Because most philosophies that frown on reproduction don't survive.

Thursday, January 19, 2012

Income Mobility Means Some People End Up Worse Off

Megan McArdle has a thought provoking piece on how income mobility is a popular concept, except that no one really wants their kids to be the ones who end up much worse off than their parents.
Many people apparently agree with me: the issue of income mobility has become more prominent in policy debates over the last few years. And yet I submit that this agreement is entirely theoretical. How many of the people reading this blog would actually tolerate a one-in-five chance that their children would end up poor?

Because that's what income mobility actually means. It doesn't just mean giving a lift to the folks at the bottom--superior health care, better K-12 education. Everyone in the country cannot be above average. For the poor to have a better shot at ending up in the top quintiles, the folks in the top few quintiles have to run the risk of ending up in the lowest.

Who among the parents fighting so hard to get their kids into a good school is going to volunteer to have their kid give up the slot in the upper middle class?
It strikes me that this becomes less of an issue if mobility is more an issue of reverting to the mean: people who are poor having a decent chance of their children doing better than them, people who are quite rich having a good chance their children will be middle class rather than wealthy. But, the thing is, most people live in moderately restricted social sets, so the falling half of the equation seems like "being poorer than everybody".

The piece itself is rather long and worth reading. I'm trying to make up my mind what I think about it. Certainly, the "American Dream" tends to be all about your children being better off than you -- not about half of your children being worse off so that half of someone else's can be better off. In this sense, the American Dream is highly dependent on the assumption that the country as a whole will become increasingly well off, and that that increase will be widely shared.

Thoughts? (Are you still out there, Joel? This one seems right up your alley.)


Anonymous said...

Income mobility is the defining trait of a meritocracy.


Darwin said...

It seems like advancement coming as a reward to merit would be the defining trait of a meritocracy, but I agree it seems like this would just about always result in income mobility.

I also think, however, that Megan's right that in general people are going to try to make sure that they give their own children every chance to excel (from sending them to the best schools to trying to impart a good work ethic) and that in general those who are already well off will have a lot more resources to throw at that problem than those who aren't.

I guess the problem from a policy point of view is: What everyone really wants to do is make sure that the education and training which the poor get is as good as that of the middle class, but that's one of the hardest things to achieve -- not only because of the matter of running good schools in bad neighborhoods, but also because poor parents often aren't able to put as much work into helping and guiding their kids as middle class or rich parents. (Those that are good at that will likely see their kids excel.)

What would be a lot easier is to try to keep those who have already arrived from giving their children every advantage possible -- but that's a set of policies that no one wants. (And with good reason.)

All of which is a verbose way of going nowhere.

Anonymous said...

We've covered part of this ground before. Months ago, in another thread here at DC, I said that I support an inheritance tax of 100% of everything over $1 million or so. After all, the children of the rich already have elite educations and rolodexes full of names of people in power, and if that's not enough for them to get ahead, then they don't belong there anyway. No more Paris Hiltons!


RL said...

Measuring where certain people fall into relation to the rest of the population at a given is useful in some contexts and appropriate if discussing income mobility. However, I think it's a mistake to tie income mobility and "place" to the concept of wanting better for your children.

The children of someone in the 20th percentile can grow up and remain in the 20th percentile and still be better off than their parents. I would think that being in the 10th percentile during the Great Depression would be immensely worse than being in the 10th percentile now or even 60 years ago.

Tony said...

We will always have "poor" people, because as everyone's standard of living goes up, there will still be a "bottom 10%", but their lot in life will be much better.

We are the only country on the planet where the primary nutritional problem for our poor is obesity.

Let the rich keep what they earned and give it to whoever they want. It's theirs.

Darwin said...

Of course, if the children of the rich decide to sit back and live off their investments, they're no threat to the up-and-comers. It's when they decide to go to Harvard, then Wharton and work hard that they start taking up space other people might want to occupy.

Maybe if we created a titled nobility and convinced the rich that work was beneath them we could make some room...

Anonymous said...

Tony wrote: "Let the rich keep what they earned and give it to whoever they want."

Tony, I am willing to compromise with you. Let the rich give their money to whoever they want - as long as they actually earned it. If they just inherited it, then no dice.

Conrad Hilton earned over $2 billion via his hotel chain. I'll give him a pass on my proposed estate tax, because he actually worked and earned that wealth. His son, Barron Hilton, became president of the chain and by all accounts ran it effectively, so I'll give him a pass, too. But Barron's son, Richard Hilton, has done nothing but dabble in real estate, and Richard's daughter Paris is - well, 'nuff said. Their estates should get taxed per my proposal.