Income Inequality, Social Inequality, and Social Mobility

by Dave Schuler on January 27, 2014

Consider the graph above. It’s pretty obvious that different people are worried about different things. Some people are worried about how long the tail is. I’m more worried about how fat the tail is and how much of that is due to rent-seeking. There are several articles that touch peripherally on this subject I wanted to bring to your attention.

First is this very dense post on trends in income inequality from physicist L. David Roper. A considerable amount of math is required. His most troubling finding is that the mode, the income that the largest number of households have, has been quite steady over time. I also find the relationship between modal income and the minimum wage concerning and note that it tends to support the view of those with strong support for increasing the minimum wage.

Related is this op-ed by Mickey Kaus in the Wall Street Journal:

When I started writing about income inequality in the 1980s, I expected to make a reassuring argument that incomes weren’t growing unequal. That article couldn’t be written. An unceasing barrage of data described an income scale that was pulling apart like taffy. The rich were getting richer faster than anyone else. But even within skill levels or professions—including journalism—the stars were making big money and everyone else was stuck or in decline.

Mickey goes on to express his concern about the loss of social equality that income inequality has carried along with it. He suggests some reasons that social equality has deteriorated:

We can, for example, honor the universal virtue of work by making it the prerequisite for government benefits wherever possible. There’s a reason Social Security checks are respectable and politically untouchable—unlike food stamps, they only go to Americans who’ve worked.

We can also pursue social equality directly, through institutions that mix people from all income levels together, under conditions of equal status—institutions like the draft, for example, or national service. Do we remember the 1950s as a halcyon egalitarian era because the rich weren’t rich—or because rich and poor had served together in World War II?

The draft isn’t coming back anytime soon. But the great social egalitarian hope—mine, anyway—was that Mr. Obama’s health plan might perform a similar function, offering the poor and middle class the same care, in the same hospitals, with the same doctors—and the same respect—that the affluent get (much as Medicare already does).

That doesn’t seem to be the course that the PPACA is taking. Rather it’s separating the American people into those who are covered under the PPACA and those who have more choices in physicians, treatments, medications, etc.

Social mobility is the topic of an article in Slate. A recent study has found that income inequality is not predictive of a decrease in social mobility but other factors are. Here are the factors listed in declining order of their ability to predict:

  1. Family structure
  2. Racial and economic segregation
  3. School quality
  4. Social capital
  5. Income inequality

I don’t think it’s a coincidence that states like Illinois and Mississippi which have very low state contributions to public education also have lower social mobility. Low state contribution ties both spending on public education and expectations of public education to location and the rich and poor are increasingly living in different places (look at the map of relative mobility in this Atlantic article).

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