Monday, July 9, 2012

New Report on Economic Mobility

Just finished reading a new report on economic mobility from the Economic Mobility Project at Pew Charitable Trust. In a nutshell, the report reveals that Americans have experienced absolute mobility, families have both more income and wealth then their parents, while relative mobility (between quintiles) has been less remarkable.

A couple of brief observations. First, economic immobility remains substantially correlated with race, there's a very good reason that people continue to seek explanations and solutions to this problem (like affirmative action).

Second, I would find the absolute mobility measures far more useful if a section were added comparing it to overall economic growth. With a rich country expected growth rate of around 2% a year, it would be shocking if any quintile did not experience some absolute growth. The relevant question is whether or not each quintile is experiencing relatively similar rates of growth or if the place in the distribution is a significant determinant of the growth rate. After all, if the lowest quintile is experiencing a 0.1% rate of growth a year over 40 years there will be an absolute improvement but it isn't very impressive if the top quintile was experiencing 3-4% a year growth. This matters for putting absolute increases in perspective.

Also, briefly, the report reinforces the importance of getting people in the lowest economic rungs into further schooling. Education has a much greater impact on these individuals than it does for others who likely have other resources to aid in their income mobility and security. In addition, the report shows that the lowest income quintile appears to have more of a floor under it than in preceding generations. This is open to interpretation, but the continuation of the stickiness of mobility at the bottom provides a hint that income support programs, like a higher minimum wage, the EITC, and more benefits targeted towards children (like SCHIP) may be helping to prevent these individuals from becoming as destitute as 40 years ago. If enhanced access to market income was the cause, I would expect the absolute gains to be associated with greater mobility, though this is only an educated guess.

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