Was Gatsby a crook? Or was he a victim of a crooked game, the American Dream as a broken promise?

In this program originally aired on CBC radio last August, Sarah Churchwell of the University of East Anglia, a professor of American literature and author of Careless People, interprets Fitzgerald as saying the American Dream is a lie.

But listen also for my reading of a few passages to appreciate, tongue-in-cheek, why the underlying economics suggest that The Great Gatsby is indeed a novel for our times.

If you want the movie version, and a detailed discussion of The Great Gatsby Curve, here is a lecture I had the honour to give earlier this year at the University of Lethbridge on the invitation of the Prentice Institute and its Director Susan McDaniel.

I have to admit, however, the Hollywood version looks somewhat more exciting!

My analysis is based on nothing more than a simple demand and supply model of the labour market to argue that this program amounts to a wage subsidy. Since it does not seem to address any clear market failure it likely promotes both inefficiency and inequity.

I did not mention the ethics of the program at all, but it involves a form of indentured servitude in which individuals who come to Canada through this “Temporary Foreign Worker” program are tied to a particular employer, not being able to enter into contracts to sell their services to any one else.

Delphine Nakache and Paula Kinoshita document the kind of abuse this leads to in a 2010 study published by the IRPP, and the whole issue is given a lot more attention in a book my colleagues at the University of Ottawa, Patti Lenard and Christine Straehle, recently published.

But the comments on my article make clear that simple demand and supply analysis of the labour is enough to elicit strong judgements.

Read the article here. Most of those who commented got the point, and presumably understand economics at the most basic level. I write to, in a small way, help increase economic literacy on public policy issues. But try to make sense of the following comments, and tell me where I went wrong!

Rebel-A :

Gee… I wonder who funds this professor’s research activities… for him to come up with these ideas in support of driving wages down…

I ask..,”Do corporations have a responsibility to improve the standard of living in the countries where they earn their income?”

Dale Reinke :

What sand pile does this guy have his head in? His articlr is absurd!

fred_j :

The United States and Western Europe have been following Professor Corak’s vacant policy prescription for years. The total absence of any true regulatory oversight in eurozone migrant labour markets has been an unmitigated disaster, but especially for the Americans, our closest neighbour and biggest trading partner. It has resulted in decimation of the US labour force in manufacturing (the intensity of which has been far greater there than here) to name but one sector, massive redeployment of capital overseas as costs have risen domestically in any number of other sectors, and a tsunami of illegal immigration accompanied by the complete loss of sovereignty and control over its southern border. Does the good Professor think the social tensions inside Germany, Holland, England and France with migrant (and now unemployed but still resident) workers are a better thing than Canada’s TFW programs? Are wages and productivity higher than they would have been otherwise? Does the Professor really think Canada can simply go back to the good old days of pulling up the drawbridge in hopes of protecting ourselves from the rest of the world inside a little enclave of high paying low skilled jobs while denying what is happening elsewhere? Total nonsense. It’s never been our schtick. Guess we could have done without the railways, huh? Canada as a so-called immigrant friendly, but EI loving and socially benevolent Switzerland on the St. Lawrence? Give your head a shake. Professor Corak’s libertarian ideal of a government policy surrender to the vagaries of a truly closed labour market hasn’t worked elsewhere in North America or Europe. To re-coin an oft used political (para)phrase and without denigrating the Professor’s obvious genuine academic credentials, it’s about the real world, stupid.

Arthur Burton :

Well this is easy.
I’m sure Mr. Miles Corak would be happy to import (on a temporary basis of course) a foreign professor (whom he would train) who would be happy to supply Capitalist arguments for much lower wages. Just like the ‘market’ would like.
The second option is even simpler: You don’t hire Canadians? I don’t buy your product or use your services. And I tell you so. Snail mail. More people read it when it arrives and it’s harder to ignore.

Loon-A-Tick :

You lost me in the first paragraph.

Since when is the Canadian Labour Market free when you can let foriegners in to do our work. When we go to war it is Canadians who defend Canada …not Foreigners. Ther has got to be some benefit to be a Canadian. If you give all our jobs away to people who think 9$ an hour is a living wage.

