In this interview, Yonatan Berman discusses his research on the interrelationships among absolute mobility, relative mobility, growth, and inequality.
Yonatan Berman is currently a visitor at The Graduate Center, where he is associated with the Advanced Research Collaborative (ARC) and the Stone Center’s GC Wealth Project. He is also a fellow at the London Mathematical Laboratory. His research focuses on the relationships among social mobility, wealth, and income inequality, from both empirical and theoretical perspectives. We recently spoke to Berman about his research, including his study, “The Long Run Evolution of Absolute Intergenerational Mobility,” which is available in the Stone Center Working Paper Series.
One of your main lines of research concerns how social mobility is linked to income inequality. What drew you to that specific question within the bigger picture of economic inequality?
I think I was first drawn to it when I was exposed to criticism of the study of economic inequality. You could say there is a common critique of studying inequality, related to the question of: Why should one care about rising inequality? As long as social mobility is high enough, maybe we shouldn’t care about rising inequality, because the economy allows everyone to have a chance, or a similar chance, to become rich at some point.
People sometimes call this equality of opportunity. It represents something broader than social mobility, which is often used as a proxy for equality of opportunity. We have good measures of social mobility.
Clearly, criticism on the actual importance of studying inequality comes from many different angles, such as: Does income inequality matter for growth? What about for education or health, and for other things we should care about?
Putting those questions aside, social mobility is linked nowadays in the inequality literature mainly to the question of whether there is a causal relationship between inequality and mobility, and vice versa. We know empirically that countries with higher inequality tend to be less mobile, but the questions of why and to what extent remain somewhat debated.
Your study, “The Long Run Evolution of Absolute Intergenerational Mobility,” presents a model for the relationships among absolute mobility, relative mobility, growth and inequality. How is absolute mobility different from relative mobility?
There’s an important distinction that one has to make when talking about mobility. Many people have different notions of mobility. I examine two types of mobility that scholars often distinguish between. They are strongly related but tell very different stories.
Relative mobility basically quantifies the probability of people to do differently than their parents in relative terms. If relative mobility is high, and your parents were at the top of the income distribution, it means there’s a higher chance for you to not wind up at the top of the distribution. And if your parents are at the bottom of the distribution, then your chances of doing better, in relative terms, are higher. It doesn’t mean that your living standards will be higher or lower than your parents’. It says something about your probability of having a different rank in the distribution than they had. This is more of a class concept of mobility.
Absolute mobility is a very different concept. It answers a simple question: What is the probability of children to have a better standard of living than their parents? It’s not about relative position, or rank. It’s simply about family income: Do you live today in a more affluent family than you used to, as a child?
It’s possible that you live in a more affluent family than you used to, as a child, but in relative terms, you went down in the distribution when you reached adulthood. It’s possible to have low relative mobility, and high absolute mobility. And vice versa.
How does this relate to perceptions of mobility, particularly to concerns within the United States that mobility is declining?
It might be the case that relative mobility isn’t really changing over time, but people believe that mobility is decreasing.
I think absolute mobility captures this belief quite well.
People are pessimistic about whether their children will have a better standard of living. This belief derives, I believe, much more from decreasing rates of absolute mobility than on changing relative mobility. People might believe that relative mobility is decreasing over time, but some evidence shows that it is not really changing in the United States. In many other countries it hasn’t changed dramatically either in the last few decades.
So why do people believe that mobility is decreasing? One possible reason is they’re thinking about absolute mobility, not relative mobility. As President Obama said in a speech in 2013: “people’s frustrations […are] rooted in the fear that their kids won’t be better off than they were.”
Absolute mobility has been decreasing for several decades: the chance of having a higher standard of living than your parents at around the same age in the United States was around 90 percent for the Baby Boom generation. It was still around 65 to 70 percent for people born at the end of the 1960s. For people born then or after, their chances are around 50 to 55 percent.
Studies have shown that the increase in income inequality explains two-thirds of the decrease in absolute mobility in the United States, you note in your study. However, you found it’s a different story in other countries, particularly in Canada, France, Japan, and the Nordic countries.
I looked at whether the United States experience is the same as the other countries. Is it a trend? Is there a single driver in the decrease in absolute mobility?
First answer: Yes. Similar to the United States, high-income countries, mainly in the West but also Japan and Australia, have experienced decreases in absolute mobility in the second half of the 20th century. The trend in almost all the countries I looked at was rather similar to the one in the United States. In Norway and Denmark, the decrease was milder. But essentially, in all other countries, the decrease was quite sharp.
But after getting this result, I asked the follow-up question: In these other countries, is the increase in income inequality the main driver in the decrease in absolute mobility?
The answer I got was basically no. The United States is a partial exception, in that the increase in income inequality explains two-thirds of the decrease in absolute mobility. In other countries, it is decreasing growth rates that explains the decrease in absolute mobility.