Mr. Kernan’s decline was mitigated by the fact that certain of those friends who had known him at his highest point of success still esteemed him as a character.
— James Joyce, “Dubliners”
News about economic studies is becoming more and more like news about medical and nutrition studies – breathless, earth-shattering and often serially contradictory.
Every week there seems to be a new fad, the next best (or worst) thing. One day, headlines and news anchors shout, “Drop everything, bacon and eggs are bad!” A week later, the same outlets say, “Bacon and eggs are great!” Caffeine, red meat, wine, gluten: same thing.
The latest example of this phenomenon in the economic sphere was the recent release of a study by six professors from Stanford, Harvard and Berkeley on trends in income mobility. Parsing a vast amount of data on birth cohorts from 1940 to 1984, the authors conclude that what they call “absolute income mobility” in the United States has declined from 90 percent to 50 percent over the period.
In practical terms, what this conclusion means is that 90 percent of children born in 1940 earned as much or more than their parents, while only 50 percent of those born in 1984 met that standard.
Recognizing that average annual economic growth between 1940 and 1970 was substantially greater than the rate since 1970, the authors tested two thought experiments.
Suppose, they said, that economic growth over the period since 1970 had equaled the growth rate of the previous three decades. What would the change in income mobility have been? It turns out their data show that the drop would have been from 90 percent to just over 60 percent – higher growth would have mitigated that decline somewhat.
Next, the professors said, presume that the post-1970 growth rate was at its current level but that the income distribution over the post-1970 period had remained the same as in 1950. What would the change in income mobility have been in this scenario?
It turns out that their data show that the drop would have been from 90 percent to just under 80 percent – greater equality would have mitigated the decline even more. Conclusion: Income inequality is more important than income growth in explaining the drop in income mobility.
Resultant breathless, screaming headlines: “The American Dream is dying!”
In health terms, it’s as if the choice for living longer is between “stop smoking” and “eat better and exercise,” and the recommendation is “stop smoking.” And if reducing inequality is like stopping smoking, we can follow the man who said, “Oh, that’s easy, I’ve done it thousands of times” and look immediately to raising the tax rates – a policy that, taken alone, is as likely to be successful as the “Just say no to drugs” policy.
Alternatively, we could candidly and seriously consider the far more difficult task of understanding the social conditions of the post-World War II period that enabled a broad sharing of economic prosperity. One key element of those times, I believe, had little to do with tax rates and much to do with the broad, complex and diverse network of nongovernmental social connections that nurtured families and communities – churches, civic organizations, clubs, local philanthropists, watering holes where talk rather than TV dominated the evening.
While James Joyce sharply criticized the oppressive effects of the Catholic Church, alcohol and what in today’s terminology would be called “Protestant, English privilege,” his depiction of Dublin in the early years of the last century was nevertheless a lyrical homage to flawed but energetic people deeply and soulfully engaged with one another, friends who – blind to the irony – would drink a toast to getting Mr. Kernan back on the wagon.
If the American Dream consists merely of making more money and slowly self-selecting into effectively gated communities of people who look and think alike, people who, if they wish to go bowling, will do it alone, it is surely a dream on its way to a nightmare of us-against-them.
Speaking of building community, it is with sorrow and gratitude that I raise a toast to the memory of Dick Sherwood, longtime planner and demographer at the Maine State Planning Office who passed away recently. Dick was a thoroughly kind and profoundly humble man. He was also an astonishingly insightful thinker.
While he was never one to jump to the front to claim credit, it is nevertheless true that virtually every significant demographic, community development or social insight published about Maine over the past 30 years somewhere bears the imprint of Dick’s gentle wisdom. All researchers and public policymakers who had any contact with Dick mourn his passing.
Consulting economist Charles Lawton, Ph.D., can be contacted at:
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