No ! Letting in Labour from other countries who do not need to defend the country in war time is not free market. Rather it is subsidizing the Corporations with cheap labour who will leave when the going gets tough.
Your argument fails in the first paragraph. I didn’t need to read any more. You are anti Canadian.
And this is not against people who come here to become citizens by applying for it .

KarstForm :

“You don’t have to be a libertarian to sense that this is a victory of bureaucracy over free markets, a victory based on the notion that government somehow knows better.”

A little confused?

Free markets would dictate that employers pay employee’s free market fair value in Canada, not free market value for China. A third world TFW can send money back home to their family which could live just fine on a minimum amount, a Canadian would need to live in a cardboard box on the same amount.

Government bureaucracy know best with this decision? Really!

The cost to government for the TFW’s are as follow, immigration screening, border services for deportation, medical. That doesn’t even get into the cost to private sector workers, more EI, welfare, youth unemployment. Yet at the same time those private sector employee’s working are paying for 3rd world competition which suppresses their own wages and opportunities.

Lastly, ever heard of economics. For ever 1 billion TFW’s send out of this country, say goodbye to 4 billion in economic activity in Canada.

But think of all the big business profits and all the extra government employee’s needed to operate this scam.

I doubt anyone who calls themselves a libertarian would support this crap; please use other groups who have in the past, like say, both Canada’s political left and right.

I’m Alex

“What happens if there is a shortage? Well, there certainly is no need for a Temporary Food Program!”

Only a fool fortunate enough never to have faced a real food shortage — when crops fail or food stores are destroyed by war — would say such an inane thing.

Snowrunner

Always amusing to hear someone who lives on the Government dole (University of Ottawa), declare the value of the free market.

Hey Mr. Economist and International Relations. If the Government is so horrible, why aren’t you competing in the “Free Market” and how the rest how it’s done? Yeah, that would probably mean many more hours in the day for probably less benefits. But that shouldn’t concern you, because as a belieber in the free market you will surely rise to the top.

Tagged: Globe and Mail, immigration, Tempoarary Foreign Worker ]]> http://milescorak.com/2013/05/02/some-less-than-supportive-comments-on-my-temporary-foreign-workers-article-make-me-wonder-about-economic-literacy/feed/ 21 milescorak http://milescorak.com/2013/04/26/how-will-the-house-of-commons-look-at-income-inequality-in-canada/ http://milescorak.com/2013/04/26/how-will-the-house-of-commons-look-at-income-inequality-in-canada/#comments Fri, 26 Apr 2013 14:57:26 +0000 MilesCorak http://milescorak.com/?p=4659 ]]> Everyone has been talking about it: academics for at least a couple of decades; think-tanks and international organizations like the OECD and the IMF as well; and even—at least since the Occupy Wall Street movement went camping—the average taxpayer.

And now, after having adopted a motion introduced almost a year ago by Scott Brison, the honourable Member of Parliament for Kings-Hants, the House of Commons has charged its Standing Committee on Finance to also talk about it: yes, Virginia, Committee hearings on “Income Inequality in Canada” have begun.

Can there be a topic that is least likely to garner consensus among our Members of Parliament than taxes and inequality? Little wonder they are so late to the conversation.

On Thursday the Committee held the second of at least three hearings, and among its terms of reference is to “examine best practices that reduce income inequality and improve per capita gross domestic product.” If the written briefs posted on its website and some of the witness statements to date are any indication, the Committee has its homework cut out for it. At first look these are lofty of principle, short on prescription.

Some warn over and over again of the evils of inequality, the violation of rights, the sheer injustice! And almost as if in response, others caution our dutiful members of the coming revolution, concretely enough to surely make some of them recall the words written more than 200 years ago by Adam Smith:

The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continually held up to chastise it.

[Adam Smith (1776), An Inquiry Into The Nature and Causes of The Wealth of Nations, New York: Modern Library, The Cannan Edition, Book V.Chapter I.Part II, page 670.]

What a pity if the Committee is not able to untangle itself from this zero-sum thinking, pay clear attention to its mandate, and move on to craft concrete policy recommendations that increase both equity and efficiency.

In part it can best do this by framing the discussion through another of its terms of reference: to “provide recommendations on how best to improve equality of opportunity and prosperity for all Canadians.”

