Tag Archives: income inequality

Stalled upward social mobility in America [UPDATED 2/14/12]

Flickr photo by AtleBrunvoll

Rana Foroohar’s cover story in TIME (Nov. 2011) is entitled What Ever Happened to Upward Mobility? Her answer is that it has stalled in the US and fallen behind rates of upward mobility in the US, Sweden or Denmark.  According to Foroohar (and based on a Pew study), a male born in the 1970s into the bottom fifth of the wealth distribution had only a 17% chance of making it to the top wealth quintile.  And while 50% of young males in this low-wealth quintile remained stuck there in the US, it was only 30% in UK or 25% in Denmark and Sweden, so upward mobility was much higher in those nations.  [Swedish economist Markus Jantti led the research project that uncovered these numbers.]

Foroohar (after consulting experts from places like Goldman Sachs) says that China and other emerging countries are driving inequality by taking away good middle class US jobs.   Foroohar believes that the answer lies in more progressive tax rates (with fewer loopholes) and greater investments in public education (which is the engine of economic mobility).

Fareed Zakaria also has three pieces on this: “The Downward Path of Upward Mobility” (Wash. Post op-ed, 11/10/11), a CNN video entitled “Fix Education, Restore Social Mobility” (about how lack of investment in education causing stagnating upward mobility is at heart of Occupy Wall Street movement), and “When will we learn” (TIME, 11/14/11).

Bhaskar Mazumder, of the Chicago Fed, highlights research that he believes shows a decrease in US social mobility from 1980-1990 and then growing less rapidly from 1990-2000 (based on studies of brothers). Mazumder notes that mobility measures are by methodological approach “backward-looking” since they impose a several decade lag before one learns of corrosive influences in society for social mobility; he  notes  that “the gap in children’s academic performance between high- and low-income families has widened significantly over the last few decades. If this trend persists, it would point to reduced intergenerational economic mobility going forward.”

We have been doing work on the connection between income inequality and social inequality among youth (that exacerbates the test score gaps) and will report on that later, but suffice it say that we find a connection between the “blue inequality” (income inequality) and “red inequality” (the ability of college graduates to pass on advantages from a generation to another) that David Brooks writes about.

In November 2011, a variety of non-profit, corporate, academic and media leaders convened to discuss social mobility in the Opportunity Nation summit.  Opportunity Nation has released an Opportunity Index that enables you look state by state or county by county to see how that locality is doing in terms of economic opportunity. And you can see videos of some of the speakers here.  Rick Warren cited an eye-opening statistic: 25% of Anglo kids, 50% of Hispanic kids, & 75% of black kids are growing up today without a stable father in the home (these are out of wedlock births).  This work is picked up in Charles Murray’s Coming Apart and in Nick Kristoff’s “The White Underclass“.

And interestingly, even conservative media venues like the National Review and the FrumForum (here and here) are discussing the decline of social mobility as noted in “Harder for Americans to Rise From Lower Rungs“, citing Republican experts like John Bridgeland.  Even Presidential candidate Rick Santorum has admitted that social mobility up into the middle class is higher in Europe than in the US. Excerpt from Scott Winship’s piece in the National Review here:

The Economic Mobility Project/Brookings analyses break the parent and child generations into fifths on the basis of each generation’s income distribution. If being raised in the bottom fifth were not a disadvantage and socioeconomic outcomes were random, we would expect to see 20 percent of Americans who started in the bottom fifth remain there as adults, while 20 percent would end up in each of the other fifths. Instead, about 40 percent are unable to escape the bottom fifth. This trend holds true for other measures of mobility: About 40 percent of men will end up in low-skill work if their fathers had similar jobs, and about 40 percent will end up in the bottom fifth of family wealth (as opposed to income) if that’s where their parents were.

Is 40 percent a good or a bad number? On first reflection, it may seem impressive that 60 percent of those starting out in the bottom make it out. But most of them do not make it far out. Only a third make it to the top three fifths. Whether this is a level of upward mobility with which we should be satisfied is a question usefully approached by way of the following thought experiment: If you’re reading this essay, chances are pretty good that your household income puts you in one of the top two fifths, or that you can expect to be there at age 40. (We’re talking about roughly $90,000 for an entire household.) How would you feel about your child’s having only a 17 percent chance of achieving the equivalent status as an adult? That’s how many kids with parents in the bottom fifth around 1970 made it to the top two-fifths by the early 2000s. In fact, if the last generation is any guide, your child growing up in the top two-fifths today will have a 60 percent chance of being in the top two fifths as an adult. That’s the impact of picking the right parents — increasing the chances of ending up middle- to upper-middle class by a factor of three or four.

