Robert Samuelson, who is, frankly, rarely my favorite economics pundit, writes a not entirely terrible column, “Upward mobility is a myth”, largely pivoting off a recent study, “The Fading American Dream: Trends In Absolute Income Mobility Since 1940”, issued by the National Bureau Of Economic Research, put together back in March 2017 by a bunch of Harvard/Stanford/UC-Berkeley dudes. 1 According to the Abstract of the paper,
“We find that rates of absolute mobility have fallen from approximately 90% for children born in 1940 to 50% for children born in the 1980s. … In counterfactual simulations, we find that increasing GDP growth rates alone cannot restore absolute mobility to the rates experienced by children born in the 1940s. In contrast, changing the distribution of growth across income groups to the more equal distribution experienced by the 1940 birth cohort would reverse more than 70% of the decline in mobility. These results imply that reviving the “American Dream” of high rates of absolute mobility would require economic growth that is spread more broadly across the income distribution.”
The authors, it seems to me, don’t emphasize enough (though Bob points it out) that parents of kids born in 1940 might be said to have a bit of a “skewed” earnings record, skewed in the sense of having endured the most brutal depression since the Industrial Revolution ushered in “modern times”. Furthermore, they have two important findings that, to the casual observer, at least, don’t seem to jibe, though they don’t bother to discuss this.
First, economic mobility has declined more for the middle and upper economic classes: “Rates of absolute mobility have fallen substantially since 1940, especially for families in the middle and upper class. At the 10th percentile of the parental income distribution, children born in 1940 had a 94% chance of earning more than their parents, compared with 70% for children born in 1980. At the 50th percentile, rates of absolute mobility fell from 93% for children born in 1940 to 45% for those born in 1980. And at the 90th percentile, rates of absolute mobility fell from 88% to 33% over the same period.”
Second, to cite language already quoted “we find that increasing GDP growth rates alone cannot restore absolute mobility to the rates experienced by children born in the 1940s. In contrast, changing the distribution of growth across income groups to the more equal distribution experienced by the 1940 birth cohort would reverse more than 70% of the decline in mobility.” This is because most of the increase in income resulting from increased GDP growth rates would be captured by the higher earnings groups: “Since income shares of GDP are larger for high-income individuals, higher growth rates benefit those with higher incomes the most, while a more equal distribution benefits those at the bottom the most.” Which means that upper income groups, though less likely to move up than in the past, would still capture so much of increased GDP that mobility rates of lower income groups wouldn’t improve that much.
Curiously (to me), the authors make no attempt to link their work with Robert Gordon’s now-famous work The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, whose arguments are helpfully summarized in this review by William D. Nordhaus for the New York Review of Books, arguing that a great deal of the big post WWII increases in productivity and earnings were a “one time only” deal, particularly in terms of increases in education levels, health, and longevity. It’s easy to out earn your dad if he was a high school dropout and you finished. And a college diploma beats high school, and so on. But the problem is, we’ve picked the low-hanging fruit—most of it, at least. It’s (relatively) easy to get most kids through high school. But, clearly, the college completion rate, around 30%, isn’t going to go that much higher. And, according to Gordon, the marvelous improvements in health and longevity made during the 20th century have taken the human machine about as far as it can go, so that we’ve peaked both mentally and physically.
All this suggests that income redistribution via a greatly expanded Earned Income Tax Credit—taking from the rich and giving to the poor—is the way to go. I’ve ruminated about this, along with ways that we can improve earnings for the poor, in a variety of posts collected here.
Afterwords
Bob, whom I’ve pretty much forgotten about, because he isn’t that important, is more worried about the declining mobility rates for the middle and upper class. My own feeling, which isn’t terribly profound, and is surely skewed by my own comfortable circumstances, is that if your income is approximately the same as your middle class or better parents, your quality of life is probably better, thanks, yes, to all our modern conveniences, raved about with surprising energy by National Review Senior Political Correspondent Jim Geraghty, who sounds pinker than Steven.2 Also, to go back to Bob again—another reason to dislike him, I mean—Bob says that reviving economic growth will be hard, but there is some cause for optimism: “With so many confusing sources, it’s hard to design a program that will automatically reverse existing trends, though President Trump says he’s trying.” Yes, Bob, he’s extremely trying, and so are you, you pathetic ass-kissing schmuck.3
- Raj Chetty(H), David Grusky(S), Maximilian Hell(S), Nathaniel Hendren(H), Robert Manduca(H), and Jimmy Narang(UC-B) ↩︎
- Though it may sound either “shocking” or naive to say so, non-whites, women, and gays enjoy far more freedom than they did fifty years ago. This doesn’t mean that young people ought to be “grateful” for either “progress” or smart phones any more than I was for Social Security and black and white TV. It also (unfortunately) doesn’t mean that people are likelier to be happy today than in the past. All humans are creatures of habit—that is to say, creations of habit—and however irrational our habits might be, when they are disturbed, we are disturbed. ↩︎
- Bob used to believe in free trade, balanced budgets, elimination of subsidies, entitlement reform, and, you know, all of that stuff. But that was when, you know, Obama was president. ↩︎