The majority of Canadians, regardless of their political leanings, are likely to hold the view that opportunities should be equal; that children should have the freedom to become all that they can be regardless of their starting point; that outcomes should be the result of talents and energies, not of privilege or position.

Designing a tax system to encourage equality of opportunity will make any level of inequality more acceptable, and less damaging.

That is certainly a challenge. But not an insurmountable one. Our tax system already contains examples of best practices that can be built upon and expanded in a way that targets more adequate benefits on those most in need without unduly creating inefficiencies. Indeed, some of the witness statements make this very clear.

Most notable is the submission by Robin Boadway of Queen’s University who points out that more use of refundable tax credits is a best practice in the design of the tax system.

Unrefundable credits do little to lessen inequality in the lower half of the income distribution, but refundable credits can be targeted by income in a way that is of most benefit to the least well off. They do not introduce a stigma, and can be made conditional on activities of benefit to children. Committee members should be examining the impact and adequacy of refundable credits.

Other submissions repeatedly stress that a best practice in the design of the transfer system is offered by the Working Income Tax Benefit.

If you are a leftist think of this earnings top-up as a “social wage” that fills the role traditionally played by unions in securing reasonable wages for their members, a role much diminished by the polarizing trends of the labour market.

If you belong on the right this is Milton Friedman’s negative income tax with a twist that induces work effort: income transfers are made conditional on employment. Committee members should be examining  the impact and adequacy of conditional cash transfers.

Indeed, the submissions the Committee has received are worth a second look, but only through a lens that brings a lot more into focus than the tired old slogans that have, in part, kept this issue from coming to the floor of the House of Commons for way too long.

Maybe, just maybe, the Committee will craft a report that draws a constructive line between the politics of envy and the politics of privilege. But don’t count on it just yet.

[ If you have an interest you can download my submission to the Committee as a pdf here: Corak_Submission_to_Finance_Committee ]

Tagged: Adam Smith, House of Commons, inequality, Refundable tax credits, Robin Boadway, Standing Committee on Finance, taxation, top 1%, Working Income Tax Benefit ]]> http://milescorak.com/2013/04/26/how-will-the-house-of-commons-look-at-income-inequality-in-canada/feed/ 0 milescorak Screen Shot 2013-04-23 at 9.56.24 PM Screen Shot 2013-04-23 at 9.56.56 PM http://milescorak.com/2013/04/24/tax-policy-for-equality-and-social-mobility/ http://milescorak.com/2013/04/24/tax-policy-for-equality-and-social-mobility/#comments Wed, 24 Apr 2013 12:21:41 +0000 MilesCorak http://milescorak.com/?p=4654 ]]> The Canadian House of Commons has charged its subcommittee on Finance to examine income inequality in Canada.

More specifically the Committee’s mandate is to produce a report that will:

• review Canada’s federal and provincial systems of personal income taxation and income supports;
• examine best practices that reduce income inequality and improve per capita gross domestic product;
• identify any significant gaps in the federal system of taxation and income support that contribute to income inequality;
• identify any significant disincentives to paid work in the formal economy that may exist as part of a “welfare trap;” and
• provide recommendations on how best to improve equality of opportunity and prosperity for all Canadians.

Its website contains the written submissions received by the April 5th deadline.

I will appear as a witness in a televised hearing beginning at 8:45 EDT on Thursday April 25th, 2013.  The other witnesses slated to appear at the same meeting are listed here.

You can view it all here as Meeting 116 if you have an interest.

A copy of my written submission is available as a pdf: Corak_Submission_to_Finance_Committee.

At the TEDxWaterloo 2013 Event called chasingHOME I extended an invitation to participate in a conversation about a “crazy” idea: children should be given the vote. Here is the text of my presentation.

1. An invitation

I would like to invite you into a conversation, a conversation about a “crazy” idea. At least I thought it was crazy when I first heard it.

Children should be given the vote.

My first response to this idea was as a parent of three girls. Children already have a good deal of power in the home.

Any mother fumbling through her purse in the middle of the grocery store check-out line does not need—thank you very much—to be plunged into intense negotiations with the three-year old standing in front of the rows and rows of candy bars placed strategically at toddler eye level.

Can you imagine these kids on election day, quietly lined up at polling booths—their purple crayons in hand—waiting to put an X beside the name of a candidate who best represents their interests?

