Why economic mobility measures are overrated

by on January 18, 2012 at 7:13 am in Economics, Philosophy, Uncategorized | Permalink

By mobility I mean whether people are crossing into different income quintiles or deciles than the ones they were born into, or the ones they enjoyed at an earlier period of life.

1. If the general standard of living is rising (and I am more than willing to admit problems in this area for the United States), mobility takes care of itself over time.  I find it more useful to focus on slow growth, if indeed that is the case.  Just look at income growth for non-wealthy families and that is more useful than all the mobility measures put together.

2. Measured mobility in the United States does not seem to be falling, or at least not falling much, as shown by Scott Winship.

3. For a given level of income, if some are moving up others are moving down.  Do you take theories of wage rigidity seriously?  If so, you might favor less relative mobility, other things remaining equal.  More upward — and thus downward — relative mobility probably means less aggregate happiness, due to habit formation and frame of reference effects.

4. Why do many European nations have higher mobility?  Putting ethnic and demographic issues aside, here is one mechanism.  Lots of smart Europeans decide to be not so ambitious, to enjoy their public goods, to work for the government, to avoid high marginal tax rates, to travel a lot, and so on.  That approach makes more sense in a lot of Europe than here.  Some of the children of those families have comparable smarts but higher ambition and so they rise quite a bit in income relative to their peers.  (The opposite may occur as well, with the children choosing more leisure.)  That is a less likely scenario for the United States, where smart people realize this is a country geared toward higher earners and so fewer smart parents play the “tend the garden” strategy.  Maybe the U.S. doesn’t have a “first best” set-up in this regard, but the comparison between U.S. and Europe is less sinister than it seems at first.  “High intergenerational mobility” is sometimes a synonym for “lots of parental underachievers.”

5. How much of immobility is due to “inherited talent plus diminishing role for random circumstance”?  Is not this cause of immobility very different — both practically and morally — from such factors as discrimination, bad schools, occupational licensing, etc.?  What are you supposed to get when you combine genetics with meritocracy?  I do not know how much of current American (or other) immobility is due to this factor, but I find it discomforting that complaints about mobility are so infrequently accompanied by an analysis of this topic.

6. I am more than willing to hear arguments than a less mobile society is a less stable society, or otherwise a society which makes worse political decisions.  But I haven’t seen serious arguments here.  By “serious arguments” I mean those which take endogeneity into account and go beyond noting that Denmark is a better polity than Brazil, and so on.

7. I would like all measurements in this area to take into account the pre-migration incomes of incoming entrants.  Denmark, which doesn’t let many people in, is a much less upwardly mobile society once you take this into account.  Sweden deserves more praise, and in general this factor will make the Anglo countries look much, much more supportive of mobility.

Addendum: Here is more from Scott Winship.

Previous post:

Next post: