Horatio Alger is Dead

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Horatio Alger is Dead

• CEPR Basic Economics Seminar
• Heather BousheyOctober 27, 2005

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America the land of opportunity?
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Um, well, kinda.

• After John Schmitts talk on inequality in the
  U.S. labor market, maybe you asked So, what.
  Dont all Americans move up over time,
  canceling out static inequality snapshots?
• Reality is, U.S. has not only highly unequal
  economic outcomes in one point in time, but
  inequality multiplies over time and economic
  mobility has decreased.

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Structure of talk

• U.S. economic mobility, over time.
• Relative
• Absolute
• Escaping poverty
• How does U.S. compare internationally?
• Why has mobility decreased?
• Link to prior talks role of inequality more
  generally and role of wives.
• Job ladders, displacement, job instability.
• Wealth inequality, access to education, health
  care, pensions, race/ethnicity.

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Economic Mobility. Huh?

• Mobility not the same as inequality.
• Inequality is the difference in incomes at one
  moment in time.
• Mobility is the changes in an individuals
  ranking over time, that is, are they better off
  compared to their peers or worse off, over time?

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Figure 1. Annual growth in real family income in
the U.S.
Source John Schmitt, 2005. Labor markets and
economic inequality in the United States since
the end of the 1970s.
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The technicalities data

• To study economic mobility, need different data
  than to study inequality trends.
• Inequality different people over time.
• Mobility same people over time.
• More costly to do these kinds of surveys because
  must follow individuals.

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Figure 2. Relative mobility
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A real world example

• Lets say Mark and Peter are the same age and are
  both college graduates.
• In 1989, Mark and Peters family income were both
  44,000 and both were in the middle quintile.
• In 2005, Marks family income was 70,000 and
  Peters was 54,000.
• In Figure 1, Mark is upwardly mobile and moves
  up one step to the Fourth Quintile, while Peter
  stays in the Middle Quintile.
• All numbers are in constant 2004 dollars.

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Figure 3. U.S. Intergenerational mobility
Source Blanden and Machin (2002), Table 5.
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In U.S., class matters now more than ever

• Sons from the bottom three-quarters of the
  socioeconomic scale were less likely to move up
  in the 1990s than in the 1960s (Wysong et al.
  2004).
• By 1998, only 10 of sons of fathers in the
  bottom quarter (defined by income, education, and
  occupation) had moved into the top quarter,
  whereas by comparison, by 1973, 23 of
  lower-class sons had moved up to the top.
• Thus, there is a smaller chance that a low-income
  family will move up the income ladder over time.

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Background for Tables 1,2 3

• Bradbury and Katz (2002) use the PSID (Panel
  Study of Income Dynamics) to examine family
  income mobility.
• Survey began in 1968 with 5,000 families who have
  been interviewed each year (most years) since
  then.
• Random distribution would be all boxes in Tables
  1 2 at 20.

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Table 1. Relative mobility, 1969-79
Source Bradbury and Katz, 2002.
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Table 2. Relative mobility, 1988-98
Source Bradbury and Katz, 2002.
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Table 3. Relative mobility, Comparing 1969-79
1988-98
Source Bradbury and Katz, 2002.
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Working wives critical for economic mobility

• Recent research has found that families where
  wives had high and rising employment rates, work
  hours, and pay were more likely to move up the
  income ladder or maintain their position, rather
  than fall down the ladder (Bradbury and Katz,
  2004).
• However, even the large increase in labor supply
  of women (and mothers, in particular) has not
  been sufficient to counterbalance declining
  mobility overall.

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Table 4. Income growth, married-couple families
with children
Source Mishel, Bernstein, and Allegretto, The
State of Working America 2004-05, p. 104.
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Figure 4. Mobility, 1969-79
Source Bradbury and Katz, 2004.
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Figure 5. Mobility, 1988-98
Source Bradbury and Katz, 2004.
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Absolute mobility

• Both notions of inequality and mobility discussed
  so far are relative, not absolute concepts.
• Can look at mobility absolutely, that is, share
  of individuals moving above a certain threshold.

