Americans cling to the conceit that
they have unrivaled opportunity to
move up and, alas, down the income
ladder. This notion, that families that
occupy the bottom rungs of the income ladder readily exchange places
with those that occupy higher rungs,
breeds indifference to the most glaring economic fact of the past quarter-century: widening inequality.
The gap in earnings, for example,
between college and high school
graduates more than doubled.
Yet in a recent Op-Ed piece in The
New York Times, W. Michael Cox
and Richard Alm acknowledge that
the wealth of poor families has been
falling at the same time that the
wealth of rich families has been rising, and ask, "So what?"
Mr. Cox and Mr. Alm suggest that
mobility along the income ladder is
serving as an antidote to inequality.
But exactly how much mobility is
there? According to them, quite a lot.
"America isn't a caste society," they
say, citing a study by the Federal
Reserve that shows that only 5 percent of the poorest 20 percent of
people stayed in that lowest income
group over a 17-year period.
Everyone else moved higher.
But this stunning statistic is stunningly misleading.
Prof. Peter Gottschalk of Boston College points out
that the Fed study counts teenagers
and young adults from upper-income
families who work part time while in
school as moving upward when they
find higher-paying jobs after graduation. This upward mobility of students hardly answers the enduring
question: How many grown-ups are
trapped in low-paying jobs?
The answer is, a lot. America's
conceit is just that -- a conceit.
Mr. Gottschalk and Prof. Sheldon
Danziger of the University of Michigan have looked at the plight of children during the 1970's and 80's. They
separate children into five groups
according to their family's income.
About 6 in 10 of the children in the
lowest group -- the poorest 20 percent -- in the early 1970's were still in
the bottom income group 10 years
Almost 9 in 10 children in the
bottom group remained in the bottom two income groups 10 years later.
Neither of these figures budged in
the 1980's, providing solid evidence
that mobility did not rise over the 20-year period. About 70 percent of poor
black children in the early 1970's
were still poor a decade later.
The upshot is that few families
occupying the low rungs of America's income ladder get rich.
Economists provide no rule for
figuring out how much mobility a
society needs to counter the impact
of any given amount of inequality.
But there is indirect evidence that
mobility is not high enough in this
country to provide an adequate safety valve for those on the bottom
rungs. Even if mobility was high
enough 30 years ago to justify a so-what attitude toward inequality, it
seems improbable that it could be
high enough today, given that mobility has remained constant but inequality has reached extreme levels.
Another sobering indicator: mobility
is no higher in the United States than
in Western Europe, where living
standards are comparable and there
is only a fraction as much inequality.
Some inequality is essential for
capitalism. High incomes are the reward for studying long hours, working hard and investing in risky businesses. But high incomes can result
for reasons that have little to do with
merit, reflecting rich parents, luck or
manipulation of the political process.
Inequality driven by such factors can
breed social division, anger and a
politics of resentment. It also belies
the notion that America gives everyone a fair chance.
Economists are in general reluctant to tamper with market-driven
incomes. The risk of squashing incentives and innovation can be great.
But there is a compelling case for
eradicating one virulent form of inequality: poverty. The richest country in the history of the universe
tolerates a poverty rate of about 20
percent among its children, and
about 35 percent among its black
children. No conceit about mobility,
real or imagined, can excuse that
Copyright 2000 The New York Times Company