See somewhat related Social Capital blog piece on increased residential income segregation.

Read Paul Krugman’s excellent “We are the 99.9%” (NYT, 11/24/11)

Read Nick Kristof’s excellent piece “Occupy the Agenda” (NY Times, 11/19/11)

Listen to Steven Haider (Michigan State Univ. economist) on Michigan Public Radio (11/18/11) discussing the myth of upward mobility in America.

Other pieces on this topic:

TIME Magazine: “The Land of Opportunity” by Richard Stengel, 11/14/11

Washington Post-ABC News Poll: http://www.washingtonpost.com/wp-srv/politics/polls/postabcpoll_110311.html   [see questions 16-18]

December 2011 OECD report Divided We Stand: Why Inequality Keeps Rising on how inequality among OECD countries is at a record high over the past 30 years and demands action.

The reports that Zakaria uses to show that mobility is lower in US than in Europe are:
– OECD 2010 report: http://www.oecd.org/dataoecd/2/7/45002641.pdf
– German Institute for the Study of Labor report (2006): http://ftp.iza.org/dp1938.pdf

- Professor Miles Corak (economist at Univ. of Ottawa) compared rates of mobility in a review of over 50 studies spanning nine countries.

- See Scott Winship’s testimony to Senate Budget Committee (Feb. 9, 2012) on inequality and social mobility, and see Jared Bernstein’s and Heather Boushey’s as well.

Two of most startling charts of testimony were one by CBO showing how the income of the top 1% is the one cohort that has done well over the last 40 years in the US economy:

And one showing that, unlike in most countries where progressive taxation is used to curb the excessive inequalities of the market and ease the distribution somewhat, the tax and transfer system in the US actually make inequality WORSE.

Michael Gerson on economic mobility

Flickr photo by ant.photo

George W.’s speechwriter has an Op-Ed noting that we should focus more on economic mobility than economic inequality and we couldn’t agree more:

Excerpt:

“Still, the most important measure of U.S. economic success is not income equality but social mobility. Economic inequality can be justified in a fluid society, in which economic advancement is a realistic goal. Economic inequality in the absence of economic mobility amounts to a class system in which the circumstances of birth are the main economic blessing or curse….

“There remains a considerable amount of economic mobility, upward and downward, in the middle class. But nearer the bottom of the income scale, upward mobility is weak and stuck. As a result, according to the Economic Mobility Project, the U.S. economy is less fluid than the economies of Canada, France, Germany or the Scandinavian countries.”Individual advancement is closely tied to educational achievement and family structure. An economy that rewards skills and other forms of human capital is not a good place to be a dropout with a child out of wedlock.

“Conservatives are correct that tax increases on the wealthy to fund entitlement commitments that go mainly to the elderly would do precious little to address this problem.

“Liberals are right that a combination of rising economic inequality (even if the rise is gradual) with stalled economic mobility is an invitation to destructive social resentments. Americans will accept unequal economic outcomes in a fair system. They object when the results seem rigged. That way lies the Bastille.

“So the question comes to liberals and conservatives: If social mobility is the goal, what are the solutions? What can be done to improve the quality of teachers in failing schools, to confront the high school dropout crisis, to encourage college attendance and completion, to reduce teen pregnancy, to encourage stable marriages, to promote financial literacy, to spark entrepreneurship?

“Both Democrats and Republicans should have something to contribute to the development of this agenda. Neither party, however, currently has much to say. And this is not likely to change until the discussion turns from equality to mobility.”

Read Michael Gerson, “Economic inequality is the wrong issue” (Washington Post Op-Ed, 11/4/2011)

Growing inequality in the news; point of no return?

The Congressional Budget Office (CBO) issued a report early this week that outlines factoids known to scholars of inequality for some time — that over the last 30 years the share of income captured by the top has grown at the expense of those in the middle or low-end of the income hierarchy.

After-tax incomes for the top 1% grew 265% over the roughly three decades from 1979-2007 while those with incomes in the bottom 20% of the distribution saw after-tax income rise a paltry 18% over roughly 30 years (or about half of 1% per year).

