Same ladder, bigger steps

January 23, 2014

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Let’s be happy that it’s not getting harder to climb up America’s economic ladder; let’s be sad that it’s not getting easier. “Children 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,” 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’s authors cite 2011 articles by Fareed Zakaria and Rana Foroohar that express worry about America’s 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’s authors and Bernstein say that three decades of rising American income inequality have changed what it means to climb the income ladder. Here’s 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 “the consequences of the ‘birth lottery’ – the parents to whom a child is born – are larger today than in the past.” 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. “The fraction of children living in single-parent households is the strongest correlate of upward income mobility,” the study’s authors write.

The study’s authors call the geographic effect on mobility America’s “lands of opportunity” — 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’s links:

Bold Ideas
Does San Francisco need a land value tax? - Noah Smith

New Normal
American companies that are meeting demand without hiring or investing - WSJ

Davos
Cowardice from global leaders in Davos on LGBT rights - Felix

Wonks
Secular stagnation and the zombie rentier class - Izabella Kaminska

Must Read
Against the Rage Machine - n+1

Please Update Your Records
10 things that aren’t panaceas - Brad Plumer

So Hot Right Now
“Glass-covered internet machines” - Zach Seward

Fact Check
“Nothing revolves around a planet… except MOONS” - Emma Carmichael

Oxpeckers
“At age 11, Stelter started a fan site dedicated to ‘reporting’ on Goosebumps” - Noreen Malone
Let’s all agree that we should ditch navigation bars, especially sticky ones - Kendra Gaines

Servicey
6 reasons why you should not discuss illegal things with coworkers over email –  Eric Spitznagel

Awesome
On The Fly and Kakfa’s The Metamorphosis - David Cronenberg

Interesting
Why Germans love renting their homes - Matt Phillips

Alpha
Paul Singer loves trading derivatives, even if they are “a net negative to society” - Jesse Westbrook

Movin’ Out
Residents of gentrifying neighborhoods move out less frequently - NPR

They’re Just Like Us
CEOs at Davos are worried about wages, healthcare, and underemployment - WSJ

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