Economic inequality is the “defining challenge of our time,” President Barack Obama declared in a speech last month to the Center for American Progress. Inequality is dangerous, he argued, not merely because it’s unseemly to have a large gap between the rich and the poor, but because inequality, itself, destroys upward mobility, making it harder for the poor to escape from poverty. “Increased inequality and decreasing mobility pose a fundamental threat to the American Dream,” he said.
Obama is only the most prominent public figure to declare inequality Public Enemy #1 and the greatest threat to reducing poverty in America. CAP’s new Washington Center for Equitable Growth, Princeton economist Alan Krueger, and economist Miles Corak (with his famous Great Gatsby Curve) have all argued that it’s harder for the poor to climb the economic ladder today because the rungs in that ladder have grown farther apart. In Krueger’s words, countries like the United States with high inequality tend to have less upward mobility “for children from low-income families.”
But for all the new attention devoted to the 1 percent, a new dataset from the Equality of Opportunity Project at Harvard and Berkeley suggests that, if we care about upward mobility overall, we’re vastly exaggerating the dangers of the rich-poor gap. Inequality itself is not a particularly potent predictor of economic mobility, as sociologist Scott Winship noted in a recent article with his colleague Donald Schneider based on their analysis of this data.