Friday, July 13. 2007
NYT: United States is not the Land of Opportunity
Posted by Editors in International Economics on Friday, July 13. 2007
When questioned about the enormous income inequality in the United States, the cheerleaders of America’s unfettered markets counter that everybody has a shot at becoming rich here. The distribution of income might be skewed, but America’s economic mobility is second to none. That image is wrong. (...)
Recent research surveyed by the Organization for Economic Cooperation and Development, a governmental think tank for the rich nations, found that mobility in the United States is lower than in other industrial countries. One study found that mobility between generations — people doing better or worse than their parents — is weaker in America than in Denmark, Austria, Norway, Finland, Canada, Sweden, Germany, Spain and France. In America, there is more than a 40 percent chance that if a father is in the bottom fifth of the earnings’ distribution, his son will end up there, too. In Denmark, the equivalent odds are under 25 percent, and they are less than 30 percent in Britain.
Any idea which study from the OECD was used by the New York Times? There are dozens and yet I missed finding one that mentioned mobility.
I don't know which study that was.
I have written about other studies that come to the same conclusions in two comments:
[url]http://atlanticreview.org/archives/415-Social-Justice.html#c4538[/url]
[url]http://atlanticreview.org/archives/415-Social-Justice.html#c4665[/url]
[b]It would be great if anybody could scrutinize the statistics.[/b] It could be apples and oranges, but then again, the OECD usually uses good and comparable data.
I did not have the time to scrutinize any of the studies, but I think it is worthwhile pointing out that the OECD study is yet again another one that confirms the previous studies.
Nevertheless, the [b]pro-American myth[/b] persists in Germany (and around the world) that the US is the Land of Opportunity, from rugs to riches, the American Dream etc.
In the previous discussion (see above links), Don pointed out "Approximately twice as much social mobility among poor caucasians than among poor blacks - again no suprise."
So, yes, the black population brings the statistics down. Likewise others have "excused" the high murder rate in the US by pointing out that African Americans are responsible for the high statistics.
While I do think it makes sense to point this out for the benefit of better understanding, I do not think this is an excuse. And if social mobility for African Americans remains low, then this is a big problem and the US is not the Land of Opportunity for everyone. Perhaps that is even one of the reasons for the high murder rate.
Another one:
[url]http://neweconomist.blogs.com/new_economist/2006/04/robin_naylor.html[/url]
"In the previous discussion (see above links), Don pointed out "Approximately twice as much social mobility among poor caucasians than among poor blacks - again no suprise."
So, yes, the black population brings the statistics down. Likewise others have "excused" the high murder rate in the US by pointing out that African Americans are responsible for the high statistics."
I didn't intend to rationalize it - merely agreed that it was likely.
The problem with solving the social pathologies Black Americans suffer from is the legacy of slavery. When analyzing the causes of the pathology two very bad thigs happen. Ine, it provides a ready-made excuse for failure "My Great great great Grandfather was a slave - that's the reason I can't achieve". This is bullshit - how many Americans are the descendents of serfs and coolies and German dirt farmers and Irish tenant farmers and and American Indians and the like - and yet manage to achieve?
The other pathology it encourages is to encourage the notion that success is not in the hards of this particular group of 'victims'; The government must somehow ensure their success. This never works. Never has, never will. Success occurs as a result of individual effort plus community support.
How many young Jews went to Yeshiva? In strictly utilitarian terms Yeshiva is a pretty useless exercise except for one thing; it developed research and argumentative skills, skills which apply to many pursuits outside of religion, such as business, politics, and the law.
The tragedy of American Blacks is that these kinds of instituions have eroded in their community. They used to have them - look at WEB Dubouis and the 'Talented Tenth' movement. 60 years ago one could get an Ivy-league quality education in the Harlem public schools - but no longer.
I don't believe that portion of social mobility will recover in the Us until those kinds of institutions recover. I see similar problems here in the UK and maybe in Germany.