2. Right to vote as privilege

When it comes to voting rights societies have always drawn a clear and very sharp line between those who are capable, and those who are not; between those who are informed, and those who are not; and between those who are responsible, and those who are not.

And it is clear that children are not capable; it is clear that they are not informed; and it is clear they are not responsible.

Their sphere of influence should not extend beyond the home, to acts of politics and the setting of social priorities that affect us all.

It is the capable, the informed, and the responsible individual who has the privileges of citizenship, the first and most important being the right to vote.

This has been clear for a long time.

In 1906 a certain Mr. Samuel Evans, QC, stood up from his seat as an MP in the British House of Commons, took I imagine a small step forward, and in a debate over a proposal by the Labour Party said: “If women were to be entitled to the privileges of citizenship, they ought to perform its duties. Would it be desirable that women should have to go out to battle?”

Mr. Evans, I also imagine, had to raise his voice to be heard because the newspapers of the day reported that his remarks were met by howls of outrage from the many women who packed into the public gallery of parliament that late April day more than a hundred years ago.

3. Right to vote as inherent

I suspect that to Mr. Evans, and to many others, the proposal that women should in principle be given the vote must have sounded crazy: after all they were not capable, they were not informed, they were not responsible.

And indeed the growing women’s movement always had a strong case to argue that women were as capable as any man, as informed, and as responsible.

But on their way to winning the right to vote they also questioned the underlying logic of the conventional wisdom: that citizenship and full participation in society is something that has to be earned.

They articulated a different perception of rights: the right of citizenship was inherent in the worth of every individual, and it was the duty of society to recognize this right, not for individuals to prove they were worthy of it.

4. The age of majority and the elderly

Think of another line that we draw between those who have the right to vote and those who do not: the age of majority. In many democracies citizens under the age of 18 do not have the right to vote.

All democracies draw a line of this sort. Yet, nowhere do we draw a line at the other end of the life cycle: we don’t take the right to vote away from citizens who are deemed in some sense to be too old!

In the later years of her life my grandmother suffered from certain physical and cognitive impairments: impairments so severe that certainly my 12 year old daughter at the time was much more physically and mentally capable than her, more informed, and more responsible.

Yet the idea of taking the right to vote away from anyone over the age of 85 is a crazy idea if we feel that citizenship is a right, rather than a privilege to be earned.

The onus is not on us to prove that we are capable, informed, responsible and therefore worthy of citizenship; but rather we have a right that is inherent to us as citizens, and this right creates a reciprocal duty, a duty that governments have to recognize our rights.

This too was what women were arguing in the 1800s and early 1900s as they mobilized to get the vote. The howls of outrage that greeted Mr. Evans were also, in some measure, demands that the inherent rights of citizenship should be recognized by those who govern us.

5. Convention on the Rights of the Child

The reason that a proposal to give the children the vote might gnaw at us is that it does not sound as crazy if looked at from this perspective.

To be certain children are adults in becoming, but they have at all stages in their lives their own interests and concerns that societies in some sense have an obligation to recognize: concerns about home and well-being in the here-and-now, and concerns about the home they will inherit in the future. These shouldn’t count for nothing in the electoral process.

But just “how” to make them count is a challenging question.

A way to constructively carry this conversation forward might be found in the UN Convention on the Rights of the Child gives some guidance.

It articulates the rights of the child in a very broad and comprehensive way, but I would draw your attention to two articles.

Article 12 makes clear that there is a duty upon governments to put policies and mechanisms in place that assure children have the right to express their views.

Obviously, age and maturity come into play, and so in matters of voting it is reasonable to set an age of majority, be it 21, or 18, or even—as is being discussed by some—16. But this is not to say that younger children do not have a right to vote, only that our duty toward them is imperfectly performed.

We need to take some extra steps.

For the elderly we take extra steps. In my country, Canada, during elections polling stations are mobile, going to old age homes on election day in recognition that some of the elderly have physical limitations that compromise mobility.

Other countries, like the United Kingdom, permit voting by proxy: individuals with, for example, health limitations may not be able to vote, but they can give permission for someone else to cast a vote on their behalf.

6. Demeny Voting

Article 5 of the Convention gives us a hint on how we might take these extra steps for children.

