The Corner

Economics

Am I Lowballing Upward Mobility?

Much of the criticism of my book, The American Dream Is Not Dead: (But Populism Could Kill It), has come from those on both the left and populist right who think I am not concerned enough about inequality — see this, for example, from former labor secretary Robert Reich, who argues for the psychological importance of inequality — and that I am too quick to argue that the United States is still characterized by economic mobility.

So I’d like to highlight a critique from the other side. In a thoughtful article just published by The Independent Review, the economist William J. Luther writes this:

If anything, Strain concedes too much to the naysayers. Consider his discussion on relative income mobility. Using the Panel Study of Income Dynamics, Strain shows that 36.1 percent of those raised in the bottom quintile find themselves there today (p. 83). “I am paid to have strong opinions about these sorts of statistics,” he writes, “but honestly I don’t know what to make of them. On the one hand, arguing that one-third of children raised in the bottom remain there when they reach their prime earning years makes America seem like a class society. On the other hand, arguing that two-thirds of children raised in the bottom escape that position as adults makes America seem quite upwardly mobile” (p. 84).

Really? If family income was determined by pure chance, one would expect 20 percent of those raised in the bottom quintile to land up there as adults. In a pure class system, it would be 100 percent. America is much, much closer to a random distribution than it is to a pure class system. And, surely, some portion of the outcomes observed today is the result of hereditary traits that played a role in the outcomes observed in the past. That only 36.1 percent of those raised in the bottom quintile remain in the bottom quintile as adults despite these hereditary traits suggests that America is incredibly mobile.

Check out my book — Amazon is still able to have it to you before Christmas! — to see if you agree with me, Dr. Luther, the Left, or the populist Right.