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Saturday, April 4, 2015

Equality and Mobility

At The New York Times, Tyler Cowen distinguishes income inequality (the gap between rich and poor) and economic immobility (inability to improve one's lot).  He says that increasing economic mobility is more important.
For instance, while we have talked incessantly about the disproportionate gains of the top 1 percent, the wage slowdown in the United States in recent decades is a bigger problem for most people. Since 1973, for workers as a whole, wages have stagnated largely because of a severe productivity slowdown.
The consequences have been startling. Data from the Economic Report of the President suggests that if productivity growth had maintained its pre-1973 pace, the median or typical household would now earn about $30,000 more today. Those higher earnings would constitute a form of upward mobility. For purposes of comparison, if income inequality had maintained its pre-1973 trend, the gain for the median household would be about $9,000 in income this year, a much smaller figure.
To see how a perspective dominated by mobility differs from one focusing on inequality, consider the licensing of occupations like interior decorators and barbers. This licensing, which covers an increasing part of the American labor market, limits economic opportunities for many lower earners and thus hinders mobility.

But if we relax licensing for a particular sector, that will most likely create some wealthy people, and also some business losers, and it is quite possible that measured income inequality will rise. That may not register as a net gain according to the formal metrics of the egalitarian, but there is more opportunity, and greater liberty to earn a living as one sees fit. The inequality focus tends to draw us to redistribution, whereas a mobility focus is more conducive to ideas for wealth creation.