When it comes to income inequality, Emmanuel Saez and Raj Chetty are two of the most important academics in the field. With professional clout, access to the best data, and a renewed public interest in the topic since Occupy Wall Street, the release of the Saez et al. paper last week showing that late-Generation Xers and early Millennials have similar levels of income mobility was big news.
But while the work makes a contribution to the discussion of economic mobility, the results are really not so unexpected. Instead, the take-away result (that workers over the 15 year period between 1997 and 2012 had similar opportunities to improve their relative incomes) only reinforces the need to look at the structural barriers linked to geography and race that have not been amended for this generation of workers, and that have consistently undermined mobility for some populations within the U.S.
The latest study by Saez, Chetty, and others, looks at workers between ages 26 and 41 today—15 years of income data—and relates their adult income to that of their parents, and then projects income for younger workers based on educational attainment. Across the 15 years with income data available, the chances that a worker would reach a higher income quintile than their parents didn’t change much. A 41-year-old born to parents in the bottom 5th of the income distribution shows an 8.4 percent chance of reaching the highest earning bracket. That compares to 26-year olds, who exhibit a 9.0 percent chance of moving to the top.
During the 15 years under study here, incomes climbed with economic growth at the beginning of the period and then receded during the recession—maintaining almost $27,000 per year for an individual in both 1997 and 2012 (see table P4 here). But by the beginning of the study in 1997, the structural changes that perpetuate widening inequality in the U.S. had long been in effect.
Saez et al. interpret their results as an extension of the findings from earlier papers, using different data sources for those workers born up to 20 years before this study begins (Hertz, 2007 and Lee and Salon, 2009). In that light, they argue, the results indicate a stubbornly stable degree of income mobility across generations despite the growth of income inequality and diminishing social supports for working class youth.
But for people who care about equality of opportunity, this new information makes a better compliment to the earlier work of the authors themselves. Their previous major study similarly scrutinizes the chances that a worker today can improve her relative position in the economy. For the Gen Xers and Millennials who comprise the subjects of the latest release, the ability to outperform their parents has been greatly impacted by the structural disparities identified in the previous study—disparities that become a more urgent focus for policy with the new information that they aren’t fixing themselves.
For the current generation of workers, higher educational attainment and an economy twice the size of their parents’ has not meant an easier grip on the ladder of opportunity. Among the factors that correlate to low income mobility, Saez et al.’s 2013 paper finds that geographic disparities hinge on five major barriers: residential segregation, income inequality, primary school quality, social capital, and family stability. That is, the stasis of income mobility professed in their latest paper conceals a wide divergence of mobility within the country based on structural issues that leave pockets of the population out of the fold.
Areas with the most racial segregation have the least upward mobility. The isolation of poverty, a lack of access to jobs, and underfunded school districts may also contribute to lessened opportunity through geographic circumstance, while rising inequality among the bottom 99 percent of earners slows the pace of those attempting an upward climb. These results mean that our friends in Charlotte, Atlanta, and Cleveland are at a serious disadvantage compared to those in Seattle and Salt Lake City—and that the American Dream is only available in limited quantities in some locales.
By identifying the contributors to low relative mobility within the nation, the 2013 study tells us what we need to do if we want to effectuate a land of opportunity; the latest study points out that our generation hasn’t done it yet.