Miles Corak has for years been making important contributions to the relationship between inequality and mobility. His data generated the figure in a recent presentation of the issues by White House economist Alan Krueger, featured here.
Corak posts a more recent version of the graph with more countries. Recall that the graph shows the relationship between inequality in these economies (x-axis) and lack of mobility (y-axis -- the "intergenerational earnings elasticity" is a measure of correlation between the income of grown children and their parents -- higher values suggest less mobility).
First of all, note that in the Krueger chart, the US scores among the highest on the combination of the two variables, but that's because that sample is limited to only "advanced" economies -- a legitimate comparison, by the way, as these economies are the most similar.
But here you see how we exist at the borderline between advanced and emerging. The question then becomes, which way do we go -- up the line toward South Africa or down the line toward Denmark?
My fear is that until we deal with the underlying structural factors driving inequality ever higher (outside of recessions), it's the former.
* Note: Scott Winship of the Brookings Institution has raised questions about these data and relationships that Corak addresses (and debunks) on his website (which is a treasure-trove of top quality info on these issues).
This post originally appeared at Jared Bernstein's On The Economy blog.
It argues, "everything that I'm doing is legitimate, and everything that you're not doing is just bad luck. I'm in first class; you're in steerage. Sucks that I have a lifeboat and you don't."
"The rich and the poor have always been with us," but many ways of becoming insanely-wealthy consist of committing intentional torts against millions of people ... enabled, very much so, by the High Crime of Bribery.
Inequality will always be with us. But, I'm not talking about inequality. I'm talking about felony. THAT, we can address.
the trend is the answer. has the chart for the usa moved up the line or down the line. has the usa become more immobile as wealth becomes more concentrated. that is an easy question. how about the other countries? which way are they going? that is the real question.
"As riches increase and accumulate in few hands . . . the tendency of things will be to depart from the republican standard." Alexander Hamilton
Thomas Jefferson, "I hope we shall crush ... in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country".
Bunch of Marxists, right?
The founders were Locke liberals fighting against the Burke conservative multinational plutocrats, like the East India Tea company at the Boston Tea party.
Money and economic rules are human construct with flaws: wealth accumulates into too few hands, choking the economy and impoverishes the 99%. Automation just makes that much worse. The cure for that is progressive income taxes.
Sweden, Germany, Holland and Ike's USA all show us how to have a great citizens safety net, great infrastructure and great economies, including lots of billionaires and millionaires. They are happier, live longer, more educated and more productive.
The USA today since Reagan, shows us how to return to plutocracy, just what our country was founded against.
We should ask why Pakistan and Switzerland plot on top of each other. And the Ukraine falls midway between France, Germany, and Japan? What's that mean?
I've stated that the GINI can as easily reflect a much higher ceiling as it might a lower floor. I am asserting that in the US, the floor is about the same height as elsewhere, but the ceiling is far higher.
On the income elsticity quotient, I think this also deserves some critical thinking. Absolute mobility would always be a two-way street: every person who rises into the top 20% automatically demotes someone else. Simple math. This income elasticity factor seems to work differently, but how differently? If income elasticity between generation is high, it means that more people are doing better than their parents, but it also implies that more people are doing WORSE. Low mobility would imply that fewer children are relatively rising, but fewer children are also relatively falling.
This statistic seems to reflect the stage of development of an economymoreso than it does current circumstances. The US peaked while the rest of the world was in shambles. Nations wax and wane, nothing goes up forever.
I'm not sure that we know any such thing. Not that it's relevant, but the poverty rate is more like 15%, not 50% (and it's very similar, slightly lower, than the poverty rate in the EU):
http://en.wikipedia.org/wiki/Poverty_in_the_United_States
vs
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-18012010-AP/EN/3-18012010-AP-EN.PDF
But that's neither here nor there.
The real question is, how do the people that we consider "poor" stack up to the poor in other countries? Because once a person or family has the necessities of life, all the rest are curiosities most often portrayed on reality TV shows.
I don't think that the poor in America are any worse off than the poor anywhere else, with the possible exception of some genteel and exclusive boutique nations in Europe (which could not possibly hope to scale up to put 310 million highly diverse citizens under the umbrella).
I don't share your focus on how much more someone else may have. I have more than enough to be happy ... if I'm not happy it isn't because I don't have enough "stuff". Justice is something I measure by the fairness a citizen receives when dealing with the courts, not by the contents of bank accounts.
That's why they plummet straight down into the middle class or lower.
