FIGURE 4.2
The One-Percent’s Share of Total Pre-tax National Income: Four First World Countries
SOURCE: Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez, The World Top Incomes Database, at http://topincomes.g-mond.parisschoolofeconomics.eu/.
America and Europe have traded places. While there was greater wealth inequality in Europe in 1910, now there’s more of it in the United States. That doesn’t mean that America’s 99 percent, or even the average American, is poor, by world standards. It’s only when ordinary Americans are compared to the top American one or five percent that the inequalities stand out. Were the median American family, with its earnings of $50,000 a year, matched against people across the world, it would find itself in the global one percent. In the lottery of life, nearly all Americans are amongst life’s great winners, and seem poor only in comparison with the richest Americans. But then it wouldn’t occur to compare oneself with the average Kenyan.
The picture that emerges from all of this is of a society that offers tremendous financial rewards for the very rich. It’s also a picture of a middle class that has been squeezed from both ends. The rewards of a sound economy have flowed disproportionately to those at the very top end, with generous welfare benefits going to those at the bottom.
Income inequality might not seem much of a problem if everyone had an equal shot at the prize. That’s how most conservatives respond to liberal concerns about inequality. But what if there really isn’t much income mobility in the United States? What if Lincoln’s promise of opportunity for everyone proves false? In that case Americans might join in comedian George Carlin’s bitter laughter: It’s called the American Dream, he said, because you have to be asleep to believe it.
So just how much mobility is there in America? Historically, a lot, in Ragged Dick’s America. The nineteenth century was a golden age for income mobility, and in the 1950s and 1960s more people than ever before went to college, aided by the G.I. Bill. On graduation, they found good jobs waiting for them, and better homes than the ones they grew up in. Discriminatory barriers continued to impede women and minorities from moving up, but these began to recede with the rise of feminism and the civil rights movement. Since then, however, income mobility has slowed, and today there is much less chance for a family to move up the ranks.14
TABLE 4
Cross-country Immobility Rankings
| COUNTRY | IMMOBILITY |
| United Kingdom | 0.50 |
| Italy | 0.48 |
| United States | 0.47 |
| France | 0.41 |
| Spain | 0.40 |
| Germany | 0.32 |
| Sweden | 0.27 |
| Australia | 0.26 |
| Canada | 0.19 |
| Finland | 0.18 |
| Norway | 0.17 |
| Denmark | 0.15 |
SOURCE: http://www.economicmobility.org/assets/pdfs/PEW_EMP_US-CANADA.pdf.
Table 4, taken from the Pew Economic Mobility Project 2011, ranks countries on an immobility scale, where a higher score means less mobility (a closer correlation between the incomes of fathers and sons). At zero there is no correlation and the society is perfectly mobile. Denmark has a ranking of 0.15 and is relatively mobile, while an immobile Britain has a ranking of 0.50. Surprisingly, the U.S. comes in at a relatively immobile 0.47. To put this in dollar terms, imagine a father who earns $100,000 more in income than the average family. Danish children will earn only $15,000 more than their peers, but British children will earn $50,000 more and American children $47,000 more.15 Remarkably, the U.S. is now one of the least mobile societies in the First World.
Over time, the earnings advantage dissipates, but for rich Americans it would still persist for several generations. At a ranking of 0.47, a father earning $400,000 (just over the one percent threshold) would assume that it would take four generations (great-great grandchildren) before his descendants fall into the middle class. Using more sophisticated estimation techniques, Bhashkar Mazumder reports that it would be more like five generations (great-great-great-grandchildren).16 That might not seem like a lot, but it’s a good run even when compared to the British aristocracy. Few British nobles can trace their titles back much before 1800, and before then most of their ancestors lived in obscurity.
This has to be troubling for Americans, who don’t want to see permanent classes of peers and peasants. That’s our idea of what Europe is or was, and we’ve always seen the U.S. to be better than that. We see America, not Denmark, as the land of opportunity. If it turns out that we are more class-ridden than the Europeans, then a core understanding of what it means to be American will have been lost.
Inequality Hardens into Immobility
A high measure of income immobility magnifies concerns about income inequality. People who think that there’s a lot of income mobility in America—children doing better than their parents—don’t worry about income inequality. They’re willing to accept it so long as their kids have an equal shot at getting ahead. That’s why the United States resisted socialism, thought Marx. As the most advanced capitalist country, America should have been the first place where socialism triumphed, according to Marxist theories of history. If that didn’t happen it was a bit of an embarrassment, which Marx tried to explain away by pointing to American social mobility. “True enough, the classes already exist, but [they] have not yet acquired permanent character, [and] are in constant flux and reflux, constantly changing their elements and yielding them up to one another.”17
But that was then. Today America is both unequal and immobile. As that becomes more apparent, we might begin to see the kind of class-consciousness that Marx thought was missing in 1850s America, and with this a greater support for wealth redistribution schemes. Perhaps that’s already started to happen. It’s what the 2011 Occupy movement and the one percent protests were all about, and the 2012 election too.
FIGURE