Upward Mobility

I read an interesting article on economic mobility in National Review Online, which got me thinking. The article is good in that it points out some of the statistical challenges in measuring upward mobility. For example, who counts as poor? Who counts as middle class? Are we measuring intergenerational or intragenerational mobility? In acknowledging these questions, the article does well. Where the article falls short is in two key areas.

First, it assumes that upward mobility in the United States is lower than in many other countries. This may or may not be true, depending on how it is measured. For example, how much credit should be given to official statistics as reported by various countries? Certainly, focusing on the official “poverty” level will give bad results, as discussed here.  But even using income percentiles poses challenges. For example, should welfare and other “benefits” in socialist European countries be counted as income? When I lived abroad, I routinely encountered people making more money than I did, for doing absolutely nothing. The individuals in question were not independently wealthy or trust-fund babies; they were merely beneficiaries of a very generous welfare state, which rewarded them for being unemployed and sitting around various public areas all day, which making no effort to find work. The artificial support given to such individuals may mask the natural cause-and-effect relationships between work and prosperity on the one hand and sloth and poverty on the other.  The NRO article, like most discussions of economic inequality, also totally ignores wealth, focusing only on income. There are good reasons for this, chiefly the availability of data on income and lack thereof on wealth, but the distinction is still an important one and is totally ignored in the article in question.

The second and more significant failing is in the article’s assumption that increasing upward mobility is always a good thing.  That’s not necessarily true.  Certainly, increasing opportunities are always good, but one can easily imagine a very high-mobility society with an extremely dysfunctional economy.  For example, imagine a tax system in which anyone whose parents were in the top 40% of the income distribution at the time of his or her birth pays a tax surcharge of 40% of his or her gross income, which funds are then distributed to those whose parents were in the lowest 40% of the income distribution.  This would, at least temporarily, result in incredibly high mobility, but it would be manifestly unfair and strongly disincentivize anything resembling ambition or hard work.  The point is that mobility is not the goal; opportunity is. Past a certain level, increased mobility can only be achieved at the cost of stability and fairness.  For every person who moves up the income distribution, somebody else moves down, because rankings are a zero-sum game.  Foster too much movement from the lower end of the distribution into the higher end, and you are by extension fostering an environment in which many of the highest earners suffer precipitous plunges in their incomes.

These are just some quick musings on the article; I would be curious to hear what others thought.

Posted

in

by

Ed

Tags:

, , , , , ,

Comments

3 responses to “Upward Mobility”

  1. Ed Cottrell » More on Inequality

    […] the heels of my post on upward mobility comes an insightful post by Cato’s Michael Tanner. Two key quotations: In the end, however, […]

    Reply
  2. Jillian Avatar
    Jillian

    I’ve just stumbled across your thoughts, though I know they were written some time ago. I agree with all your points on the difficulties of measuring upward mobility and I hadn’t previously considered the difficulty with including generous benefits, which would be an interesting further study. However, I had one comment for you to consider: either you believe that prosperity is achieved through hard work and therefore is a privilege earned and should not be taxed more highly, or you believe that wealth can be maintained by the rich and they should not suffer ‘precipitous plunges’ in their wealth from generation to generation. You can’t really have it both ways. If the wealthy are ‘lazy’ then they too should deserve to be poor in the future otherwise you are essentially arguing that the rich deserve to be rich because they were born into it and that should not be challenged and the poor deserve to be poor whether they work hard or not. And, after all, “it is easier for a camel to pass through the eye of a needle’. It would be reasonable to argue that relying on philanthropy of the rich to help the poor is inefficient at best.

    Reply
    1. Ed Avatar
      Ed

      Jillian,

      Thanks for your very interesting comment. I was not actually thinking about the issue you raised (fundamental fairness in tax policy); I was really just focusing on the assumptions that inequality is an unqualified bad thing and that economic mobility is an unqualified good.

      That said, I think we disagree. I do believe both that economic success in the marketplace is earned and that people have a right to keep what they have earned and maintain their wealth. In short, I think we can and should “have it both ways” on these points. I say that because I believe that people have a right to what they earn and that government, as an instrument of the public, has no business deciding how much is enough or who has really earned what they have. If a child of rich parents turns out to be lazy and less productive than the parents were, then that person may deserve to be poor — may, because that person might be doing worthwhile things that are merely less lucrative than the parents’ endeavors. If he or she is truly lazy and doing nothing of value, he or she will likely end up poor, anyway. But the government has no right to make that happen.

      Best,
      Ed

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *