The income mobility myth
By David Callahan
The opinions expressed are his own.
Top Republicans have a simple answer to surging public concern about Americaâs vast wealth divide: More income mobility. âWe want success for everybody,â House Majority Leader Eric Cantor said last week, adding that Americans shouldnât âexcoriate some who have been successful.â This remedy for economic unfairness taps into the popular American belief that public policy should ensure equality of opportunity, not outcome.
Too bad it wonât work.
Changes in the economy mean that, no matter how hard people work or how much they invest in education, they may still find themselves barely treading water. Even before the financial crisis, there werenât enough good jobs to go around â thanks to globalization, automation, declining unionization, and lax labor standards. The majority of new jobs created during the presidencies of Bill Clinton and George W. Bush were low-wage positions with no benefits. These trends â not, say, a lack of ambition â help explain why half of all American households bring in under $50,000 and have no assets.
âSuccess for everybodyâ is simply not possible against this backdrop of structural inequality. Ironically, conservatives like Cantor are placing ever more faith in the great American virtues of hard work and self-improvement even as these virtues deliver less and less mobility.
Once upon a time, for example, Americans with a strong work ethic but little education could move upward thanks to unionized manufacturing jobs. But as both manufacturing jobs and unions started to disappear in the 1970s, earnings of high school-only males fell off a cliff: declining by 15 between 1973 and 1989. Today, about a third of poor families with children include a parent who is working full-time.
Realizing that plain hard work doesnât mean upward mobility anymore, Americans have been piling into college at record levels â only to find that a degree is no magic ticket to success, either. Pay for college educated males has largely stagnated over the past few decades while living costs have soared. For example, nearly all the modest income gains of middle income families between 1999 and 2009 were eaten up by rising healthcare costs. Increasingly, too, white collar jobs are disappearing in the same way that blue collar jobs did â being shipped overseas or eliminated by technology or reclassified as temporary with no benefits.
The conservative mobility narrative trumpets the wealthy as âjob creatorsâ and agents of opportunity. But that story is exactly backwards in some respects. Corporations and the wealthy have embraced a set of strategies for improving the bottom line that have spelled downward mobility for many workers. For example, when a company moves its back office accounting work overseas, executives and shareholders in that firm may get a nice return as profits go up. But a bunch of college grads lose their jobs.
Even many jobs that stay in America have been turned from good jobs into bad jobs thanks to domestic outsourcing aimed at boosting profits. Janitors or food workers or drivers for big companies used to be on the same payroll as other employees and have benefits. Now those jobs are often contracted out to firms that pay lower wages and no benefits.
Meanwhile, greed among business elites has undermined the wealth building strategies that have long been a key to upward mobility. Speculative frenzies followed by financial crashes have wiped out trillions of dollars in household wealth not once, but twice in the past 11 years. Insiders made fortunes in both episodes even as the middle class got walloped. Those with the smallest toehold in the American Dream were hit the hardest. African-Americans and Latino households lost over half their median net worth during the most recent boom and bust â even as the Wall Street insiders who invented the subprime securitization machine and capitalized predatory lending outfits got unbelievably rich.
Republicans like Cantor are in sync with American values when they invoke the dream of a better life made possible by hard work and determination. But they canât seem to admit that traditional mobility strategies are hitting a wall and that one of the GOPâs main constituents, corporations, are at least partly to blame.
The rules have changed in a post-industrial economy where those with capital hold all the cards. Growing the pie doesnât count for much anymore if the increases just mean bigger slices for the wealthy and crumbs for the rest.
The fact that Republicans are talking about inequality at all is more evidence that Occupy Wall Street is the changing the national economic debate. Clearly, though, their movement still has plenty of work to do.