The top 1% now capture 17% of the nation’s income, more than double the 8% they captured back in 1979.  The bottom 80% of households (most of us) saw their share of income decline 2-3 percentage points over this period.  [CBO points out that part of this trend toward increasing inequality was the result of higher-income households capturing a higher share of wages in the market and part was government doing less than 3 decades ago to redistribute and even out this market-based inequality.]

While these factoids are known by some, what may be new is: 1) that general unrest and anger/frustration at this inequality is growing, as evidenced by the Occupy Wall Street protests; and 2) even mainstream believers of capitalism, like PIMCO bond-fund investment chief Mohamed El-Erian (also former manager of the Harvard endowment) or Harvard pre-eminent labor economist Larry Katz (former chief economist for the department of labor under Clinton) believe that we have drifted into economically deleterious levels.

Mohamed El-Erian, another pillar of the financial world … is sympathetic to aspects of the Occupy movement. He told me that the economic system needs to move toward “inclusive capitalism” and embrace broad-based job creation while curbing excessive inequality.

“You cannot be a good house in a rapidly deteriorating neighborhood,” he told me. “The credibility and the fair functioning of the neighborhood matter a great deal. Without that, the integrity of the capitalist system will weaken further.”

Lawrence Katz, a Harvard economist, adds that some inequality is necessary to create incentives in a capitalist economy but that “too much inequality can harm the efficient operation of the economy.” In particular, he says, excessive inequality can have two perverse consequences: first, the very wealthy lobby for favors, contracts and bailouts that distort markets; and, second, growing inequality undermines the ability of the poorest to invest in their own education.

“These factors mean that high inequality can generate further high inequality and eventually poor economic growth,” Professor Katz said. [quoted from "Crony Capitalism Comes Home" by Nick Kristof, NYT Op-Ed 10/27/11]

Is Occupy Wall Street a moment or a movement? (UPDATED 6/7/12)

Flickr photo by eleephotography

Despite their lack of demands, it’s been fascinating to watch the growth in Occupy Wall Street protests (in the US and abroad).  As someone long puzzled that the US don’t object more to the uneven distribution of wealth, it is heartening to see many Americans taking the issue of inequality to the streets.  The effort has been incredibly effective at putting the issue of “income inequality” (the 1% vs. the 99%) on the table, but far less effective at effecting change.

Is it a social movement?  Or as Marshall Ganz says “is it a moment“? The eminent Univ. of Columbia sociologist/political scientist/historian Charles Tilley (1929-2008) identified three components widely considered to be the core elements of a social movement:

  1. A sustained, organized public effort making collective claims on target audiences (“a campaign”);
  2. Employing various combinations of political action (“repertoire”), including special purpose associations and coalitions, public meetings, processions, vigils, rallies, demonstrations, petition drives, public statements through the media, and pamphleteering; and
  3. Participants’ concerted public representations for themselves or  constituents of their worthiness, unity, numbers and commitment (WUNC).

Along these three criteria, Occupy Wall Street merits mixed success.

1a. sustained campaign: so far Occupy Wall Street has been going for 6+ months but their momentum has fallen sharply from their original days [their funding is running short, contributions have slowed dramatically, public support for the movement has gone from 54% approval in an October 2011 TIME poll to 71% disapproval in an April ABC/WSJ poll. Social media interest in OWS has fallen: there were 20-60 tweets a minute in October  (hitting a peak one night of 1500 tweets a minute) using the hash tags #occupy and #OWS; that flow has fallen by June to 5 a minute and some of these concern an Oregon Wildlife Campaign.  The number of sites has dissipated dramatically.

The ouster of protesters by police in places like NYC, Oakland, Portland, Denver, and the like, seems to have substantially dissipated their numbers.  And violent confrontations with police in places like Oakland have undermined broader support for the Occupy movement.

1b. organized:  so far Occupy Wall Street is highly unusual in their self-organization.  They do not have leaders.  They don’t even have megaphones so they resort to people around a speaker physically amplifying a speaker’s comments by repeating it in unison or developing hand signals to show approval/disapproval with comments.  OWS certainly is organized as far as things like the provision of food, having various committees, etc.  While there was no leader to the OWS protest, it was the brainchild of Adbusters, and based on the Arab Spring protests and designed to be a US-based Tahrir Square, but having called people to protest, they have remained fairly hands-off.  Note: it’s worth reading the interesting “Pre-Occupied” on the history of OWS and ongoing involvement of Adbusters.