I think the mentioned OECD study is [url=http://www.oecd.org/dataoecd/27/28/38335410.pdf]No. 52. Intergenerational Transmission of Disadvantage: Mobility or Immobility across Generations? A Review of the Evidence for OECD Countries. Anna Cristina d'Addio (March 2007) [PDF][/url]
And another OECD study which is possibly interesting for some of you: [url=http://www.oecd.org/dataoecd/28/5/38163889.pdf]No 47. The Labour Market Integration of Immigrants in Germany. Thomas Liebig (February 2007) [PDF][/url]
The analysis of the OECD data is deeply flawed. If there is a significantly smaller income gap between the richest and poorest quintiles of a nation, that nation will have a higher mobility between quintiles. This is because it takes a much smaller change in income to move into a different quintile. In a nation with a smaller income gap just getting a promotion or taking a higher paying job offer could move you into a higher quintile. In a nation with a high income gap it would require greater achievement such as business success or graduate school degree to move into a higher quintile.
Also, this a zero-sum analysis. Nobody moves up a quintile without someone moving down. If you wanted to spin this opposite of the NY Times you could say downward mobility is much higher in Europe than the US.
This analysis is a distraction from the real important economic data. GDP per capita based on purchasing power parity.
Huh?
[i]The analysis of the OECD data is deeply flawed. If there is a significantly smaller income gap between the richest and poorest quintiles of a nation, that nation will have a higher mobility between quintiles.[/i]
Snark alert.
Feudalism too had a very large income gap between nobles and serfs. So according to your "theory" the OECD would be wrong to criticize them too?
Snark end.
[i]This is because it takes a much smaller change in income to move into a different quintile. In a nation with a smaller income gap just getting a promotion or taking a higher paying job offer could move you into a higher quintile. In a nation with a high income gap it would require greater achievement such as business success or graduate school degree to move into a higher quintile.[/i]
Seriously though, a smaller income gap might also mean that more people have almost the same chances at education. And to get a promotion might mean facing stiffer competition.
Note: That doesn´t mean that I want to denigrate business success. And as the article mentions, mobility in the USA isn´t zero. And the sheer size of the USA guarantees that some capable people will rise to the top. It is possible though that the USA is losing some talents because of the obstacles put in their way.
[i]Also, this a zero-sum analysis. Nobody moves up a quintile without someone moving down. If you wanted to spin this opposite of the NY Times you could say downward mobility is much higher in Europe than the US.[/i]
Well yes.
But there is a difference. Mobility means that I´m moving up or down according to my own capabilities and talents. Education opportunities give me a fair chance to move upwards. Less mobility on the other hand probably means that it´s up to your parents and grand-parents to decide your own "status" at birth. Regardless of your own capabilities.
[i]This analysis is a distraction from the real important economic data. GDP per capita based on purchasing power parity.[/i]
Sorry, disagree.
It is important, no question. But it´s just an average.
Look at my feudalism example. 5% nobles with a very high income and 95% serfs with a very low income might produce an acceptable GDP per capita. The society though is deeply flawed. Not to mention that not everything that counts as GDP makes sense IMO. As in, productive for a society.
Talk about median incomes. Throw in things like health care, education costs, leisure time etc. and we can talk.
Thanks,
I don't see any "flawness" in the data or the OECD analysis, too. It's about intergenerational [i]mobility[/i], or as the NYT says, the image "that America's economic mobility is second to none". This image isn't empirically confirmed and that's not very suprising for everyone familiar with the international data.
[i]Also, this a zero-sum analysis. Nobody moves up a quintile without someone moving down. If you wanted to spin this opposite of the NY Times you could say downward mobility is much higher in Europe than the US.[/i]
It's only partly a zero-sum analysis, especially when estimating intergenerational earnings elasticity. Take the probability for the son of being in the same quintile as his father or the probability of a son to move from the lowest to the highest quintile with respect to the father's position. If social mobility were high in both directions these probabilities should be equal across quintiles and independent of the father's income. They aren't.
Now the typical counterargument goes as follows: It's true that income inequality in the US is very high compared to other countries (e.g., measured by Gini coefficients) and social mobility is relatively low. But people who are poor in the "individualistic" US are already better off because of their higher incomes than people in "egalitarian" countries with a large welfare system and a more extensive use of income redistribution. Therefore you have to compare absolute indices like the average income per capita on a PPS basis for international comparisons.
One problem with this argument is that income distributions generally are heavily skewed so the arithmetic mean is a rather uninformative index. Think of two artificial income distributions like
1,1,1,2,2,2,3,3,3,82 with a mean of 10 and
1,1,1,2,2,2,3,3,3,72 with a mean of 9
Both distributions share the same median and even the usual indices for low income (10th percentile) and high income (90th percentile). Now compare low- and high-income households of different countries to the income per capita (PPP)-median in the United States and you'll see that low-income households in the US have income levels comparable to that of low-income households in countries that are less wealthy than the US. But these countries typically provide more social and economic support to their citizens and these transfers and social spendings aren't captured in your comparison.
