Want to See More Economic Mobility? Put More Rungs in Your Ladder

Julia Isaacs of the Brookings Institution has released a study of family economic mobility. This is a companion to the study on racial disparities in economic mobility that I wrote about a couple of days ago. Isaacs' main finding in the new study is that two thirds of families have higher income than their parents did, but only half of them have moved up a rung on the income ladder. A rising tide has lifted nearly all boats; some have then risen even higher than average beyond the rising tide.

Isaacs makes an important point -- most people are better off than their parents were, but that is not entirely due to their own efforts. The entire society is richer, so many people are absolutely better off even if they have stayed relatively the same. For example, if you compare a hypothetical family in the exact middle of the income spectrum a generation ago and now, our middle family today will be absolutely richer and have a higher standard of living than the middle family a generation ago, but will still be in the middle of the income spectrum.

Still, there is a bit of statistical mystification here. Isaacs compares quintiles (equal fifths) of the income distribution. 2/3rds of families moved up in income, but only half of them - 1/3rd of all families - moved up enough to change quintiles compared to their parents. This one third is what Isaacs calls true upward mobility. But suppose she had been comparing not quintiles, but deciles? That is, suppose her income ladder had twice as many rungs in it? We can't tell for sure without real data, but it is likely that with twice as many rungs, we would see twice as much mobility (down as well as up). Likewise, I have seen studies by mobility pessimists who use quartiles. Not surprisingly, such studies show less mobility than Isaacs' quintile study does.

The main conclusion that I draw from this is not that "you can make statistics say anything," but that the income distribution is not a very helpful quantity to describe social reality. Only sociologists think of people in quintiles. The real rungs of the social ladder don't match the income distribution very well. It is helpful to know if people have more of less money than they grew up with. But knowing that they have changed quintiles (or quartiles, or deciles, or percentiles) doesn't really tell you if they have changed classes.