If that’s the case then, we may have a problem. Jared Bernstein recently flagged a paper by Katherine Bradbury (2011) of the Boston Federal Reserve, which shows that income mobility in America peaked in the 1970-1980s and has markedly declined since then. See the figure above, from that paper. This holds for both poor people moving up and rich people coming down and appears likely due to declining levels of taxation from the 1980s onward. Bernstein summarizes:
As Bradbury puts it:
Overall, the evidence indicates that over the 1969-to-2006 time span, family income mobility across the distribution decreased, families’ later-year incomes increasingly depended on their starting place, and the distribution of families’ lifetime incomes became less equal.
This notion that where you start is an increasing determinant of where you end up poses a fundamental challenge to a basic American value. Most of us don’t seek policies to ensure equal outcomes, but we do seek equal opportunities. The combination of increased inequality and decreased mobility suggests the violation of both: less equal outcomes and diminished opportunities.
Moreover, I believe these two results are not simply correlated over time, as Bradbury shows, but causally related. That is, higher inequality is itself driving a chain of events that leads to lower rates of income mobility. [emphasis is his]
Not only are income disparities widening, but people are having a harder time moving out of poverty. Not a pretty picture.