Getting Ahead is Now Harder in the New World Than the Old

Economic mobility is a tricky subject and it helps to do your homework before offering opinions in this area. Case in point is the recent speech by House Budget Chairman Paul Ryan at the Heritage Foundation. Ryan lauds the United States as a land of upward mobility -- a place, in fact, founded on this ideal -- and contrasts our bounty of opportunity with Europe, where "Top-heavy welfare states have replaced the traditional aristocracies, and masses of the long-term unemployed are locked into the new lower class."

Before getting to the mobility issue, let me just point out that a number of European countries with strong welfare states have lower unemploment rates than the United States: Germany is at 6.5 percent, Sweden at 7.3, Denmark at 7.1, Belgium at 6.8, and the Netherlands -- with the most generous social safety net in the world (along with Sweden) -- has an enviable unemployment rate of 4.4 percent.

These countries are also growing at a faster rate than the U.S. -- with Sweden, for example, a veritable boom economy compared to America. (It's growth rate was twice the U.S. rate in 2010.)

Of course, plenty of European countries are also basket cases -- Spain, Ireland, Portugal, Greece -- but, as it happens, these countries tend to have the weakest welfare states in Europe, not the strongest.

The resilience of Northern Europe's mixed economies in the face of a global economic downturn may help explain the larger truth that Ryan ignores: Many European countries now have higher levels of mobility than the United States. In fact, according to the Russell Sage Foundation -- a leading center for research on inequality:

The United States, with the highest rate of inequality among advanced economies, has the lowest level of economic mobility from one generation to the next.

You read that right: We are the bottom of the pack, not the top as Ryan implies.

There are various reasons for stalled mobility in the United States, and one surely is that in recent decade our society has betrayed what Ryan describes as "the American Idea that justice is done when we level the playing field at the starting line, and rewards are proportionate to merit and effort."

America isn't exactly set up these days to honor this core idea. The way we finance our educational system, largely with property taxes, ensures inequalities in opportunity for children nearly from day one of their lives (most European systems finance schools in a centralized fashion) and these inequities are reinforced in a post-industrial labor market where less skilled workers have declining opportunities to build security and move higher. Attacks on labor unions and labor standards, as well as a less progressive tax system, also explain why mobility is stalling out.

As for rewards that are "proportionate to merit and effort," that's a virtue that went out the window long ago. Is employee number 6 at Google, who probably is now a centamillionaire, actually any better or smarter than employee number 6666? Does a private school, Ivy League robo-student who lands a job making $140,000 as a first-year associate at Cravath really deserve to make four times as much as a starting cop who worked his way through college? Thirty years ago maybe you could make a case that a typical CEO deserved to be paid 40 times more than the average production worker. But it's harder to justify pay that is 185 times greater. Do today's CEOs really demonstrate that much more merit and effort than they did in 1980?

Ryan attacks President Obama -- who wants to raises taxes on the rich -- for favoring equality of outcomes, not equality of opportunity, and accuses him of class warfare. But Ryan misses an elementary point about opportunity in a capitalist society, which is that some of the winnings of the very successful need to be recycled to ensure ongoing opportunity for all. Otherwise you get concentrations of wealth and a playing field tilted toward the privileged. Andrew Carnegie famously espoued this argument in his essay Gospel of Wealth and Warren Buffett often repeats it.

Progressive taxation and a strong welfare state are not forms of class warfare that weaken mobility. They are actually prerequisites of mobility, which is why Europe is pulling ahead of America in promoting people's upward economic movement.

It's ironic -- no, it's appalling -- that Ryan and other Republicans are championing the great American idea of income mobility in order to justify policies that will produce a more stratified U.S. society.