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Tuesday, September 29, 2009

Social Mobility

Andrew Leigh says this is a "a terrific piece on social mobility":

American dreams, by Peter Browne: When Barack Obama spoke to schoolchildren at Wakefield High School in Virginia last week, he drew on his own experiences to argue that all young Americans, regardless of their family’s wealth and income – even kids who “goofed off” at high school, like he did – have the potential to rise to the top. ...
But how typical is [this]? ... The seductive idea that anyone can move up the income scale might mean that Americans are more tolerant of a degree of inequality that would cause much deeper unease in many other western countries. ...
[R]ecent research drawing on a series of studies from Europe, the United States and Australia ... has concluded ... that among comparable countries, the United States has an unusually rigid social system and limited possibilities for mobility. ...
President Obama is no doubt aware of this research, and has made oblique references to the problems facing low-income families and neighborhoods in speeches and interviews. But the mobility myth is so widely believed and so deep-seated that it’s not surprising he hasn’t tried to confront the problem head on. When the Economic Mobility Project [2] surveyed 2100 adults and ran ten focus groups earlier this year it found that respondents overwhelmingly believe that personal attributes – “like hard work and drive” – are the prime determinants of how economically successful an individual can be. A smaller majority also disagreed with the statement that “In the United States, a child’s chances of achieving financial success is tied to the income of his or her parent.”
As the studies show, that statement is true for ... a higher proportion of American children than in most comparable countries. Among the twelve countries analyzed by economist Anna Cristina d’Addio in a 2007 OECD report,... the United States was in a group of four – with France, Italy and Britain – where family background plays the greatest role in influencing adult income. Children born into a poor family in any of these countries had a much lower chance of breaking into a higher income group than in any of the other countries in the study. ...
Britain came out worst, with around 50 per cent of a person’s income explained by his or her parents’ income. ... Italy and the United States weren’t far behind, at around 47 per cent. At the other end of the range were Denmark, Norway, Finland and Canada, where parental income explained less than 20 per cent of the child’s eventual earnings. ...[I]t’s those four countries, rather than the United States, that come closest to realizing the American Dream.
Some studies have found that mobility is not only limited in the United States but has worsened in recent decades. ...
Why do some countries fare so badly...? The OECD report offers the most comprehensive list of likely factors, but its conclusions are tentative. ... But looking at the factors that the OECD believes contribute “significantly” to differences in mobility, it isn’t hard to see why the United States performs badly...
First, there’s the problem of entrenched income inequality. “In general,” says d’Addio..., “the countries with the most equal distributions of income at a given point in time exhibit the highest mobility across generations.” Among the twelve countries examined in the report, the United States has the most unequal distribution of income. ...
Equally interesting is the role of immigration in pushing up mobility. Overall, immigrants tend to be more upwardly mobile than the broader population. ... Yet the United States doesn’t seem to have gained the ... benefits from migration... This clearly has something to do with how well migrant students perform at school. ...
The other key factor identified indirectly by the OECD, and more explicitly in a new Economic Mobility Project [8] report, is a strikingly low level of mobility among black Americans. ... The author of the Project’s report, New York University sociologist Patrick Sharkey, finds that growing up in a high-poverty neighborhood “increases the risk of experiencing downward mobility and explains a sizable portion of the black-white downward mobility gap.”
These neighborhoods usually suffer from other warning signs for low mobility identified in the OECD report, including a high rate of male unemployment at the time of a child’s birth and a high rate of relationship breakdown. ...
For Barack Obama, the ... reform that’s causing him the most difficulty at the moment – healthcare – also has implications for economic mobility. Child birth-weight is a “significant” factor in explaining low mobility, and the child’s mental health and parents’ physical health are “significant and large” factors, according to the OECD. Like any measures designed to break down the rigidity that keeps many Americans poor, improvements in health will take some time to influence overall mobility. But a system of health insurance for all Americans would certainly have an impact in the long term.

Ironically, the remarkable rise of Barack Obama could make it harder for Americans to recognize the shaky foundations of the American Dream. And the fact that so many people continue to believe the myth could make the problem worse. As the American researcher Isabel Sawhill writes, “When those who are relatively poor believe that they or their children will rise in status over time, they are less likely to complain about the status quo and more likely to accept the prevailing system.” ...

Is it true that we tolerate inequality because we believe we are highly mobile, and that merit rather than family background is the most important factor in determining social outcomes? Even if it were true that merit is the most determinant of social mobility, that is not enough. The opportunity must be present before those with merit can take advantage of it, and ensuring that everyone has a chance to succeed is an important step in fixing the mobility problem. Nothing will ever be completely equal, some people will always have more opportunity than others to get ahead, but we could do a whole lot better than we are doing now at creating the opportunity for people to reach their full potential.

I am not generally predisposed to redistributive policies, and the best solution to the mobility problem is to ensure everyone has an equal chance to succeed. But since equal opportunity is a long way from reality, I believe that redistribution that compensates for differences in opportunity is justified.

    Posted by on Tuesday, September 29, 2009 at 04:35 PM in Economics, Income Distribution | Permalink  Comments (49)


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