Thinking about education, mobility and inequality

Is education the key to reducing inequality? Turns out, probably not:

Brad Hershbein, Melissa Kearney and Lawrence Summers offer a simple little simulation that shows the limits of education as an inequality-fighter. In short, more education would be great news for middle and lower-income Americans, increasing their pay and economic security. It just isn’t up to the task of meaningfully reducing inequality, which is being driven by the sharp upward movement of the very top of the income distribution.

One of the main reasons we want to reduce inequality is that inequality reduces economic mobility, which is bad. Only it doesn’t:

The evidence across local job markets in the United States throws severe doubt on the idea that income inequality harms opportunity (and it makes a hash of the empirical basis for the left’s “middle-out” sloganeering). As we and others have shown, as evidence goes, the Great Gatsby Curve is paper thin.

So rather than focus on inequality, perhaps we should focus on improving the lot of the poor, and their mobility:

To see how a perspective dominated by mobility differs from one focusing on inequality, consider the licensing of occupations like interior decorators and barbers. This licensing, which covers an increasing part of the American labor market, limits economic opportunities for many lower earners and thus hinders mobility.

But if we relax licensing for a particular sector, that will most likely create some wealthy people, and also some business losers, and it is quite possible that measured income inequality will rise. That may not register as a net gain according to the formal metrics of the egalitarian, but there is more opportunity, and greater liberty to earn a living as one sees fit. The inequality focus tends to draw us to redistribution, whereas a mobility focus is more conducive to ideas for wealth creation.

[…]

In personal discussions, I’ve found that egalitarians often retreat to pro-mobility intuitions when confronted by such examples, because who wants to oppose greater opportunity? Still, the key is to be consistent, and that means acknowledging that widely used gauges of economic inequality, like the Gini coefficient, aren’t well suited for measuring social and economic progress. That metric and similar ones don’t focus our attention on what is actually unfair about the status quo: the absolute deprivation and lack of opportunity imposed on too many people.

 

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Stephen

Professor and quant guy. Libertarian turned populist Republican. Trying to learn Japanese and play Spanish Baroque music on the ukulele.

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