1c. demands:  so far, there are no demands that Occupy Wall Street has made of the government, of Wall Street, etc.  In fact some (like Bill Clinton) are criticizing OWS for not having made specific demands, although in some ways it makes it easier to sustain this amorphous “movement” by being potentially all things to all people and being a vehicle for people’s general anger.  They have now formed a committee to try to develop demands.  Many of their demands like “an end to Wall Street greed” seem relatively unachievable without a cap in pay on Wall Street (which seems very unlikely).  Other possible goals like writing down student debt for unemployed students might be more achievable.

Derek Thompson, writing for The Atlantic claims that the mid-November ouster of OWS from Zuccotti Park is a good thing because it enables the protesters to reformulate their movement and focus on a central demand:  “Whether or not the protesters return to their tents, New York police have given them a chance to lift up, take stock, and pitch their energies in an issue worth occupying. Writing for The Atlantic yesterday, Sara Horowitz reached back into the Industrial Revolution protests that culminated in the Eight-Hour Day Movement. From a “massive, inchoate, messy movement emerged a central demand: an eight-hour workday,” she wrote. And that eventually led to Fair Labor Standards Act as part of the New Deal in 1938.

“What should be the Eight-Hour Day Movement of the moment? Maybe they should focus on student debt reform. Today, student debt lives with you until you die and cannot be unwound in bankruptcy court; perhaps it should be. Maybe they should focus on the minimum wage, which has declined in real value for the last few decades. Maybe they call for repealing the Bush tax cuts, a savvy request that would represent broad sacrifice (it would raise taxes on almost all households, but mostly at the top) to demonstrate to Americans that the movement is willing to sacrifice for its ultimate goals. There is also welfare reform, unemployment benefit support, and other platforms that would aim to support the least well-off.”  Such demands don’t require a physical base.

Some protesters after the Zuccotti Park eviction said they “were already trying to broaden their influence, for instance by deepening their involvement in community groups and spearheading more of what they described as direct actions, like withdrawing money from banks, and were considering supporting like-minded political candidates.” But “Doug McAdam, a sociology professor at Stanford, predicted that the energy could quickly dissipate without the occupation. ‘The focal point will be lost,’ he said. ” (NY Times)

In total, on dimension 1, given how short this protest has lasted and the current lack of demands, I’d give them a C+ on this.

2. repertoire:  OWS has largely resorted to rallies thus far, but they have had a couple of marches (to places like Times Square).  They make wide use of social media, including the Internet, Meetup, Twitter.  They have a website (Occupy Together) that charts their efforts in other cities.  They use protest signs, music (although often more entertaining than protesting).  I’d give them a B+ on this front.

3. WUNC: they clearly have made a general statement that government has been there during the Great Recession much more for the 1% than for the 99% (Wall Street at the expense of Main Street).  Moreover, their message appears to be resonating, in terms of number of actual and inchoate demonstrations, number of Facebook sympathizers, and views in the general public.   As noted in a lack of their demands, there is relatively little “unity” and their “numbers” while growing are still relatively small in any one site.  As to “commitment”, it certainly appears that some of the protesters are there for the long-haul, sleeping there overnight, but their numbers have dramatically fallen. I’d give them an C- on this dimension.

As someone who has written about the power of Meetup before and about “alloy social capital“, the Occupy Wall Street (OWS) folks who originally showed their support on Facebook (a far less meaningful indicator of support in my book) have now taken to using Meetup as a tool to organize protests in new cities.    As Micah Sifry noted on 10/14/11, “On Meetup.com/OccupyTogether, where the OccupyTogether folks shifted their efforts, the number of communities represented has also doubled in the last 8 days, from 945 to 1,749. The number of occupiers listed as having joined one of those Meetups has tripled, from just under 4,000 to about 12,300.”

If this chart to left is put on a logarithmic scale, one sees that the rate of growth dramatically slows after 10/7, even with an action (registering a “like” on facebook that is quite easy). By June, 2012, there were only 167,000 Facebook likes.

I think the growth on Meetup is much more real, but many of these locations are currently inactive (see below).

