Social Mobility and Income Inequality—Posner

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.

via:http://www.becker-posner-blog.com/2014/02/social-mobility-and-income-inequalityposner.html