It states that parents have the right and duty to give direction and guidance in exercising a child’s rights, and that they should do this in a manner consistent with the evolving capacities of the child.

For example, most societies transfer income to parents to keep children from falling into poverty, and it is the parents’ responsibility to spend this on the well-being of children.

The suggestion has been made that we do the same thing by transferring political resources to parents in the name of the child.

So the proposal I would put to you is that we should recognize the right of children to have the vote, but that this right be exercised by giving parents an extra proxy vote for each child under their guardianship.

7. How this would work

My home is made up of five Canadian citizens: my wife and me, and our three daughters—a 21 year old, an 18 year old, and a 15 year old—but if an election were held tomorrow we would have only four votes, my youngest daughter not having her rights recognized because she is younger than 18.

It is proposed that my wife and I be given an extra vote that we would cast in her name: either my wife would do it, or I would do it, or we would each have an extra half vote, or maybe even my daughter would decide who would do it.

This voting scheme has been talked about for almost a century, but more recently it has been called Demeny voting after the Hungarian-American demographer—Paul Demeny—who proposed it in the 1980s.

8. What is wrong with this?

It is quite reasonable to wonder about this.

It can appear to violate the principle of one person–one vote. Some have suggested that people who do not have children may be put at a disadvantage.

Parents may not vote in the interests of their child, and this therefore just privileges some adults over others.

This certainly may be true.

When we give parents extra money for their children, it is probably the case that some of them don’t spend it in the child’s best interests. But we do it anyways because it probably does a lot more good than bad.

Demeny voting is not a perfect scheme, but does that mean we should let the good and feasible fall victim to the perfect but unattainable?

Would it take us closer to one person–one vote?

Of course, if we do not in a fundamental sense accept that children are persons we would not accept the idea at all.

9. What else is wrong with this?

Some children would not want their vote to be cast by their parents.

Some teenagers may be particularly well-informed, better informed than their parents. Why shouldn’t they cast their own vote?

There are also some regrettable cases in which the home is a dangerous place for children. In cases of abuse, or when children leave the home before the age of majority, should parents continue to cast a proxy vote for the child?

For these reasons some have argued that the age at majority should simply be lowered, to say 16 years.

But this still does not recognize the rights of younger children.

And besides if this is how you feel then would not a Demeny voting scheme bring momentum to exactly this.

I can just imagine the look on my 15 year old’s face when she learns that I will be casting her vote for her, and the heated dinner time conversation that might ensue.

But isn’t this a good thing, something that would encourage interest in and engagement in the political system?

9. Conclusion

In 1918 the government of the United Kingdom passed the Representation of the People Act that introduced universal suffrage.

But in a particular way. All men over the age of 21 were given the vote, and those as young as 19 were able to vote if they had actively served in World War I. All women were also given the vote, that is, all women over the age of 30 who were of property—either their own or their husbands.

Well as momentous as this change was, it was not long before parliament passed the Equal Franchise Act, which in 1928 recognized that everyone over the age of 21, regardless of gender and social status, had the right to vote.

The conversation on the right to vote has been between a view of citizenship as a privilege, and citizenship as a right.

In the 19th century this conversation was about extending the franchise without regard to property and social class; in the 20th century it was about extending it without regard to gender; and in our times it may be about extending it without regard to age.

