Same ladder, bigger steps
Welcome to the Counterparties email. The sign-up page is here, it‚Äôs just a matter of checking a box if you‚Äôre already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.
Let‚Äôs be happy that it‚Äôs not getting harder to climb up America‚Äôs economic ladder; let‚Äôs be sad that it‚Äôs not getting easier. ‚ÄúChildren entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s,‚ÄĚ the authors of a new, much-discussed¬†study write. They found that American economic mobility has remained stable during the second half of the 20th century.
David Leonhardt¬†says that these findings run counter to a certain type of post-crisis conventional wisdom and¬†arguments¬†recently put forward President Obama and top Republicans. The study‚Äôs authors cite 2011 articles by¬†Fareed Zakaria¬†and¬†Rana Foroohar¬†that express worry about America‚Äôs ostensibly waning economic mobility.
Jared Bernstein¬†wonders why we think stagnating economic mobility is news: the findings mostly confirm what economists know. Still, the study‚Äôs authors and Bernstein say that three decades of rising American income inequality have changed what it means to climb the income ladder. Here‚Äôs Bernstein:
It is human nature to assume that stability is what we want, and in this regard, the finding of this paper could be misconstrued. While stable mobility is unquestionably better [than] declining mobility, as the rungs of the ladder become more distant, it takes bigger steps to climb.
Rising inequality, the authors write, means that ‚Äúthe consequences of the ‚Äėbirth lottery‚Äô ‚Äď the parents to whom a child is born ‚Äď are larger today than in the past.‚ÄĚ¬†Jim Pethokoukis¬†writes that the study — from economist Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez — contradicts liberal arguments that income inequality hurts economic mobility. (More on that debate¬†here). Family structure and civic involvement, Pethokoukis points out, may also be key factors. ‚ÄúThe fraction of children living in single-parent households is the strongest correlate of upward income mobility,‚ÄĚ the study‚Äôs authors write.
The study‚Äôs authors call the geographic effect on mobility America‚Äôs ‚Äúlands of opportunity‚ÄĚ — San Jose has the highest rates of economic mobility, and Charlotte, North Carolina has the lowest. (The WashPost has a big, cool map¬†here). As a whole, though, America may be relatively lacking in opportunity: it has¬†lower levels¬†of economic mobility than many of its OECD peers, including France, Germany, Sweden, and Canada. -- Ryan McCarthy¬†
Further reading:¬†Pew’s Economic Mobility Project
On to today‚Äôs links: