By Lana Gura
How did you get where you are today?
Alan Krueger says you can give most of the credit to the financial status of your parents. Krueger, past chairman of the Council of Economic Advisers in the Obama administration, put forth that idea in a 2012 speech when he introduced the Great Gatsby curve, a graph that showed that the more inequality that exists between the rich and the poor, the harder it is for low-income people to climb up the socioeconomic ladder.
Now a professor of economics at Princeton University, he says he was inspired to begin his research because he was “concerned that the three-decades-long rise in inequality could be reducing social mobility.”
The curve, which plots inequality on the x-axis and intergenerational mobility on the y-axis, shows that countries with low levels of inequality have some of the highest levels of mobility and vice versa.
“I think the increased inequality that we have experienced is a much greater concern if it means that the fortune or misfortune of birth has greater consequences for children,” Krueger said.
Scott Winship, who studies economic mobility and inequality at the conservative Manhattan Institute for Policy Research in New York City, agreed that children who grow up in richer families tend to do better than those who grow up in poorer families, but he questioned whether income was the deciding factor. He said Krueger’s curve has been unable to show a cause-and-effect relationship between inequality and less mobility.
“I think it’s really important for advocates to distinguish between inequality of opportunity and income inequality, and the problem with the Great Gatsby curve is, it puts all of the emphasis on income inequality, which may be a red herring if you’re worried about inequality of opportunity,” he said.
But Chuck Collins, a senior scholar at the Institute for Policy Studies in Washington and director of their Program on Inequality and the Common Good, believes that the Gatsby Curve reflects a growing problem.
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A passionate advocate for progressive taxation, he would direct much of the income from higher taxes on the rich toward education to combat what he sees as the effects of inequality.
“The way I think of it is compounding advantage for the top and compounding disadvantage for the bottom,” he said. “It’s like I own a credit card company and you have a credit card; I keep getting your interest payments and get richer, and you can’t get ahead because you have to pay interest.”
“What I think happens in our culture is we like to focus on the individual merit side of the equation. There is one, but it’s so small compared to these larger trends of inequality that have more to do with the rules of the game. But we still like to live inside that myth of deservedness.”
For Collins, “part of the challenge is getting people who had wealth and advantage to tell true stories about how their wealth came about.” Having grown up wealthy, he lives his philosophy by acknowledging the advantages he received that those with lower-income parents may not have. He said he sees people break out of the “myth of deservedness” most when they meet people who haven’t had the same advantages and can understand the systemic barriers that have hindered them.
“I think it’s good that people accept a certain amount of responsibility for their fate,” added Isabel Sawhill, a senior fellow at the Brookings Institution in Washington, D.C., and an expert in social mobility and inequality. “But if one comes to believe [in that] too strongly, it will close one’s mind to the fact that we are all victims of the circumstances of our birth.”
“Attitudes in the U.S. are very individualistic. We believe that anyone can get ahead if they work hard if they have a certain amount of talent. I believe that affects our ability to shift policy in a more mobility-enhancing direction,” Sawhill said.
For Richard Burkhauser, a professor at Cornell University’s College of Human Ecology in Ithaca, N.Y., income inequality can’t explain the lack of social mobility in America. He cites the work of Harvard University economics professor Raj Chetty, which states that no change in cross-generational mobility has occurred over the last 30 years.
“If income inequality has increased by as much as people claim, and there’s been no change in mobility, then where is the Great Gatsby curve?” he said.
Sawhill said “it takes a while for inequality in adult lives to trickle down to their children and for their children to be affected by it. It’s analogous to the climate change debate and the need to take out an insurance policy before we’re in deeper trouble.”