Income mobility (in which Noah, possibly for the first time, defends conservative talking points from liberals' logic)

Gasp. I'm about to do it. I'm about to defend conservative economic talking points against liberal criticisms that are well-grounded in empirical data. This is not something that is likely to happen again.

Matt Zeitlin:

[A]nother argument that conservatives seem to take for granted is that, despite our abnormal-for-the-industrialized-world inequality, we have more intergenerational mobility, that the economic and social status for a given person is less influenced by their parents economic and social status than it is in other countries. Marco Rubio, profiled in today’s New York Times Magazine, believes this wholeheartedly:

He jackhammers his message about America’s exceptional status in the world. “This is the only society in history where your future is not determined by where you were born,” he said. “I believe that the United States of America is the greatest society in the history of humanity.”

This, intuitively, seems unlikely; if the income distribution is more spread out, it would seem harder to advance along it. But even when you just measure gross income gains, Marco Rubio, “The First Senator From the Tea Party?” is pretty wrong. Here are just a smorgaboard of papers and reports that all conclude that the US has less intergenerational income mobility than comparable countries. And, most damningly for hardcore economic conservatives, Scandinavian social democracies have higher levels of intergenerational income mobility.

Bhashkar Mazumder, an economist at the Federal Reserve Bank of Chicago, has a paper which says that “Using administrative data containing the earnings histories of parents and children,the IGE is estimated to be around 0.6. This suggests that the United States is substantially less mobile than previous research indicated.” And, “estimates of intergenerational mobility are significantly lower for families with little or no wealth.”

Or, from Markus Jantti of Abo Akademi University:

The United States, Italy, and France all have high persistence, at 0.45, 0.44, and 0.42, respectively, which with a 12-fold income advantage in the parental generation would translate to roughly three times higher incomes among the children of the richest fifth compared to those of the poorest. Denmark has the lowest persistence at 0.12, and most other countries are quite close to 0.25. These numbers translate to 1.35 and 1.86 times higher incomes among the richest fifth offspring, holding constant the parental income advantage

In summary, “Intergenerational income persistence in the United States is quite high compared to other countries...”

And, from a Center for American Progress report ‘Understanding Mobility in America,’ “By international standards, the United States has an unusually low level of intergenerational mobility: our parents’ income is highly predictive of our incomes as adults. Intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States.”

I don't know, maybe I'm just playing devil's advocate here. But isn't there a difference between mobility and opportunity?

Consider two imaginary societies. In Society 1, everyone has access to the same capital, education, etc., and the rules of the economy are all fair and fairly administered. Given this equality of opportunity, incomes are mostly determined by natural ability, or skills learned from parents (with some random events like illness thrown in). Ability and skills are passed down from parent to child. Hence, there is very little actual mobility from generation to generation, despite total equality of opportunity.

Now consider Society #2, in which there are "class barriers"; the social class you're born into determines whether you have access to capital, good education, and favorable treatment by the government. However, this class system is not perfect; many talented lower-class people will be able to take opportunities to form businesses, invent technologies, etc. that allow them to jump the class divide. And many upper-class people, who never learn to work hard for their money, become lazy and careless, and are much more susceptible to being bankrupt by random events. This society will show a greater degree of actual intergenerational mobility than Society 1, because of the presence of the class system.

And just for fun, consider Society #3, where everyone is forced to work, and yearly income is decided by lottery. This society will have huge observed income mobility, but it's all involuntary.

Now, I am not saying that we live in Society #1 (which is what a conservative pundit would likely argue). But I am saying that none of the papers cited by Matt Zeitlin offers solid evidence that we don't live in Society #1. The papers fail to shed any light on why observed income mobility is low in the U.S. And then writers like Zeitlin look at these papers and conclude that America is a place where poor people don't have as much opportunity to get rich as they would in France or Sweden. That's just not a valid logical conclusion.

(Of course, let me note that conservatives have failed to identify this flaw in liberals' arguments. Why? Because, by and large, conservative economic philosophy is based on faith rather than evidence. There's plenty of good hard solid evidence that cutting taxes doesn't raise tax revenue, and that hasn't stopped conservatives from continuing to believe unquestioningly in that old myth. Conservatives don't need to find logical flaws, they just reject logic itself...)

So what is my personal guess as to the cause of our low mobility? In fact, I think our lack of mobility comes partly from our crappy education system (which raises the importance of parent-to-child skill transfer), partly from our sheer inequality (which makes changing income percentiles a much bigger jump), partly from family breakdown (which forces poor kids to start working earlier than rich kids), partly from the black-white racial barrier in our culture, and partly from the large differences in natural ability that crop up in a nation of immigrants (because we tend to recruit either badass engineers or unskilled manual laborers, rather than people who were middle-class in their home countries). A little of Society #1, but a lot of institutional factors, not all of which can be corrected by public policy. But hey, that's just a guess.

UpdateYglesias reads the Zeitlin piece and offers the standard conclusion:

This one stat isn’t the be-all and end-all of mobility. One nice thing about the United States and social mobility is that compared to most European countries (but not Canada or Australia, or for that matter Sweden in Europe) it’s easier for foreigners to move here and make their way. Still, the facts are the facts. The ex ante level of inequality in the United States makes social mobility hard, and we’re not doing anything like the kinds of investments in child nutrition, early education, etc. that could make up for it ex post.

Besides the fact that Yglesias misuses the term "ex post" (in terms of income, "ex post" would be what people earn once they start earning, not while they are children), he misses the logical fallacy, and concludes that yes, America does make income mobility difficult (except, apparently, for immigrants).