I invite you to participate in this conversation, to participate with a certain wonder about how far it has come, and a curiosity, a curiosity about how our words and deeds will be interpreted by our grandchildren.

~~~~~~~~~~~~~~~~~~

Dear Z…,

thank you for thinking of me and for the opportunity to address your questions. There is probably no single answer to these questions, but I will try to answer briefly from the perspective of economics.

Statistics Canada reported that employment rose by 51,000 in February.

These numbers seem to gyrate tremendously from month to month in a way that has little to do with economic fundamentals: jumping by 40,000 in December, falling by 22,000 in January, and now rising significantly.

How much confidence should we have in them?

Well, we should certainly trust Statistics Canada to produce unbiased statistics. No doubt about that. The methods used are impeccable, and if you don’t trust StatCan numbers then you certainly have no business trusting statistics produced by any other polling firm in the country, or for that matter anywhere.

But trusting the numbers to be unbiased is the not the same thing as having complete confidence in them. Indeed, the fact that its methods are impeccable means that StatCan knows exactly how much confidence we should have in the month to month changes.

Pollsters trying to gauge voting intentions use samples of only one or two thousand Canadians, and their results are routinely reported to acknowledge the uncertainty in extrapolating to the entire population: “accurate to within so many percentage points 19 times out of 20″ is the commonly used phrase.

Statistics Canada surveys are no different: information on about 56,000 households is used to represent 28.5 million working age Canadians. Economic statistics have the same inherent uncertainty associated with making this extrapolation.

The Statistics Canada jobs report tells us that between January and February employment rose by 51,000, but also—if you look hard enough for the details—that this is accurate to within plus or minus 57,400.

If you wanted 95% certainty of not being mistaken, you have to accept the possibility that last month’s job change ranged from -6,400 to 108,400. If you were willing to be a little less confident, willing to entertain a 1 in 3 chance of being wrong rather than 1 in 20, then you would accept the possibility that the change ranged from 22,300 to 79,700. And if you wanted to be very precise and claim that the change was 51,000, then you have to accept being wrong pretty well with certainty.

Source: US Geological Survey, http://gallery.usgs.gov/sets/1997_Grand_Forks,_ND/list/_/1

Nate Silver, author of the best-selling book The Signal and the Noise, tells one particularly poignant story of statisticians who gave the impression that their forecasts had no margin of error.

In the spring of 1997 the Red River flooded the town of Grand Forks, North Dakota leading to an evacuation of almost all of its inhabitants, damage to the majority of homes, and billions of dollars in cleanup costs.

Yet the US National Weather Service did a pretty good job of predicting that the river would crest at historic highs, its best guess being 49 feet. The residents of Grand Forks were aware of this. The problem was that the statisticians did not communicate that their margin of error was 9 feet.

The Red River eventually crested at 54 feet, not far off the prediction and well within the margin of error. But the town’s levees had been designed to withstand a maximum crest of 51 feet, and no extra precautions were taken to handle the coming flood because the residents and town officials did not entertain the possibility that the forecast could have been off. Mr. Silver reports that the forecasters later told investigators “that they were afraid the public might lose confidence in the forecast if they had conveyed any uncertainty in the outlook.”

While lives are not exactly at stake when it comes to the Statistics Canada numbers, one can’t help but wonder if it doesn’t also hold this point of view. The very first line of its press release screams “Employment rose by 51,000″, encouraging readers to treat the numbers with complete confidence. Buried deep in the website is the information on the margin of error. The more accurate, albeit less attention grabbing, lead is that ”in February employment rose by 51,000. This figure is accurate to within 57,400 19 times out of 20.”

The US Weather Service now communicates the uncertainty associated with its forecasts openly and honestly to the public.

Would our trust in the StatCan numbers be any less if the Agency clearly conveyed that it can never promise complete certainty? Probably not: knowing that we can’t have full confidence in the numbers would probably lead us to trust them all the more.

“The idea that all citizens should have an equal chance to succeed in life, regardless of where they start, is fundamental to liberal societies and emblematic of the American—and Canadian—dream” is the way a Canadian think tank, Canada2020, introduces a panel discussion it hosted that explored the idea of economic mobility, why it is important, and how it is related to inequality of outcomes.

I was a member of the panel and had a very interesting—and at times humorous and entertaining—discussion with Zanny Minton Beddoes the economics editor of The Economist, Carolyn Acker the founder of Pathways to Education, and Ron Haskins a senior fellow at the Brookings Institution. You can view the entire discussion, which was moderated by Diana Carney, by clicking on the following screen shot (and waiting a bit for it to load):

The short presentation I made at the beginning of the talk is, if you are interested, available here: Equality_of_Opportunity_A_Canadian_Dream_for_Canada2020

