Mobility remains low as inequality increases

Inequality means that some income earners claim a larger slice of the pie than others. Some people might argue that this is not such a big problem if everyone has an equal shot at winding up at the top. Some even claim that this is the essence of the American Dream; that regardless of where you begin, if you work hard, you can have all the opportunities to succeed.

Unfortunately, income mobility—movement between income classes—is less common than purveyors of the American Dream would have you believe. An article by Jason DeParle in today’s New York Times discusses important findings from five large studies, including research by Markus Jantti and coauthors and Miles Corak, which both show mobility in the U.S. lags behind its peers. Significant other research has demonstrated a similar lack of mobility in the U.S.

In a world of perfect mobility, people will be able to move up in the income distribution with hard work and dedication, regardless of where in the distribution they started out. One way of thinking about this is by looking at college completion rates by income status and eighth grade test scores. If all it took were high test scores to get ahead, no matter what your income, you would have an equal opportunity to graduate from college. These data tell another story: High-income students who have low test scores are more likely to graduate from college than low-income students with high test scores.

Other research demonstrates that mobility is more restricted for some groups than others. African Americans who start out in the bottom 25 percent of the income distribution are nearly twice as likely to remain there than whites.  In addition, white Americans who start out in the bottom 25 percent are about four times more likely to make it to the top 25 percent of the income distribution than blacks.

As DeParle notes in his article, the notion of the American Dream is actually less common in the U.S. than in many peer nations. Look at the relationship between a son’s earnings and his father’s earnings. The likelihood of a son staying in the bottom 40 percent of the wage distribution if his father was in the bottom 20 percent is higher for those in the U.S. than in peer countries (Denmark, Finland, Norway, Sweden and the United Kingdom). The U.S. also boasts lower rates of upward mobility because a lower share of sons with low-income fathers end up in the top 40 percent of the wage distribution than in similar countries.

A new paper by Katharine Bradbury released last fall looks at changes in mobility across time. The figure below shows the percent of those in the poorest and richest quintiles that move up or down and those that move far over the subsequent 10 years.

While it is not clear that mobility has fallen, it is evident that mobility has not increased. Although many argue that income inequality is acceptable in the U.S. if mobility is also greater, this clearly shows that mobility has not increased enough to offset the drastic rise in inequality over the last 30 years.

  • clarenceswinney

    hOW CAN THAT BE? Local Libertarian paper just had article from Heritage that Mobility is alive and active?
    burlington nc

    • EconomistToBe

      I love to see this article and it’s statistics is there any way to get a link?

      • clarenceswinney

        Disqus generic email templateINEQUALITY.ORG many on a google search
        I am compiling a DVD (Chart only) to show in pics how Middle Class was Built–1945-1980 then Destroyed 1980-2009. It will yield more than and dozens of books and thousands of words email me for copy in 30 days and if ready will send a copy.

        —- Original Message —–
        From: Disqus
        Sent: Monday, January 23, 2012 11:56 PM
        Subject: [epiblog] Re: Mobility remains low as inequality increases

        EconomistToBe (unregistered) wrote, in response to clarenceswinney:

        I love to see this article and it’s statistics is there any way to get a link?
        Link to comment

  • Nita Dossin

    Great article pointing out a shared American value — most Americans agree that economic mobility is important. Why not ‘build in’ mobility for all Americans regardless of race or background, as proposed in the policy paper at ? Remove barriers to workers who need to change jobs. Thanks.