Obama Is Wrong: Income Mobility Has Not Declined Over the Past 50 Years

In December, in a
speech at the Center for American Progress, President Barack
Obama asserted that “we’ve seen diminished levels of upward
mobility in recent years,” further declaring that “a dangerous and
growing inequality and lack of upward mobility” is “the defining
challenge of our time.”

The president is wrong about “diminished levels of upward
mobility” according to a new
study by economists from Harvard University and the University
of California, Berkeley. Parsing data from the 1950s and 1970s, the
researchers involved with The Equality of
Opportunity Project
find that…

…measures of social mobility have remained stable over the
second half of the twentieth century in the United States.

In 2012, President Obama’s former chairman of his Council of
Economic Advisors, Alan Krueger, introduced the concept of the
“Great
Gatsby Curve.” Krueger compared income inequality and income
mobility across countries and found that …

…children from poor families are less likely to improve their
economic status as adults in countries where income inequality was
higher – meaning wealth was concentrated in fewer hands – around
the time those children were growing up.”

In other words, as income inequality increases income mobility
decreases: the poor stay poorer and rich stay richer.

The new study reports that it can find no evidence for the
existence of a “Great Gatsby Curve.” Instead the researchers find
that income inequality has indeed increased in the United states,
which means that “the rungs on the income ladder have grown further
apart,” nevertheless, “children’s chances of climbing from lower to
higher rungs have not changed.”

MIT economist David Autor is
surely right when he tells the Washington Post that
the new results will serve as…

…”a sort of Rorschach” test that will support many economists’
preconceived notions about the effectiveness of government programs
in providing opportunity.

Some could view the results as a failure of programs such as
Pell grants, Head Start and nutritional supplements for children
that are intended to promote mobility. Or, he said, “you can view
this as: Social policies have fought market forces to a draw.”

What factors do retard upward income mobility? Among other
things, being located in the Southeastern United States, greater
residential segregation by race and ethnicity, poor public schools,
residing in areas with lower social capital, and living in
neighborhoods with higher percentages of single-parent
families.

For example, the researchers report…

…the strongest predictors of upward mobility are measures of
family structure such as the fraction of single parents in the
area. As with race, parents’ marital status does not matter purely
through its effects at the individual level. Children of married
parents also have higher rates of upward mobility if they live in
communities with fewer single parents.

As
Brookings Institution analysts Isabel Sawhill and Ron Haskins
pointed out more than ten years ago, if a person wants to stay out
of poverty and move up the income brackets, do three things:
graduate high school, get married, and then have kids. My Rorschach
blot test tells me that expanding welfare programs have barely made
up for the deleterious social and economic trends they have
exacerbated over the past 50 years.

For more background, see my recent column, “Why
President Obama is Wrong on Inequality.”