I plan on revising the background document I wrote for the event—which you can download from the Canada2020 website—and would therefore be very pleased to hear your views on the discussion, and any specific feedback you might have.

“Inequality matters. It matters because it has the potential to shape opportunity.”

This is how I begin the conclusion to a just finished paper that will serve as a background document for an event called “Equality of Opportunity—a Canadian Dream?” that will take place Tuesday evening, February 26th.

The event is organized by Canada2020, an Ottawa based think tank, and will take the form of a panel discussion moderated by Diana Carney and include as panelists  Carolyn Acker (founder of Pathways to Education), Zanny Minton Beddoes (the economics editor at The Economist), Ron Haskins (senior fellow at The Brookings Institution), and me.

The conclusion to my paper, “Public policies for equality and social mobility”, continues:

In the first part of this paper I have tried to describe [the relationship between inequality and opportunity], as it is summarized in the Great Gatsby Curve, pointing out that Canada had a moderate level of inequality about a generation ago, and that children raised during that period displayed a relatively high degree of generational mobility. Cross-country comparisons on these metrics are descriptive, and it is important to understand the underlying causes in order to draw appropriate inferences for public policy.

Overall income inequality reflects deeper inequalities that form the capacities and talents of children: inequalities in family structure and family resources, both monetary and non-monetary; inequalities in the structure of labour markets with which families must interact; and inequalities in the provision of public and community sources of support, income, and insurance. These three broad forces interact to determine the adult success of children. They are configured in different ways in different societies, and lead to different degrees of generational mobility.

This discussion raises a pair of related questions: has inequality increased? And, where it has, is there now a higher risk of lower mobility? In particular, has inequality increased in Canada, and does Canada risk sliding up the Great Gatsby Curve?

The second part of this essay documents the fact that inequality has indeed increased in Canada. Technology, free trade, and changing labour market institutions have all played a part, leading to a more polarized, unequal distribution of earnings and incomes. This means lower wages in the lower half of the distribution, higher wages in the upper half – including very high wages at the very top – and not much change at all for the typical household.

Does more inequality imply less opportunity for the next generation of children who will reach adulthood in the coming years and decades? I suggest that this will depend in part upon the public policy choices made in this era of higher inequality, and how effective they are: in fostering a higher-wage labour market, particularly among those in the lower half of the earnings distribution; in offering sufficient income support and income insurance through the tax-transfer system; and in fostering strong families and meeting their diverse set of needs in raising their children.

The final part of this paper discusses policy changes in these three domains – (i) labour markets and human capital development, (ii) taxes and transfers, and (iii) family – outlining how policy makers might be called to accept certain realities, advance new initiatives, and retreat from counterproductive policies.

An overall goal for policy makers should be to engender a high-wage labour market because of the simple reality that active labour market engagement is the main source of family income. If inequalities in the lower half of the earnings distribution are not too great, then lower income families will have reasonable levels of income allowing them and their children to participate normally in society. More money implies more mobility.

Tax and transfer policy has, in the past, played an important role in buffering and supporting families, and in muting the overall level of inequality. In an era of higher inequality it needs to continue to do this, but increasingly in a way that fosters labour market engagement. The policy changes I suggest are intended to offer income support but also income insurance. More money implies more mobility, but more uncertainty in monetary resources may imply less mobility.

Finally, if parents are required to be increasingly engaged in the labour market, then family policy must strive to help them balance family and work so that children continue to receive the time and attention – the whole host of non-monetary resources – needed for their full development. More money implies more mobility, but money is not everything: poverty of attention, experience and expectation are equally important determinants of adult success.

It is a very open question as to whether higher inequality will lead to less opportunity and mobility in Canada. The promotion of upward mobility from the bottom will require both effective and progressive public policies: effective in the sense of having causal impacts on the determinants of mobility, and progressive in the sense of being of relatively more benefit to the relatively disadvantaged. The effectiveness of policy can only be determined in a spirit of experimentation and evaluation, and certainly policy makers should strive to do no harm. But how progressive it can be is also an open question, higher inequality also influencing social choices by giving more voice to some groups than to others.

[ If you have an interest, the complete paper can be downloaded from the Canada2020 website, where I believe you can also get free tickets to attend the event if you are in Ottawa, or watch the live stream beginning at 17:00 Eastern on February 26th. ]

