The Way Back. F. H. Buckley

Immobility Tracks Income Inequality

      SOURCES: Miles Corak, “Inequality from Generation to Generation: The United States in Comparison,” in Robert Rycroft (ed.), The Economics of Inequality, Poverty, and Discrimination in the 21st Century, ABC-CLIO (2013); CIA Fact Book.

      It’s not just that people worry more about inequality when there’s little income mobility. There’s also more real inequality in immobile societies. Immobility entrenches inequality. That’s the message from Figure 4.3, where the immobility rankings from the Table 4 data set (times 100) are paired against a cross-country measure of inequality (the economist’s Gini coefficient times 100).¹⁸ At the Figure’s lower left, Denmark is an egalitarian and highly mobile society. Brazil, on the upper right, is an unequal and immobile society. The United States is in the upper right quadrant, closer to Brazil than to Denmark.

       How to Measure Inequality

      The Gini coefficient is a single number between zero and one, with higher numbers representing more inequality. If everyone earned the same income (perfect equality), the Gini value would be 0; and if all the income went to the highest paid person (perfect inequality), the Gini ratio would be 1. No country is at 0 or 1, and in practice the range of Gini ratios is between .25 and .65. Clear data are hard to come by and there are significant measurement issues, but the Gini coefficient nevertheless provides a commonly accepted measure of cross-country income inequality.

      Figure 4.3’s straight line reveals a nearly one-to-one relationship between immobility and inequality. (I explain how the line is derived in Appendix C.) Alan Krueger, the former chief White House economist, has labeled the line the “Great Gatsby Curve,” with a nod to F. Scott Fitzgerald’s tycoon. With more accuracy, it might be labeled the anti-Gatsby curve, since Fitzgerald’s eponymous protagonist came up from nowhere, and the message from the line is that this is less likely to happen in the United States than in Denmark. What the Figure portrays is inertia: egalitarian countries are likely to stay egalitarian, and unequal countries are likely to stay unequal. For highly unequal countries, that’s a recipe for peasants with pitchforks.

      Does this describe the United States? To answer that, we’d want to move beyond cross-country comparisons to look at the relation between inequality and immobility at the local level in America. That’s what Raj Chetty and his co-authors did, and what they found is that unequal American communities are also more immobile, as the Great Gatsby curve would predict. Explaining what happened is more complicated, however. Were Obama right, the fault would lie with the one percent, who sucked all the oxygen and the money out of the room. But that’s not what Chetty et al. reported. Instead, they didn’t find any relation between the one percent’s share of the economy and income immobility in local communities.¹⁹

      Chetty et al. also found that the chances of an individual child moving up from his parents’ earnings quintile hasn’t changed in the last twenty years, and more recent scholarship tells us there hasn’t been much change since 1980.²⁰ Perhaps that’s not surprising. Always ahead of his time, Irving Kristol described the emergence of an aristocratic New Class in 1978, a term that Christopher Lasch also employed before his death in 1994.²¹ The causes I attribute to the rise of immobility in the last part of this book—the weakening of the public education system, a flawed immigration law, legal barriers to advancement—are moreover things that go back to at least 1980. The more recent rise of the one percent seems to be an epiphenomenon that serves to draw attention to the emergence of a class society without much explaining how we got where we are.

      So why did we become so immobile, if it wasn’t the one percent? What happened, suggested Chetty and his co-authors, was the jobs polarization phenomenon, the shrinking of the middle class and the shift of people towards lower income jobs.²² In the bottom end of the income distribution, each person had the same chance to move up the ranks as he did twenty years ago, but now there were more people in the bottom end. That’s why, in absolute numbers, more people remained in the lower class.

      Then there were the social pathologies that kept people back. The strongest predictor of upward mobility was family structure, such as the fraction of single parents in the area. Not merely is it better to come from a two-parent family, but children of married parents also have more upward mobility if they live in communities with fewer single parents. That’s not a novel insight. It’s one that conservatives have voiced at least since Charles Murray’s Losing Ground in 1984,²³ without identifying a means of returning to the norms of an earlier, more hopeful society, and without persuading voters to follow them there. The other things contributing to immobility include the weakening of public education, a flawed immigration law, legal barriers to advancement, and these we’ll look at in the last part of this book.

      The Great Gatsby curve has been seen as an invitation to despair. If we are so immobile as that, then we might be passing on our inequalities to future generations. But the curve moves in both directions. Suppose that we could, as suggested in the book’s last part, return to a country of high mobility. Then the promised land of equality might follow.

       CHAPTER

       5

       Why Republicans Should Care About Income Immobility

      INCOME DISPARITIES ARE OBVIOUSLY AN ISSUE FOR THE LEFT, and not just the Occupy movement. In Ill Fares the Land, the dying Tony Judt mourned the loss of cohesion, the sense that we’re all in this together, in an unequal economy.¹ It’s not a new complaint. The title of the book was taken from Oliver Goldsmith’s Deserted Village, his romantic lament for the destruction of the Irish peasantry by rich landlords and the enclosure movement.

       Ill fares the land, to hastening ills a prey

       Where wealth accumulates and men decay.

      Scholars of the Left offer a variety of diagnoses for the malady. The New Republic’s Timothy Noah decries the tax breaks and legal arcana that advantage the rich,² and the same charge has been made by a host of similarly minded commentators.³ Harvard Law professor Larry Lessig points to the baneful influence of money on politics,⁴ while in Billionaires (which sadly is not a self-help book), Darrell West makes the similar complaint that the super-wealthy have an outsized influence on politics.⁵ Then there are structural changes to the economy: the shift from a highly paid industrial to a lowly-paid service economy that has left Americans Nickel and Dimed, according to political activist Barbara Ehrenreich.⁶ Finally, Senator Elizabeth Warren has risen to political prominence for her description of a middle class pushed to the edge of financial ruin by economic instability and an overly-harsh bankruptcy regime that strips debtors of their assets.⁷ Today Democrats campaign for the White House on the theme of income inequality, and Bernie Sanders has shown that voters of that party are not unprepared to support a self-proclaimed socialist.

      People on the Left obviously need no persuading about any of this. Instead, it’s people on the Right who dismiss concerns about a society increasingly fragmented by wealth. They’re wrong to do so.

Not Just the Left