Income inequality has become a cause célèbre for many on the Left these days. Oxfam has even jumped on the income inequality bandwagon and declared war on income inequality. In the United States, we're coming up on the midterm election season, which seems like an opportune time to pursue the issue of income inequality. The income inequality narrative goes like this: There is a huge relationship between income inequality and income mobility. Because of that, we should do something about income inequality to prevent further income immobility.
Forgetting that "correlation doesn't equal causation" for a moment, a friend of mine was kind enough to send me a couple of recently published Harvard studies on the matter. These studies are an improvement in discerning the issue of income inequality because instead of using small surveys, these studies use larger sets of data consisting of millions of tax records. The first one was a longitudinal study entitled Is the United States still a land of opportunity? Recent trends in intergenerational mobility (Chetty et al, 2014a). I find its conclusion to be remarkable, which was that "rank-based measures of social mobility have remained remarkably stable over the second half of the twentieth century in the United States (p. 10)." Over the past forty years, income inequality increased while income mobility stayed the same. As a matter of fact, it may even be improving (p. 7). In spite of what the Great Gatsby Curve has to say, income inequality does not cause income immobility, which makes sense because much like income immobility, income inequality is an outcome of given policies and [market and societal] forces, not the cause of societal woes. Not only that, the results of this study show that it is not any more difficult to climb the income ladder than it has been in the past four decades. The days in which we use "income inequality" and "income immobility" interchangeably with a serious face are over.
But wait, it gets better. If income inequality doesn't cause income immobility, then we have to ask ourselves what does. This where the Harvard University longitudinal study of Where is the Land of Opportunity? The geography of intergenerational mobility in the United States (Chetty et al, 2014b) comes into play. This study looked at five main factors associated with income mobility: residential segregation, income inequality, primary schools, social capital, and family stability (p. 4). Given the heavy rhetoric about income inequality, I was expecting income inequality to be the culprit of income immobility. However, in spite of some geographical variants (Figure VI), income inequality is a comparatively weak factor. Although the authors were careful to state (p. 5) that these factors should not be interpreted as causal detriments (no surprise there….that can be said about any study. Can we say "endogeneity problem?") and there is possibly a correlation between the various factors (p. 45), they nevertheless concluded (Table IX) that "the strongest and most robust predictor is the fraction of children with single parents (p. 46)" and that "children of married parents also have higher rates of upward mobility if they live in communities with fewer single parents (p. 4)."
At the very least, these studies quash the Left's assertion of "income inequality leads to income immobility." At the most, it affirms that conservatives were correct in saying that we should legitimately be worried about family structure and making sure that couples get married before having children. There is validity to advocating for married couples, particularly if children are involved. If one is to raise children, two parents are more able to bring in income than one parent. Plus, a two-parent household is better equipped to devote time and effort to childrearing. This is not to say that there aren't single parents who can raise children better than a married couple. There are obviously children who were successfully raised by single-parent households. It is to say, however, that a child will statistically fare better with a home that has two parents than a home with a single parent. Even non-conservative policy analysts believe in the importance of a two-parent home.
Whether family structure is the primary or sole factor in income immobility, it is safe to say that a fixation on income inequality is not going to solve our problems. We should find policies that make life better for as many people as possible, so how about a "war on economic immobility" instead? At least that way, we can better focus on causes of income immobility and root problems related to poverty.