Mobility verses Inequality

Politicians both on the left and right are at it again, posing that income inequality is not the problem, but rather socioeconomic mobility is the real problem. As this paper (PDF) proves, they are the same thing. Sociologists have known this for 100 years.

Sean McElwee over at Salon has an interesting take on socioeconomic mobility: in American capitalism, it is largely determined by unequal market forces, creating a meritocracy. In a problematic meritocracy, people simply aren’t working hard enough to improve their lot in life, and that’s the reason for all of our social problems.

But let’s not forget the purpose and definition of economics: the equal distribution of resources.

So how’s that mobility thing working out? This map from the National Bureau of Economic Research at Harvard shows that at best, people have a very small chance of moving from the bottom 5th to the top 5th.

original

Are people simply not working hard enough to improve their lot in life? Consider that this has been unchanged for the past 30 years. That means that the chances of mobility hasn’t fallen, but rather the gap between quintiles has grown farther apart. In other words, the reason people aren’t moving up the socioeconomic ladder is because of income inequality; not from a lack of work ethic.

According to the data, the southern states have the worst mobility rate. This is interesting because the southern states have the highest poverty rates, and contribute the least to national GDP. In these charts, I exclude Florida because its economy is very different from the rest of the south.

South GDP

Percent GDP

In other words, all of the southern states combined, contribute only 17% to National GDP, making their poverty rates the most breathtaking, as I wrote about earlier. In order to be “equal,” this number should be closer to 22%. If you live in the south, your chances of having a better SES than your parents are anorexic at best.

The argument can be made about meritocracy, but that’s not Economics. That’s certainly not Sociology. That’s public policy – a.k.a. Political Science. However, even the most liberal politicians are forgetting the textbook definition of Economics, democracy, and “free” market. Equal chances for mobility is dependent upon equality in income for skill based on market demands. Even Adam Smith said that people should be paid what they’re worth based on their education and skill. Yet the doctor who saves lives makes a pittance of what the CEO of Citibank makes. And the lowest wage workers can no longer survive on their wages. Do they deserve better? Do they deserve a chance not to starve in the streets?

If socioeconomic mobility is to be addressed, then so does income inequality, which also means addressing jobs that pay a living wage – including the “free market” principles of paying people based on skill and education.

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This entry was posted in Demographics, Economics, Political Economy, Poverty, Public Policy, Socioeconomics, Sociology. Bookmark the permalink.

One Response to Mobility verses Inequality

  1. Raw Discourse says:

    Thank you for this post.

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