Inequality in America

You can tell that we’re neither in a recession nor a jobless recovery because the MSM is talking about its favorite topic when America is prospering under a Republican administration — inequality. The New York Times is leading the way with its series on “inequality in America.” But, as Bruce Bartlett notes, the Wall Street Journal, Christian Science Monitor, and Business Week all have jumped on the bandwagon.
People sometimes confuse two issues during these discussions — inequality and lack of upward mobility. My colleagues John and Scott first made names for themselves as pundits by writing about inequality. One of their central observations was that the evidence left-wing economists rely on to show inequality tends actually to be indicative of an opportunity society. For example, leftists point to studies showing that the gap between the bottom quintile and the top two quintiles is increasing. But typically the bottom quintile in the studies relied on is made up mostly of people who basically don’t work, including students and retirees. To the extent they don’t work, their income will always be zero. If people in the upper quintile are outpacing them by growing margins, that’s a sign that productive people are doing better than before, while people who don’t work naturally are doing the same. Such studies aren’t a cause for concern. If you want less of this “inequality,” move to France or Germany and participate in a stagnant economy. But check with French and Germans first to see how they like it.
Evidence of declining upward mobility would be another matter. However, as Bartlett shows, the best evidence seems to rebut any claim of such a decline. Even so, our current immigration situation presents a challenge with respect to upward mobility. For example, Robert Samuelson in the Washington Post cites findings by Harvard economists George Borjas and Lawrence Katz that children of Mexican immigrants aren’t advancing quickly. Thus, to the extent that present immigration patterns continue, studies may tend to show declining upward mobility. Indeed, one would expect that, absent effective restrictions on immigration, societies that provide substantial opportunities for significant advancement would be inundated with immigrants to the point that they ceased to provide as much opportunity as before, especially for low-skilled immigrants.

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