Everyone likes upward economic mobility. But how much do we like downward economic mobility?
One obvious point is that while we all like absolute upward economic mobility, relative economic mobility is a bit dicier. I think we can all agree that it would be great to have more overall growth and bigger increases in absolute incomes across the spectrum. But this is fully compatible with a world in which there isn’t that much upward relative economic mobility for many people.
According to this study (which I found thanks to a pointer by Paul Krugman), the elasticity of son’s income with respect to father’s income is about 0.5 in the United States. How do you interpret this fact?
Some see this as a sign of an entrenched economic aristocracy. The rich can buy various advantages for their children — access to high-quality schools and other enrichment experiences, membership in social networks that facilitate entry into high-status, high-wage occupations — and this dampens downward mobility. There is, as Mankiw notes, another dimension to this phenomenon:
As I understand it, that 0.5 estimate is roughly the correlation between father and son income. That means that the fraction of variance of son’s income explained by father’s income–that is, R-squared–is only 0.25. This last number is sometimes called the “heritability” of a characteristic.
By contrast, the heritability of IQ is usually estimated to be much larger than that. At least some of the heritability of income must come not from inequality of opportunity but from the genetic transmission of talent. Other aspects of talent, such as drive, energy, and spunk, might well have a genetic component as well, but they are harder to measure and thus we know less about them. But the one that has been studied extensively, IQ, seems more heritable than income.
And so, Mankiw concludes, it would be weird if we didn’t see significant heritability of income. Indeed, I wonder if the fact that the 0.5 estimate isn’t higher has something to do with the “threshold earners” phenomenon Tyler Cowen has described. Many children from affluent households are choosing psychic income over market income.
I’ll add another wrinkle. As Michael Fletcher reported in the Washington Post a few years back, drawing on a study sponsored by the Pew Charitable Trusts, downward mobility is more common among African Americans than among non-blacks:
Overall, family incomes have risen for both blacks and whites over the past three decades. But in a society where the privileges of class and income most often perpetuate themselves from generation to generation, black Americans have had more difficulty than whites in transmitting those benefits to their children.
Forty-five percent of black children whose parents were solidly middle class in 1968 — a stratum with a median income of $55,600 in inflation-adjusted dollars — grew up to be among the lowest fifth of the nation’s earners, with a median family income of $23,100. Only 16 percent of whites experienced similar downward mobility. At the same time, 48 percent of black children whose parents were in an economic bracket with a median family income of $41,700 sank into the lowest income group.
Do we want the downward mobility that defines life for many African American families to become the U.S. norm? Or do we want the “stickiness” of middle-class and more affluent black Americans to match that of non-blacks, while also improving absolute incomes at the bottom?
Rather than answer that question directly, I’ll just say that Somewhere, directed by Sofia Coppola, daughter of Francis Ford Coppola, was my favorite film of 2010.
P.S. Gabriel Rossman, a sociologist at UCLA and one of my favorite scholars, wrote in to add that the pattern of downward mobility for African Americans identified by the Pew study has been there for a long time — Blau and Duncan found the same pattern in The American Occupational Structure, a landmark study of social mobility in the U.S. first published in 1967.
And Gabriel kindly sent me a copy of “The Impact of the Cultural Revolution on Trends in Educational Attainment in the People’s Republic of China” by Zhong Deng and Donald J. Treiman. Basically, the Cultural Revolution succeeded in reducing the intergenerational transmission of educational attainment.
So if we really want to lower the father-son correlation of income and fight the natural tendency of parents to offer their children opportunities for economic security and advancement, we could send children of upper-middle-class parents to rural work camps (no, not an Outward Bound or NOLS course), making a careful effort to cut them off from their existing networks. Somehow I think that would be overkill.