Economic View

It’s Not the Inequality; It’s the Immobility


Income inequality and economic immobility are often lumped together, but they shouldn’t be.

Consider the two concepts positively: Income equality is about bridging the gap between the rich and the poor, while economic mobility is about elevating the poor as rapidly as possible. Finding ways to increase economic mobility should be our greater concern.

For instance, while we have talked incessantly about the disproportionate gains of the top 1 percent, the wage slowdown in the United States in recent decades is a bigger problem for most people. Since 1973, for workers as a whole, wages have stagnated largely because of a severe productivity slowdown.

The consequences have been startling. Data from the Economic Report of the President suggests that if productivity growth had maintained its pre-1973 pace, the median or typical household would now earn about $30,000 more today. Those higher earnings would constitute a form of upward mobility. For purposes of comparison, if income inequality had maintained its pre-1973 trend, the gain for the median household would be about $9,000 in income this year, a much smaller figure.

Those changes in productivity and inequality trends aren’t entirely separate, but accelerating the growth of productivity has the potential to do more for upward economic mobility than redistributing money from the top 1 percent.

To be sure, we need to retain the concept of inequality in our thinking, if only to understand public perceptions of the economy or how pay structures are evolving inside corporations. Still, we should be cautious in using “inequality” as an automatically negative term. A lot of inequality is natural and indeed desirable, because individuals have different talents and tastes and opportunities can never be fully equalized.

The concept of mobility helps us distinguish between “good inequality” and “bad inequality.” Reductions in inequality can follow from a leveling in either direction — by elevating the poor or pushing down the wealthy. It is the plight of the poor that we most need to improve.

In the book “Equality for Inegalitarians,” George Sher, a professor of philosophy at Rice University, argues that the equality we should care most about is giving everyone a chance to “live effectively.” Most of all that means ensuring that people have enough for their daily needs. We can tolerate many of the inequalities that arise above this minimum income level, provided there is protection on the downside and plenty of opportunities for those who are economically ambitious.

From this perspective, there has been some good news in recent decades: In the United States, absolute poverty has fallen greatly since the 1960s, once we count the value of government benefits received and adjust properly for changes in the price level. We could and should do better in elevating the poor, but the numbers do not support the picture of an America falling off the tracks or on the verge of a crisis.

To see how a perspective dominated by mobility differs from one focusing on inequality, consider the licensing of occupations like interior decorators and barbers. This licensing, which covers an increasing part of the American labor market, limits economic opportunities for many lower earners and thus hinders mobility.

But if we relax licensing for a particular sector, that will most likely create some wealthy people, and also some business losers, and it is quite possible that measured income inequality will rise. That may not register as a net gain according to the formal metrics of the egalitarian, but there is more opportunity, and greater liberty to earn a living as one sees fit. The inequality focus tends to draw us to redistribution, whereas a mobility focus is more conducive to ideas for wealth creation.

The issue of immigration also looks different when considering these two perspectives. Letting more immigrants reside legally in the United States will help the immigrants and perhaps help many wealthy Americans who can hire them to work for their companies or perhaps to perform personal services for them at home. Those same immigrants may not help the American middle or lower middle classes, since the best evidence suggests those effects are very close to neutral. Someone focused on equality may be lukewarm about such a change, which may raise measured inequality, but a mobility advocate will embrace it, because it makes the immigrants as a group much better off.

In personal discussions, I’ve found that egalitarians often retreat to pro-mobility intuitions when confronted by such examples, because who wants to oppose greater opportunity? Still, the key is to be consistent, and that means acknowledging that widely used gauges of economic inequality, like the Gini coefficient, aren’t well suited for measuring social and economic progress. That metric and similar ones don’t focus our attention on what is actually unfair about the status quo: the absolute deprivation and lack of opportunity imposed on too many people.

Emphasizing mobility also suggests a less bleak perspective on the recent course of American history. While it’s sadly true that productivity and income growth have lagged since the 1970s, to the extent that we’re concerned primarily with relative progress through the income ranks, the best research suggests that income mobility in America has been flat for at least 20 years. Upward mobility hasn’t increased, but at least it hasn’t declined.

Furthermore, actual mobility has been much more robust than the numbers indicate. The statistics do not count the gains of people who have come from another country for a new and higher salary in the United States. The percentage of foreign-born Americans has been rising for decades and that suggests significant unmeasured mobility gains.

It is quite possible the future will bring higher levels of income inequality, which will undoubtedly distress many commentators. But we are likely to be better off if we keep our eye on the ball, identify what really helps people the most and do whatever we can to increase economic mobility. That is a practical program that we all should be able to endorse.