The Game of Life


Timothy Noah, whose series about income inequality for Slate fed into his forthcoming book The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It, continues his beat with a new piece in The New Republic, "The Mobility Myth." His history of economic mobility in America kicks off with some interesting economic archaeology by a Northwestern prof:

In a 2005 paper, Joseph Ferrie, an economics professor at Northwestern, studied census records about the occupations of fathers and sons between 1850 (the year [Horatio] Alger turned 18) and 1920 (21 years after Alger’s death and the year [Henry] Adams turned 42). Ferrie then compared these records with father-son data from the Bureau of Labor Statistics during the second half of the twentieth century. He divided everyone into four categories: “unskilled worker,” “farmer,” “skilled or semi-skilled worker,” and “white-collar worker"…. What he found was that the equivalent of 41 percent of farmers’ sons advanced to white-collar jobs between 1880 and 1900, compared with 32 percent between 1950 and 1973. Ferrie’s conclusion held up when he looked at all four job categories and when he compared other stretches of the late nineteenth century with other stretches of the late twentieth. Between the horse-and-buggy days and the interstate-highway era, American society had become significantly less mobile.

For newer data, Noah turned to another Chicagoan:

Bhashkar Mazumder, an economist with the Federal Reserve Bank of Chicago, recalculated income heritability matching census data to Social Security data, which allowed him to compare parent-child incomes over a greater number of years. He found that income heritability was more like 50 to 60 percent. Mazumder later recalculated Solon’s PSID-based findings applying a more sophisticated statistical model and found that income heritability was about 60 percent. Then, in a 2004 study, Mazumder approached the question from a different angle, examining the correlation in incomes among siblings, using longitudinal survey data collected by the Bureau of Labor Statistics. That put income heritability at about 50 percent…. Most strikingly, he found that income among brothers actually correlated more closely than height and weight.

It probably won't surprise you that, among the research Noah found, "upward mobility for African Americans has lagged behind upward mobility for whites."

Mazumder, like Noah, is still on the inequality beat. He recently released a Chicago Fed Letter, "Is intergenerational economic mobility lower now than in the past?" (PDF, via), in which he returns to inheritability and brother correlation. Some of his findings are in line with the above when it comes to the experiences of boomers and post-boomers:

Levine and Mazumder use two separate surveys that tracked young men from adolescence to adulthood. The first sample is of men born between 1942 and 1952 whose income was measured between 1970 and 1981. The second sample features men born between 1957 and 1965 whose income was measured between 1983 and 1995. Figure 2 shows that the sibling correlation in wages, earnings, and family income all increased markedly across these periods. For example, the brother correlation in annual earnings rose from 0.26 to 0.45. This occurred at the same time that the returns to education increased sharply from 7% to 13%.

And not just here, though not as much:

Using data on Swedish men, Björklund, Jäntti, and Lindquist also report a modest increase in both the brother correlation in earnings and the returns to education across a similar group of birth cohorts as in Levine and Mazumder (2007).

One of the points that Mazumder makes is that changes in "returns to education"—basically, the relationship between earnings and education—correlate with decreases in economic mobility: "returns to college in the labor market dropped from 1940 to 1950, stayed relatively steady between 1950 and 1980, and then rose after 1980." Increasing returns to education can be good for the uneducated; there's evidence that it increases the wages of high school grads and dropouts. But it can also contribute to a decline in mobility:

Higher economic returns to education and lower levels of public financing of education decrease intergenerational mobility because when income depends on education, children from low-income families need to go to college to be upwardly mobile.

So as bad as the data is on African-American upward mobility, it's much worse for the poor across races, as Mazumder writes (emphasis mine):

In a very carefully done analysis, Reardon presents striking evidence that the difference in test scores by family income has grown by 30% to 40% for children born in 2001 relative to those born in 1976. In fact, the gap in scores between families at the 90th percentile in the income distribution and those in the 10th percentile is now twice as large as the black–white achievement gap, which has gathered considerable attention.

Sean Reardon's paper, "The Widening Achievement Gap Between the Rich and the Poor" is here. The black-white gap and the rich-poor gap have essentially switched places in extremity, for good reasons (decreasing black-white achievement gap) and bad (increasing rich-poor achievement gap). At the end of his paper, he takes a stab at an explanation for the latter:

[I]ncome inequality in the United States began to grow sharply in the 1970s, a trend that continues to the present. The gap between the rich and the poor has widened significantly, particularly among families with children. Moreover, the Reagan-era changes in social policy—particularly changes in housing policies, income-support policies, and other social safety nets for low-income families (Katz 1989, 1995)—have made life much more difficult for low-income families. Not only do the poor have less money than they did before, they may have fewer social support systems as well.

But it's not a direct correlation:

Although income inequality grew sharply for families with below-median incomes during the 1970s and 1980s, the income achievement gap among children from these families was largely unchanged. The achievement gap did grow among children from above-median-income families, but this appears to be better explained by an increase in the association between income and achievement, not by increases in income inequality. Evidence from other studies suggests that parental investment in their children’s cognitive development has grown during the last half-century, particularly for higher-income families, a pattern that may explain the growing returns to income during this time period.

It's kind of an early adopter theory: when something is shown to benefit one's children, people with more education and/or higher incomes will have first crack at it, and it will take awhile for new approaches to spread into society as a whole.

Which reflects back on a point Mazumder makes that isn't often discussed. Income mobility may be an American ideal, and as Noah points out that, despite the (admittedly arcane) evidence to the contrary, Americans are more inclined to believe that our society is highly mobile. Even more so than residents of countries with more economic mobility than ours. But a lot of ideals are actually unappealing in reality:

While the press often describes intergenerational mobility in terms of upward mobility from the bottom of the income distribution, a society with a low intergenerational elasticity is also likely to experience a high degree of downward mobility from the top of the income distribution to the bottom. Third, there is no obvious optimal intergenerational elasticity; most of us would prefer a society where we could confer some degree of advantage to our children.

Mazumder is likely understating when he writes that "most of us would prefer a society where we could confer some degree of advantage to our children." My guess would be "all" and "as much as possible." Income and achievement is not necessarily a zero-sum game, as Mike Konczal argues in "Two Visions of How the Economic Pie Gets Sliced." But the fear of downward mobility is always going to be a shadow on policy.


Photo: meddygarnet (CC by 2.0)