And income per capita doesn't take into account the costs of fixed expenses of life (such as rent/mortgage, food, car payments, insurance, health care, education etc.).
For the nitpickers: Better use
1,1,1,1,2,2,2,3,3,3,91
1,1,1,1,2,2,2,3,3,3,80
as example.
The publication of this article could also by a way to lessen the complaints of the Sulzberger family, T. Rowe Price and the other 12% of the stockholders for the catastrophic decline in the value of their stock. In the last ten years the stock price went down from $26.38 to $23.93. Accounting for inflation the price of the stock has lost 29% of its value.
I can just hear some nameless executive, or better yet the fabulist Paul Krugman, explaining to a stockholders meeting that the paper feels terrible about this rising inequality of income and the lack of economic mobility in the US. So the New York Times company has decided to make all the stockholders poorer but more virtuous.
The problem with social mobility in the US is that is is not a major goal of anyone - including most of the people who profess to be very concerned about it!
How so? I would say that most of the supporters of social mobility use race and (sometimes) ethnicity as a proxy for social mobility - and indeed those things are part of the problem. But the 'solutions' to the racial problem all too oftle lead to less equality, not more.
Making quality education available to the 'underclass' is not an insoluable problem. Providing it to a mass audience is much more difficult because it requires that some very sensitive social pathologies be openly examined- and requires that the NEA give up some of it's power over the education system. Or it requires that ways be designed (and financed) for poor families to escape from the monopoly of the disfunctional public schools. This has been clear for at least 30 years but it is not happening.
Prosperous families can escape bad schools. Either by moving house into a good school system or paying for private schools. Poorer people (including most blacks and Hispanics) do not have those options.
Another part of the problem is one of blindness. Many proud liberals are all for affirmative action, but fail to see that they are repressing children who do not fit into the selected racial groups. Poor caucasian and asian kids are actively discriminated against by being lumped into the same group as far more affluent and advantaged children who share their racial groups - even as affirmative action preferences mostly advantage middle-class blacks and hispanics over their poor counterparts. The current system is broken.
I no longer argue that we need to eliminate affirmative action. It seems to me we may need instead to extended it - to become truely class-concious in the way we apportion educational opportunities in the US.
An interesting piece which puts the case for eliminating the SAT: http://american.com/archive/2007/july-august-magazine-contents/abolish-the-sat
"The short answer is that the image of the SAT has done a 180-degree turn. No longer seen as a compensating resource for the unprivileged, it has become a corrosive symbol of privilege. “Back when kids just got a good night’s sleep and took the SAT, it was a leveler that helped you find the diamond in the rough,” Lawrence University’s dean of admissions told The New York Times recently. “Now that most of the great scores are affluent kids with lots of preparation, it just increases the gap between the haves and the have-nots.”"
I have two conflicting experiences with standardized tests. The first was taking the ACT (sort of like the SAT but used moslty in the US Midwest). The second was taking the GMAT (like the SAT but aimed at graduate business school admission). I took the ACT with no preparation (and not even a good night's sleep as I recall) and achieved a very high score, well up in the top percentile.
I ended up going to a good but not great Jesuit run private college, mostly because I was too rural and ignorant to play the game. With better counseling I might have been able to go to an elite college or university. Never mind, Marquette served me well.
When I took the GMAT it was with about 40 hours of self-prep work under my belt. I bought a couple preparation books and did reading and drill. I think I scored about 550 on my first self-test and 700 on the last practice test before taking the exam - then surprised myself by doing 50 points better than that on the actual exam. The effects of a good night's sleep I presume - I usually took the practice exams late at night after a long day's work, probably lowering the scores.
So that might argue that preparation pays. Perhaps so - but I fall into the category of 'motivated' student which Murray describes - so the chances are good I would have done well on achievment tests. If my school or public library stocked preperation materials for such I would have found them and used them. What I really lacked was a little counselling on how to play the admissions game.
Link to the New World Order.
http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf
The Third World is surging and Europe is declining. If the 20th century was the American century, the 21st century is the Third World century.
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