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Research Desk: Has economic mobility decreased?

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DukAmok asks:

How has class mobility changed in recent history? Is there any significant correlation between overall economic growth and upward class mobility? Does the aphorism “A rising tide lifts all boats” have any factual merit?

As Isabel Sawhill notes in this literature review, economists disagree over whether income mobility has declined over the past few decades. Chul-In Lee and Gary Solon have found (non-free revision here) that the strength of the relationship between sons’ income and their parents’ (a measurement known as “intergenerational elasticity” or IGE; a higher IGE indicates less mobility) did not change significantly from 1977 to 2000, but that the IGE when comparing daughters’ income and their parents’ increased sharply from 1977 and 1984 and then plateaued at the same level as the IGE for sons. This makes sense, as that period saw more women joining the workforce, and thus reduced the degree to which their earnings depended on the wealth of the spouse, as opposed to their parents. Alternately, as Sawhill suggests, it could just be a statistical anomaly:

Tom Hertz looked at the same period, 1977 to 2000, and like Lee and Solon, found no significant change in income mobility.

Others find that mobility has significantly decreased in recent decades. Rather than comparing between parents and children, David Levine and Bhashkar Mazumder compared brothers, who would be expected to have the same family background influence on their income. They found that brothers born between 1944 and 1952 had a family income correlation of .207, as opposed to .415 for brothers born between 1957 and 1965. That is, income mobility for people entering the workforce in the ’80s and ’90s was half that of people entering in the ’60s and ’70s.

Another paper, by Mazumder and Daniel Aaronson, compared across generations by matching people in one census with “synthetic parents” in a previous generation. They found that IGE had risen from 0.297 in 1950 to 0.545 in 2000, with the biggest fall in mobility happening between 1980 to 1990, when IGE shot up from 0.375 to 0.522. They argue this trend matches the huge increase in income inequality over the same period identified by Thomas Piketty and Emmanuel Saez.

Because Lee and Solon and Hertz do actual comparisons between children and their parents, their studies provide the most direct evidence on intergenerational mobility, and so their conclusion that no overall trend exists seems compelling. But there is some dispute on the question, and the Levine and Mazumder and Aaronson and Mazumder studies give some reason to believe that income mobility has fallen as income inequality has increased. Whoever’s right, it remains the case that the U.S. has much lower income mobility than most developed countries.

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