This is Lecture 6 of the course ECON 85600, “Inequality, Economic Opportunity, and Public Policy,” that my class and I are now conducting online. You are welcome to participate, and can review all the course materials at https://milescorak.com/equality-of-opportunity/teaching/ .
Warning: this is likely to interest social scientists in sociology, economics, or other fields, interested in developing a specialized knowledge of the subject!
Read my comments presented to the Public Economics Forum on “Intergenerationally Disadvantaged: Newest Evidence and What it Means for Policy,” organized by the Melbourne Institute for Applied Economic and Social Research, on November 26th, 2019 in Canberra, Australia.
Social mobility varies across countries, but it varies in a particular way, a way that I argue is relevant for the conduct of public policy.
Inequality begets inequality. Up to 50% of income inequality is passed on to the next generation in countries like the United Kingdom, Italy, and the United States, but only 20% or even less in countries like Norway, Denmark and Finland, where there is a much smaller gap between parent incomes.
But different kinds of inequality matter in different ways for social mobility.
Research using the variation of social mobility within countries like the United States and Canada shows that intergenerational cycles of low income are more likely in communities that have more bottom half inequality, the correlation with overall inequality and with top end inequality being much weaker. Upward mobility is easier when the poorest incomes are not that far off from middle incomes.
The bottom line for public policy is don’t let inequality increase in the bottom half of the income distribution, indeed strive to reduce it in a way that encourages labour market and social engagement.
Intergenerational mobility is lower in the United States than in Canada, but the border only partially distinguishes the two countries with mobility varying significantly within each. The within-country differences and similarities hint at some of the reasons why the United States has lower social mobility than many other rich countries.
This is the main theme of a study released by the National Bureau of Economic Research, based upon Canadian data my co-authors and I constructed with the cooperation of Statistics Canada. Our research offers a more accurate comparison between these two countries than any cross-country comparisons made in the literature to date: tax-based administrative data, used to define similar measures of income, and coming close to covering the total population of similarly aged young people and their parents.
We cluster more than 1,000 communities in these two countries—709 American Commuting Zones and 288 Canadian Census Divisions—into four broad regions according to their similarity across a comprehensive set of five different measures of intergenerational income mobility, all referring to the strength of the tie between parent incomes and child adult incomes.
Continue reading “Intergenerational mobility between and within Canada and the United States”
Upward mobility is more likely in Canada than in the United States, with the middle class within easier reach for Canadian children raised in low income families than for low income American children.
Canadian children raised by parents with incomes at the bottom 10 percent can expect to be earning enough as a young adults to place them much higher, above the 40th rung of a 100 rung income ladder, and significantly higher than their American counterparts. To reach a similar point on the income ladder an American child would have to have parents who ranked as high as the 39th percentile. Continue reading “The “middle class” is within easier reach for low income Canadian children, than it is for low income Americans”
Public opinion polls suggest that Canadians and Americans share basic attitudes toward inequality and opportunity, and toward the underlying drivers of upward mobility. If there is such a thing as the “Canadian Dream,” it would look very much like what Americans say is the “American Dream.”
The Pew Charitable Trusts conducted a number of public opinion polls asking Americans what meaning they attach to the phrase “The American Dream,” and these have been adapted and conducted in Canada with remarkably similar responses.
In these polls respondents were asked to indicate the degree to which they agreed with a series of possible definitions of the American Dream. Sixty percent of American respondents ranked “being able to succeed regardless of family background” eight or higher on a ten point scale, while 59 percent of Canadians did so. The percentage indicating that the statement “Your children being financially better off financially than you” represents the American Dream was 64 percent in the United States, and 57 percent in Canada.
These two options relate most directly to social mobility as measured by social scientists, and the country differences in responses to them are not statistically significant. In fact, this was the case for the ratings given to all but one of the other ten options presented to these representative samples, Americans ranking “Owning your own business” more highly.
Intergenerational cycles of poverty vary across Canada, with low income children in some places facing a less than one-in-five chance of growing up to be poor adults, but in others the rate is more than double. The strong majority of children raised by lower income parents face a greater than one-in-four chance of growing up to be low income adults, and for many these odds were at least as high as one-in-three.
The chance that poverty will be passed on across the generations is 30 percent for the country as a whole, and the majority of children, 54 percent, live in 97 of a total of 266 municipalities where the chances of falling into an intergenerational cycle of low income are between 25 and 30 percent. A further 24 percent of poor live in a community where these chances are at least 0.30 but under 0.35.
There are 23 municipalities with a 40 percent or greater chance of an intergenerational cycle of low income. These communities are all small in population, and account for two percent of the total number of children.
There are only seven of 266 communities in which the probability of a cycle of low income is less than 20 percent, representing only 1.6 percent of all children.
The average parent income in these communities is below the national average. This raises the possibility that geographic mobility may be an important aspect of intergenerational mobility. The two Ontario communities listed in the above table are not areas in which there was significant economic growth, but the distances and costs associated with moving to nearby regions that were poles of growth—more specifically Toronto—were likely low.
[ The findings described in this post are drawn from my recently released research paper called “Divided Landscapes of Economic Opportunity: The Canadian Geography of Intergenerational Income Mobility.” You can learn more about this research, and download a copy of the paper and host of other information by reading the page devoted to this project at: MilesCorak.com/Equality-of-Opportunity . ]
Economics for public policy 