Inequality, Mobility, and Being Poor in America

Steven Horwitz

That's the title of a recent paper of mine that is now forthcoming in Social Philosophy and Policy, as part of a conference and symposium coordinated by Mark LeBar. I have put a draft version up at SSRN for those who would like to take a look at it.  I will try to link the final version if possible.  Here's the abstract:

Abstract:      

The conventional narrative that the last generation has seen the rich get richer and the poor get poorer while the middle class gets hollowed out has serious flaws. First, the claims of growing inequality overlook data on income mobility. It is not the same households who are rich and poor each year, and many poor households become richer over time. Second, the claim of middle class stagnation is largely a statistical deception based on an incomplete interpretation of median household income. The middle class has shrunk but so has the percentage of poor households as the percentage of rich households has grown significantly in the last few decades. Third, looking at consumption rather than income enables us to see both the absolute gains of poor US households and the narrowing of the gap with the wealthy. Poor US households are more likely to have basic appliances than the average household of the 1970s, and those appliances are of much higher quality. Together these three points offer a much more optimistic view of the degree of inequality and the ability of the poor to become rich. The picture is not all rosy and a final section discusses the relevance of housing, health care, and education costs to this argument.

Comments

[Levi Russell]

Sounds like an interesting paper. I look forward to reading it!

[liberty]

Excellent -- I have written about this using Luxembourg Income Study data (see my 2005 LIS Working Paper), as does Rector at Heritage, ever since his 1996 paper, but it is good to see an academic paper with updated data. I look forward to it.

One thing to note: it depends on who you are talking to, but some on the left are well aware of income mobility and care only about classes -- individual households may be getting richer but the class that is the poor are not (and even may be 'getting poorer'?) -- Marxists care about classes. Of course, so long as you have immigration and you have poorer countries, this will always be true by the data. It is not in their interest to recognize this or dwell on mobility of course, because Marxists, by definition, want revolution. ... So, it is very good to get the data out there and make this case. Good work.

[Barkley Rosser]

On the matter of mobility, there are quite a few studies out there finding that mobility is negatively linked to the degree of overall income inequality. In particular, mobility has declined fairly substantially in the US, and is now less than in many western European nations, despite their having more entrenched old classes, but greater income equality than the US.