BUSINESS
06/12/2013 10:12 am ET | Updated Jun 12, 2013

What The Great Gatsby Teaches Us About America In 1 Chart

AP

There's more to take away from The Great Gatsby than that Leo DiCaprio and a Jay-Z soundtrack can mix surprisingly well, according to the White House.

The White House has released a chart illustrating the "Great Gatsby Curve," a concept Alan Krueger, the chairman of the White House Council of Economic Advisers, introduced last year. The curve, Krueger said, helps explain that children born into countries with higher levels of income inequality are less likely to move up the income ladder later in life. (You may remember from high school that one of the themes of The Great Gatsby revolves around the consequences of extreme wealth).

The concept isn't going away. Because of a rise in income inequality over the past 25 years, the income advantages and disadvantages that parents pass on to their children is expected to rise by about 25 percent over the next generation, Krueger said in a speech last year, when he first introduced the concept.

“The fortunes of one’s parents seem to matter increasingly in American society,” Krueger said at the time.

The White House released a graphic on its Tumblr Tuesday illustrating the curve:

great gatsby curve

The Great Gatsby curve is just one of the many consequences of rising income inequality in America. The International Monetary Fund found that reducing income inequality could prolong periods of economic growth. And Nobel Prize-winning economist Joseph Stiglitz argued in a New York Times op-ed that income inequality is holding back America’s recovery.

As the White House blog post notes, President Barack Obama has introduced policies to combat income inequality, like raising the minimum wage and offering universal pre-school. But there’s still more to be done if we want to stymie the Gatsby curve trend; America’s relatively low top tax rate on the rich is likely worsening income inequality, according to a recent study released by the National Bureau of Economic Research.

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