Inheritance taxes should be aggressively supported by any would be free-marketeer ideologue. The fact that we don't see this, don't hear the right fighting for increasing inheritance taxes, means only one thing...the right is not fighting for freemarket principles...they are just fighting for the legacy of their rich children and their children's children.
Confiscatory taxes of inheritance sounds great to many, especially when they're chanting populist mantras - but it is not right.
What keeps people poor is their failure to accumulate, through a lifetime of hard work, an estate of capital. This is almost entirely due to government programs that promise to care for people, so they don't have to care for themselves. Instead of saving for retirement, people rely on social security. So their children, rather than receiving that modest inheritance when their parents pass, instead receive nothing and every generation has to start all over again at "zero".
This is the cycle of poverty. And you propose, instead of encouraging all citizens to break out of that cycle, oh no, instead you propose that the government impose that cycle of poverty on everyone. Our nation would be infinitely poorer is we were to follow your philosophy, and infinitely wealthier if we were to encourage our citizens to pursue the cycle of prosperity.
Any serious investigation into large datasets of this type would most certainly result in the researcher grasping at straws in an attempt to make a Printable Statement. I find it hard to believe that a person could reasonably compare the lifestyle of a family in west Texas, and one in upstate New York and make value judgements that withstand scrutiny.
http://www.nationalreview.com/agenda/288420/guest-post-scott-winship-offers-response-miles-corak-economics-great-gatsby-curve-reih
While the egg-heads argue about how to fit a line, perhaps real people can add their two-cents. Experience in life has shown me that income inequality among a persons parents has little to do with how well, or poorly, their children might fair. My recent discovery of Facebook (yeah, I was late) has provided me the opportunity to reconnect with people I haven't seen in 20+ years and see how their doing.
No surprise, people that I had a lot of respect for did well, and those that I didn't did not. How well my former classmates are doing is nearly 100% explained by their personal drive and genuine interest in learning. I find it hard to believe that an economist will find an adequate proxy for that on his chart, as people are not dots.
Suppose another high school twenty miles down the road had a completely different socio-economic mix of people. Am I to assume that within that "cell", personal drive and a genuine interest in learning would not be important in determining success later in life? Would the same relationship not hold?
While it may be true that the folks from this hypothetical institution may have ranked higher or lower on the aggregate, is it appropriate to allocate that difference to their parents socio-economic status?
When you go to college or apply for a job, does anyone really care where you went to high school?
The world has a problem and we all must face that.There are far to many of us.10 billion people will come in just a few years,at that point we become parasitic.
The way to reduce pressure on everyone is to slow and then reverse our numbers.There is no other viable solution.
After the Black Death in Europe the people had ample land and there were few Lords and Ladys to make them pay taxes.Nobels with blisters and dirt under their nails,that is a site to see.
And it is interesting to note that REPUBLICANS assert that 'Planned Parenthood" (with or without abortion) is a terrible evil both here and in Bangldesh.
Yes comparisons and graphs can get complicated but common sense and especially just plain history comes to our rescue. For example, history shows that big inequality of wealth produces recessions, and gigantic inequality (like 1928) procuces depressions.
There are only two types of people: those who produce things that others want, and those that take things from others by force. The public sector, like organized crime, falls into the latter category.
The public sector doesn't just receive, it takes.
If the public was receiving a fare share of the returns that corporations generate with tax subsidies, or in recovering our nation's resources we'd be able to provide free education from K-Graduate school, and free healthcare. This can be done. Alaska, a GOP red state, is an example. They provide oil royalty checks to every resident citizen. Every US citizen should be either receiving a royalty check, dividend, or in kind payment, i.e. free education, healthcare and pension, for the TRILLIONS of profits they either assist or allow the corporate sector in generating with subsidies, or simply by recovering resources, as in Alaska. Even Sarah Pallin bragged about this fact when she ran with McCain. It can be done. It should be done. Eventually, it will be done.
Because what are perpetual trusts but entailed, title-linked properties (and therefore power and influence) under another name?
I agree, but I'd be reluctant to assign blame. Because we have become a victimhood society, where victimhood confers special consideration and dispensation? Because of well-intended government programs that inter-generationally lock families into dependency? Because longstanding, Viet Nam-era cynicism ("Hey, hey LBJ, how many blah blah blah") toward America and American culture leaves us with no common handle to grasp and share, convinced that "the system" is stacked against us? The active and energetic embellishment of inequalities for political advantage?
We Americans are destroying ourselves and each other over a philosophical argument between the interdependent-BigGovernment crowd and the independent-SmallGovernment crowd. Whoever wins, before we're done it may well be a Pyrrhic victory.