Thursday, January 23, 2014

Upward Mobility, Income Inequality and Facts

The politicians of all stripes are busy telling us what they can do for us to reduce income inequality and increase upward mobility in America. They also tell us that we have become a less mobile and fair society.

But have we? Have things really changed over the past few decades? Not according to a new study, the contents of which have just been released.

Upward Mobility Has Not Declined, Study Says has the deatils:

"The odds of moving up — or down — the income ladder in the United States have not changed appreciably in the last 20 years, according to a large new academic study that contradicts politicians in both parties who have claimed that income mobility is falling.

Both President Obama and leading Republicans, like Representative Paul Ryan, have argued recently that the odds of climbing the income ladder are lower today than in previous decades. The new study, based on tens of millions of anonymous tax records, finds that the mobility rate has held largely steady in recent decades, although it remains lower than in Canada and in much of Western Europe, where the odds of escaping poverty are higher. . . .

“The facts themselves are pretty unassailable,” said David Autor, an economist at the Massachusetts Institute of Technology who has read the paper, which the authors will soon submit to an academic journal. “How you want to interpret them is the question.”

The study found, for instance, that about 8 percent of children born in the early 1980s who grew up in families in the bottom fifth of the income distribution managed to reach the top fifth for their age group today. The rate was nearly identical for children born a decade earlier.

Among children born into the middle fifth of the income distribution, about 20 percent climbed into the top fifth as adults, also largely unchanged over the last decade.

To compare their results to those for earlier decades, the authors noted that a previous study of children born from 1952 to 1975 . . . found broadly similar and steady levels of mobility. Taken together, the studies suggest that rates of intergenerational mobility appeared to have held roughly steady over the last half-century . . . .

The subject of mobility has become politically popular, as Democrats make the case that the affluent are choking off opportunity from others, and Republicans contend that a large, intrusive government is the culprit.

In a December speech at the Center for American Progress, Mr. Obama said, “The problem is that alongside increased inequality, we’ve seen diminished levels of upward mobility in recent years.”

Mr. Ryan, the chairman of the House Budget Committee and a Republican vice-presidential nominee, argued in a speech at the Brookings Institution last week that a smarter, smaller government would allow the country to “get back to those days of upward mobility.” The new study focused on a measure known as relative mobility, which tracks where people end up in a national ranking of incomes compared with where they started. If a child ends up in roughly the same place in the income distribution as his or her parents, even if the country as a whole becomes richer, he is not considered to be especially mobile.

But even a second measure — absolute mobility, which examines people’s annual incomes relative to their parents’ — produces a mixed picture.

Absolute mobility has continued to improve in recent decades because incomes have risen; median family income is about 12 percent higher today than in 1980, adjusted for inflation. As a result, most adults today have more income at their disposal than their parents did at the same age. . . .

For all the continuity over recent decades, the authors emphasized that parents appeared to cast a longer shadow over their children’s lives, in some ways, than before. As inequality has risen, pushing the rungs on the income ladder further apart than they once were, the average economic penalty of being born poor has grown over time.

“It matters more who your parents are today than it did in the past,” Mr. Chetty said."

Summing Up

We need to give every young American an opportunity to pursue his or her individual dreams and path to happiness. That's the American way.

Parental and community support, accompanied by equal educational opportunities for all, are the keys.

As an integral part of trying hard to achieve equality in educational opportunity, school vouchers must become ubiquitous in America's system of public education.

Meanwhile, maybe a few facts on the table will help instill in our kids the belief that 'If we can dream it, we can do it.'

And the further belief that hard work is the single best route to converting our current dreams into our future reality. 

Thanks. Bob.

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