But frankly the best correspondence I received on this was from a UK-based reader whose family origins are from Leicestershire, and who was kind enough to share his family history with me. His experiences vividly illustrate the challenges of upward mobility.  I am pleased to reproduce his letter to me with his kind permission.

His great-great-great-great-grandfather was a framework knitter.

Source: Wigston Framework Knitters Museum, http://www.le.ac.uk/emoha/community/resources/hosiery/museum.html

I have been able to trace my family history back 6 generations and the jobs they held, which seems to bear out the notion that mobility and opportunity is generationally restricted due to family circumstances and that it can take centuries for economic status to change.

On the paternal side, my great-great-great-great-grandfather John (b. 1756) was a Framework Knitter (a cottage industry at the time) and his son Thomas followed in his footsteps. They lived in a small village near the city of Leicester.

Jesse, his son, my great-great grandfather, started off as a gardener and later became Policeman after moving to Birmingham as the city became the focus of the Industrial revolution.

All of his three sons, including William my great-grandfather, found work as Iron Bedstead Fitters (hard manual work) in one of the 32 iron bedstead factories in Birmingham. After his marriage he moved to the nearby town of Southam and became a local policeman – like his dad.

His son Joseph, my grandfather, started work as a collier on the canal barges, but enlisted in the British Army at 17 and served for 24 years, in Ireland, India, China and the Middle East, rising to the rank of Sergeant.

My father, Frank, also enlisted in the Army served 24 years, surviving WW1 and a spell in the Middle East. Later, during my lifetime, he worked as a swimming pool attendant and a school caretaker.

Myself, I am now retired. Although I gained a scholarship to a top grammar school and did well, post my national service in the Army, it took 8-9 years of part-time study whilst working as an office clerk, to gain professional qualifications and a degree, and to get a job as a personnel officer. Later on, I joined an international airline and held executive posts in industrial relations, management training, and for sixteen years represented the airline in several overseas countries. Following that successful career, very late in life I joined the Open University Business School as a lecturer and also taught at a local HE college.

My maternal grandfather, who was an orphan and spent 9 years at a residential ‘Industrial School’ also enlisted in the Army, became a musician, and later played in the Music Halls and worked as a packer with a music publisher.

The reasons why it took me so long to get a qualification that would enable me to advance job-wise seem to be:

1. Neither of my parents had any experience of further education, nor any knowhow about access to higher education or university. None of the circle of family relatives with whom I associated had any experience of university either.
2. At 16/17 my father insisted I should get a job and contribute to family expenses. For him, who had struggled to keep the family afloat in the 1930’s depression, getting a job  was more important than improving long term job prospects.
3. Because both my grandparents spent much of their lives in the Army and much of that overseas, they  were not in need of, or familiar with, the means of access to higher or university education to advance their job prospects. In any event, being in the Army in their day probably precluded access to such knowhow.
4. It was the head of the office where I worked as a clerk after my army service that first encouraged me to take up part-time course at London University (1950’s) and a lecturer on that course who encouraged further study. Likewise my airline employer supported my managerial level training.
5. It seems my paternal family history shows there was little generational difference between levels of incomes or types of work over almost two centuries, from 1750’s to the-1950’s, when I began to improve my and my family economic status.

Looking back, it seems it was that the mentors mentioned above who collectively, enabled me to buck the family history trend.

My family name is not that common. At the turn of the 18th century in the whole of the UK there were only 57  families and 247 individuals with that surname (of whom 50% were children/young people). Remarkably, some 80%+ of the families lived in villages within a 12 mile radius of one town in Leicestershire. Almost all were engaged in manual or low skilled work – agricultural labourers, cattle drovers, gardeners, framework knitters, shopkeepers,

If a keen student wished to research the economic status and generational mobility of a handful of these families, given the detail in UK census records it would be possible to track their jobs and differences in incomes at least over 150 years and then endeavour to locate  current generations. It would be interesting to discover, whether they followed a similar pattern to my family history, or not, and the extent to which the results confirm the views expressed in The Economist article.

Footnote: At present at least 3 of my surname namesakes hold senior academic posts, two are film producers, another was a member of Parliament, several run business’s in Birmingham, and there at least 500 individuals with my surname now resident in other countries, including Canada. My son graduated from Sheffield University and my eldest grandson is in his first year at Southampton University
May I leave these thoughts with you.

A Regular Economist Reader

[ The author of this personal history would be happy to correspond with anyone interested in researching this case study in more detail, but would rather not post his contact information. Please feel to comment below, or send me an email and I will pass it on. ]