

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Comments

  1. R Richard Schweitzer says

    Whilst this is not to disagree with your positions, as one who has actually gone through the paper cited, care should be taken to analyze and think through the correlations it references and the inferences taken from them. Some of them, such as the range of income differential from post secondary education are now showing declining trends (for numerous reasons).

    So, look at the correlations from which inferences are drawn.

  2. KLDimond says

    I was attracted to this article because the paper’s name is similar to what I see as a true and meaningful measure of the economy.

    In looking at papers like the one you reference, I ask myself if there is a problem that is being addressed–effectively, an ulterior motive that might explain the findings even before the research. Academic papers, like advertising messages, can be used to move people one way or another (we see this, for instance, with David Hemenway and crew at Harvard’s full-throatedly anti-gun Injury Control Research Center and its results-oriented “research”). The intelligentsia like papers; the average guy responds to pretty girls, exciting cars and maybe those Archer Daniels Midland ads. Either way, the appeal to authority can be compelling for the unsuspecting.

    What I suspect is that this paper is an attempt to convince the intelligentsia that “things are normal,” so that they can pass it on to us dullards. “It may seem bad, but really, it’s just the way it’s being looked at. Here, let us reframe it for you so you can see the silver lining in the dark cloud.”

    Otherwise, does it really matter that approximately the same percentage of each generation rises to “the top” consistently? Isn’t this intuitive? What is the top? Is it that $78k median figure I saw yesterday on Monster.com for management consultants as the top career of the most quickly growing fields? If so, let’s compare it to the “top” from a few years ago… I would venture somewhere near twice that–before that falsely nonexistent inflation we keep not hearing about. So, now where is the meaning in the proportions who “make it to the top”? It’s ridiculous, except inasmuch as a tool to pacify the unsuspecting.

    Since I suspect that their point is in fact economic propagandizing, let me offer that most measures of the economy, the ones we hear about, measure only a segment, if that. The stock market may measure a segment, or perhaps not, if we calculate inflation (the real thing, more “money” in circulation) against stock market rises. I could go on, but I think I don’t need to…

    What I propose as the true measure of the economy, one that Joe Sixpack (uhhh… me) can appreciate and that actually measures the robustness of money and industry, etc., is job mobility. If Joe knows that he can quit or lose his job and replace it relatively easily, either with another job or by going into some business of his own, then Joe will not tolerate nasty games that we see in this economy: major downgrades in pay of sitting employees (mine was 27+% on top of the fact that I am grossly underemployed–more, by 25%, than I was 10 years ago), downgrades in benefits (we lost worthwhile Kaiser in favor of worthless Anthem Blue Cross, and I see many companies abandoning pensions and cutting paid time off, etc., in this employment buyer’s market).

    Yes, the economy, properly measured, is in its composite status as either a buyer’s market or a seller’s market when it comes to employees and services of small, independent suppliers. And subsidiary measures would be… “what education does it take to get a job doing…” (Years ago, employers were in enough need that they didn’t offload the cost of education on the employees as they do now. In other words, they TRAINED engineers, not rented them.). “How hard will it be to find suitable employment?” “How hard is it to career switch?”

    Well, I’ve had a blast writing this, speaking the truth of my mind. I hope you’ve enjoyed reading it. Moreover, I hope I’ve hit on something that is worthwhile food for thought!

  3. gabe says

    KL:

    Some interesting tidbits.
    Sorry to hear about your situation – regrettably it is all too common.
    I do like your measure for economic health – job mobility would seem to give a good indication of job creation / productivity in the market.
    I suppose that where most of us went wrong was in not getting a job in government where the benefits constantly improve, wages go up, number of employees grow epidemically and even if you want to get fired you probably can’t.
    In fact seems to be the prime qualification for switching jobs – usually upward.
    When more and more resources are allocated for the government, less is available for the private sector. appears to be a connection there, don’t you think.

    take care
    gabe

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