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Table 5. Limited mobility out of poverty in U.S.
Source Organization for Economic Cooperation and
Development, 2001e. Employment Outlook. June
2001. Paris OECD.
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Table 6. Poverty exits
Source Organization for Economic Cooperation and
Development, 2001e. Employment Outlook. June
2001. Paris OECD.
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Table 7. Poverty exits associations
Source Organization for Economic Cooperation and
Development, 2001e. Employment Outlook. June
2001. Paris OECD.
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What happened to Horatio?

• Greater inequality and limited bargaining power
  of workers taking more of a long-term toll on
  particular workers and their families.
• Dismantling of social welfare state limits access
  to institutions that foster mobilityeducation,
  housing, health care, adequate child care,
  protective labor law.

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For further reading

• Jo Blanden and Stephen Machin. 2002.
  Cross-Country Comparisons of Changes Over Time
  in the Extent of Intergenerational Mobility,
  Department of Economics, University College
  London and Centre for Economic Performance,
  London School of Economics.
• Katharine Bradbury and Jane Katz. 2002. Womens
  Labor Market Involvement and Family Income
  Mobility When Marriages End, New England
  Economic Review, Fourth Quarter.
• Katharine Bradbury and Jane Katz. 2004. Wives
  Work and Family Income Mobility, Federal Reserve
  Bank of Boston Public Policy Discussion Papers,
  No. 04-3.
• Organization for Economic Cooperation and
  Development, 2001. Employment Outlook. June
  2001. Paris OECD.
• John Schmitt, 2005. Labor markets and economic
  inequality in the United States since the end of
  the 1970s.
• Earl Wysong, Robert Perrucci, and David Wright.
  2004. Organizations, Resources, and Class
  Analysis The Distributional Model and the U.S.
  Class Structure," Indiana University Working
  Paper.

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Reading List

• Boushey, Heather. 2005. Are Women Opting Out?
  Debunking the Myth. Washington, DC Center for
  Economic and Policy Research.
• Boushey, Heather. 2005. Family Friendly Policies
  Helping Mothers to Make Ends Meet. Washington,
  DC Center for Economic and Policy Research.
• Boushey, Heather, David Rosnick, and Dean Baker.
  2005. Gender Bias in the Current Economic
  Recovery? Declining Employment Rates for Women in
  the 21st Century. Washington, DC Center for
  Economic and Policy Research. Briefing Paper.

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Reading List (continued)

• Bradbury, Katherine, and Jane Katz. 2004. Wive's
  Work and Family Income Mobility. Federal Reserve
  Bank of Boston, No. 04-03. Boston, MA. July 29.
• Budig, Michelle J., and Paula England. 2001. The
  Wage Penalty for Motherhood. American
  Sociological Review Vol. 66, pp. 204-25.
• Gornick, Janet C., and Marcia K. Meyers. 2003.
  Families that Work Policies for Reconciling
  Parenthood and Employment. New York, NY Russell
  Sage Foundation.

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Reading List (continued)

• Hartmann, Heidi, and Stephen Rose. 2004. Still A
  Man's Labor Market The Long-Term Earnings Gap.
  Washington, DC Institute for Women's Policy
  Research.
• Heymann, Jody, Alison Earle, Stephanie Simmons,
  Stephanie M. Breslow, and April Kuehnhoff. 2004.
  The Work, Family, and Equity Index Where Does
  the United States Stand Globally? Boston, MA The
  Project on Global Working Families, Harvard
  School of Public Health.

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Reading List (continued)

• Goldin, Claudia, and Lawrence Katz, The Power of
  the Pill Oral Contraceptives and Womens Career
  and Marriage Decisions, Journal of Political
  Economy, August 2002.
• Goldin, Claudia. 2006. The Quiet Revolution That
  Transformed Womens Employment, Education and
  Family. Ely Lecture, Annual Meeting of the
  Allied Social Science Associations. Boston, MA.
  January 6.

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Horatio Alger is Dead

• Heather Bousheyhboushey_at_cepr.net
• Center for Economic and Policy Research
• www.cepr.net