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Center for American Progress

RELEASE: Rising Income Inequality Reduces Economic Mobility, Increases Pessimism Among Americans
Press Release

RELEASE: Rising Income Inequality Reduces Economic Mobility, Increases Pessimism Among Americans

Washington, D.C. — In anticipation of the one-year anniversary of President Barack Obama’s landmark speech in Osawatomie, Kansas, which marked a turning point in the president’s economic argument, the Center for American Progress today released two reports drawing attention to the consequences of rising economic inequality.

High levels of income inequality are associated with low levels of economic mobility, argues the first report’s author, University of Ottawa economist Miles Corak, in his paper titled “How to Slide Down the ‘Great Gatsby Curve.’” If there is high income inequality, children will likely experience low economic mobility and opportunity as adults. Families, the market, and the state largely determine life chances for the future generation of citizens, and several factors can improve these outcomes for children.

“In many ways inequality signals opportunity, both opportunities taken and opportunities that could be taken. But in many other ways inequality can also erode opportunity,” said Corak, author of the report and professor of economics at the Graduate School of Public and International Affairs at the University of Ottawa in Canada. “This report deals with the role of families, labor markets, and government policy in promoting equality of opportunity, and finds that the United States is a high-inequality, low-mobility country. The tie between family background and adult success is significant because all three of these forces are aligned in a way that reinforces rather than weakens the tie between socioeconomic status and adult outcomes.”

Key findings highlighted in the report include:

  • Children born in countries with high levels of income inequality will experience less economic mobility on average than children born in more equal countries.
  • Economic mobility is determined by three major institutions that all interact with income inequality: the family, the market, and the state. Changes in any of these three areas affect the rate of mobility in a country.
  • Countries with high levels of income inequality also have higher levels of teenage parenthood. Teenage parents cannot invest in their children as much as other parents can due to their lower average incomes and lower levels of human capital, which harms the chances for opportunities for their children.
  • Countries have lower levels of intergenerational economic mobility when the difference between the pay of college graduates and noncollege graduates is larger.
  • Access to high-quality education is important, as countries have lower levels of economic mobility when a child’s educator is more determined by who educated her parent.

A second report released today, titled “Income Inequality in the United States Fuels Pessimism and Threatens Social Cohesion,” by University of Maryland political scientist Eric Uslaner, shows that rising income inequality in the United States has increased pessimism among Americans. According to data analyzed in the working paper, the public has become less optimistic about economic growth, more pessimistic about the welfare of the average person, and less trusting of other people as income inequality has skyrocketed over the past 30 years.

Read the reports:

See also:

To speak with an expert on this topic, please contact Katie Peters at [email protected] or 202.741.6285.