I’ve been blogging for five years, and here are my 10 favourite posts

With the New Year approaching, permit me the opportunity to wish you and yours peace and prosperity.

The end of 2016 marks the fifth year of my blog, and I’m grateful to my students and readers for making it worthwhile, and particularly to those who have taken the time to reblog, comment on, or otherwise share one of my 148 posts.

Rather than offer you the usual top ten most popular posts, here are links to my favourite posts written at some point since I started blogging in November 2011. They are not necessarily the most viewed, but I like them because they best illustrate the principles motivating my writing:

  1. Write about what you know, and give readers the opportunity and resources to learn more.
  2. Focus on what is relevant—what people want to read, and what contributes to a constructive conversation about public policy.
  3. Do this in a professional way that uses the principles of economics.

Here are links to my ten favourite posts of the last five years.

Continue reading “I’ve been blogging for five years, and here are my 10 favourite posts”

How The Great Gatsby Curve got its name

Great Gatsby Curve

On January 4th, 2012 The New York Times published an article called “Harder for Americans to Rise from Lower Rungs.” I had spent a considerable amount of time during the New Year’s holidays talking with Jason DeParle about the comparative literature on intergenerational income mobility, and was pleased to see his article on the front page.

So pleased that I emailed Alan Krueger, the Princeton University economist who at the time was the Chairman of the Council of Economic Advisors, to draw his attention to it, though I don’t know why I imagined that Krueger and his staff in the White House would not be reading The Times.

That is how “The Great Gatsby Curve” was born.

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Sons of low-income parents are more likely to grow up to be poor than daughters

Children of low-income parents are more likely than not to grow up to be low-income adults. This is true for both boys and girls, but more so for boys.

the-intergenerational-cycle-of-low-income-for-boys-and-girls
(Click on the image to enlarge.)

This figure shows the rankings of children from low-income Canadian families, what fraction stand on each of the 100 rungs defined to equally divide the population across their adult income distribution. Their parents stood on exactly the bottom 5th rung of their income ladder, and the likelihood of them not advancing very much or even falling lower is clearly evident.

If adult incomes were completely independent of family income background, then we would expect 1 percent of these children to be on each of the 100 divisions of their income distribution. If this were the case children of low-ranking parents would be as likely to rise to middle incomes, or even to the very top, as they would be to stay on the same rung as their parents, or fall lower.

But in fact, this cohort of Canadians (those born in the 1960s) are much more likely to be the low-ranking adults of the next generation and are more likely to repeat the experiences of their parents.

This inter-generational cycle of low-income is more likely for boys. Although there is considerable upward rank mobility among these children, men raised by parents who were outranked by 95 percent of their counterparts are most likely to fall even lower, to be outranked by 99 percent of their cohort. Their chances of falling to the bottom 1 percent are more than 4 percent.

They are most likely to remain in the bottom 10 percent of the income distribution. Although an intergenerational cycle of low-income is also the most likely outcome for women, the chances are significantly lower, hovering in the neighbourhood of 2 percent for each of the rungs up to about the 10th.

[ This post is an edited excerpt from a forthcoming paper I have written called “‘Inequality is the root of social evil,’ or maybe not? Two stories about inequality and public policy”, which is published in the December 2016 issue of Canadian Public Policy. If you have any feedback please feel free to let me know in the comments section. ]

Should we worry about the top 1%, or praise them?

Every Statistics Canada data release on the share of the economic pie going to the top 1% elicits strong opinions, the most recent being no exception. Do top earners elicit rather dishonourable sentiments such as envy that should be given little weight? Or do they challenge our need for community and inclusion, influencing the way we live our lives in more fundamental ways? Should we praise the top 1% or worry about them?

It depends. We would be in a better position to answer this question if we put aside questions of merit and just deserts and focused more on the sources of social mobility and the capacity to conduct policy to support it in an era of higher inequality.

Earnings mobility for children from the very broad middle—parents whose income ranges from the bottom 10 percent all the way to the cusp of the top 10 percent—is not tied strongly to family income. These children tend to move up or down the income distribution without regard to their starting point in life. This may be one element of insecurity among the middle class: in spite of their best efforts, their children may be as likely to lose ground and fall in the income distribution as they are to rise.

the-intergenerational-transmission-of-priviledge
Children raised by parents in the top 1% are most likely to grow up to be the next generation of top earners

The situation is very different for children raised by top-earning parents, as the above figure illustrates. It shows the intergenerational cycle of privilege, the percentile rank in adulthood of children raised by top-1-percent parents. This playing field is clearly not level. If it were, all the points in the figure would be the same, all lining up along the dashed horizontal line drawn for reference at 1 percent.

Continue reading “Should we worry about the top 1%, or praise them?”

Three enhancements to Employment Insurance to reduce income inequality, promote income security, and support families

Social policy in Canada faces three challenges having to do with income inequality, income insecurity, and the imbalance between work and family life. My presentation at the Queen’s University conference, “Social Canada Revisited,” begins by outlining three facts that illustrate these challenges:

  1. The share of total market income going to bottom-income Canadians has fallen
  2. Workers with steady employment suffer significant and long-lasting income losses after a layoff
  3. Families have changed to help cushion and support middle incomes, but the family-work balance is titled

I suggest that there are precedents in the existing Employment Insurance program that can be enhanced and built upon to more fully offer Canadians the social insurance they need and want, and put forward three enhancements that will move social policy in this direction.

  1. Enhance Working While on Claim and integrate it seamlessly with the Working Income Tax Benefit to offer steady and increased income support to lower-income Canadians in a way that mimics some versions of a Basic Income
  2. Introduce wage insurance that would top up weekly earnings for workers with a steady employment history who have suffered a permanent layoff
  3. Expand so-called “Special Benefits” by creating individual accounts over which individuals have complete sovereignty

Download a copy of my presentation for the details.

Inequality, life chances, and public policy

Lecture series Inequality and Miles Corak European Investment Bank Luxembourg

We should care about inequality because it has the potential to shape opportunities for the next generation. My presentation at the European Investment Bank offers a framework for thinking about this relationship, and for understanding why the adult outcomes of children are more closely tied to their family background—with the poor raising the next generation of poor adults, and the rich more likely to see their children to be rich in adulthood—in countries with greater inequality.

Differences in families, labour markets, and public policy all play a role in understanding why the United States and the United Kingdom have relatively less social mobility than many other countries.

Feel free to download the presentation, which will also soon be posted online by the University of Luxembourg.