- number of actual and inchoate demonstrations.  There is not great data on this.  Nate Silber had an interesting post on 10/17/11 about the size and geography of protesters.  Meetup charts the current number of “occupiers” by location, but this is likely an overestimate since some/many(?) of these “occupiers” may not show up on a given day and an underestimate since it only includes people registered on Meetup (and not their tag-along friends or people who see a protest and join in).

- views in the general public. Over 54% of Americans have favorable views of OccupyWallStreet. And a Quinnipiac University poll on 10/17/11 found two-thirds of Big Apple voters support the Occupy Wall Street protests.  [Recent polls, as noted above, show support for the OWS protest slipping dramatically.]

- moreover, there is some evidence that the OWS efforts are changing at least what the media is discussing.  See this post by Zaid Jilani of Think Progress on what the media was covering in the end of July versus what it was covering in October.  [Granted that the resolution of the showdown over the national deficit naturally made the focus naturally shift away somewhat from a focus on debt, but the turnaround in attention to jobs, fairness and inequality has been remarkable.]

Syd Tarrow, a pre-eminent scholar of social movements defines them as “collective challenges to elites, authorities, other groups or cultural codes by people with common purposes and solidarity in sustained interactions with elites, opponents and authorities.”  Along this definition, the OWS movement would have to wrestle with proving that they are sustained (see above), that they have “common purposes and solidarity” (see above) and “collective challenges” when they have yet to present any unified demands.  Moreover, the OWS movement has been less about interacting directly with elites, opponents or authorities (other than fighting off arrests or threats to clear them from Zuccotti Park).

Where OWS may be more successful as a quasi social movement is to the extent that they get political leaders to stand up and take notice and change their policies accordingly.  On this score, time will obviously tell, but they have tapped into a period of fundamental and widespread feeling of malaise and lack of economic confidence about the future.

+++

For a primer on Occupy Wall Street, see this LA Times piece and see this CBS piece comparing the actual distribution of income in the US against what respondents think the distribution is and what they would desire.  There is also an interesting abridgement of a Scientific American article on attitudes/behaviors toward income redistribution in the US.

Note: Jeffrey Sachs calls OWS “The New Progressive Movement“, but he is far looser about using the term social movement.

- From analysis of 5,600 completed surveys at occupywallst.org, fastcompany concludes that the typical protester is white (82%), male (61%), college-educated (61%), has a political affiliation of “independent” (70%), is 25-44 years old (44%), has a full-time job (47%), has income under $25,000 (47%) although 30% have income over $50,000 and 2% have income over $150,000, and about one quarter of them have attended occupation events previously.  Other demographics here.

- And an interesting article about how the Teamsters are allying with Occupy Wall Street around shared goals.

- See “Can Occupy Wall Street Survive?” (Reuters)

Americans far less trusting than per capita wealth would predict

Catherine Rampell has a couple of interesting charts describing the relationship of trust, income and equality (among countries).

The US is 10th most trusting of the 30 countries examined (with 48.7% saying that others can generally be trusted).  Norway and Denmark are the most trying with almost 90% saying that others can be trusted; Turkey and Mexico are the least trusting with only 20-25% of residents saying that others can be trusted.

Since wealthy countries generally are more trusting, it’s surprising that America is only ranked 10th.


The U.S. is the country in the top center of the graph, way above the black regression line with median equivalized income of $27,000 per person (y-axis) but trust just below 50% (x-axis).  If one moved the US over to the right until it hit the regression line it would have social trust levels of 90%, like Norway.  [better picture here.]

The reason for America’s low level of trust can be seen by looking at the levels of inequality in the US.  More equal countries tend to have higher levels of trust, and viewed through this lens, Americans are just as trusting as one would expect, down around the levels of trust and inequality of a Portugal or a Poland, which while far poorer than the US has similar levels of equality to the US.

The implicit conclusion seems to be that income equality trumps wealth when it comes to trust, which makes some sense as it may engender a “we’re-all-in-this-together” esprit de corps.  But the regression line, if anything, seems to better fit countries for the graph of trust against income per person than the level of trust maps onto levels of equality.  And notably, Denmark and Norway, have higher levels of trust than one would expect from their level of equality.

Food for thought…

See NY Times Economix, “Trust Me, We’re Rich” (Catherine Rampell, 4/18/11)