In a post yesterday, we noted that the growing disparity in college completion provides support for the view that increasing inequality has reduced economic mobility. Bhashkar Mazumder, a senior economist at the Chicago Federal Reserve, makes a similar point in a new article, Is Intergenerational Economic Mobility Lower Now than in the Past?, published as a Chicago Fed Letter. Here’s Mazumder’s summary of the trend:
After staying relatively stable for several decades, intergenerational mobility appears to have declined sharply at some point between 1980 and 1990, a period in which both income inequality and the economic returns to education rose sharply. This finding is also consistent with theoretical models of intergenerational mobility that emphasize the role of human capital formation. There is fairly consistent evidence that intergenerational mobility has stayed roughly constant since 1990 but remains below the rates of mobility experienced from 1950 to 1980.
And here’s his prediction for mobility going forward:
Although we cannot say with any certainty how much mobility today’s children will experience over the coming decades, recent research suggests cause for concern. The gap in children’s academic performance between high- and low-income families has widened significantly over the last few decades. If this trend persists, it would point to reduced intergenerational economic mobility going forward.
That said, reducing educational disparities is only part of the solution to increasing mobility, and it’s a long-term solution at that. Our biggest problem right now is that we’ve been producing too many poorly compensated jobs and too few good ones. Increasing compensation for workers in these jobs—through policy reforms like increasing the minimum wage, enforcing and strengthening labor laws, and making paid sick leave a basic right—would increase mobility.