Last Wednesday, President Obama gave a speech on economic inequality that I never got around to commenting on. Fortunately, Daily Caller blogger Mickey Kaus has saved me the trouble with a brilliant blog post. Kaus starts out by making the obvious points. He notes that the policies Obama calls for -- raising the minimum wage, “the Paycheck Fairness Act” -- would be pitifully inadequate in reducing income inequality, and he notes, stingingly, that inequality has increased during Obama's five years in the White House. His one major measure to reduce inequality, Obamacare, he writes, “may not be hopelessly screwed up due to his own inattention and non-competence.”
Kaus notes as well that when Obama laments that lower income people tend to spawn lower rates of marriage and higher rates of single parenthood, he seems to have got causation backwards. Simple arithmetic explains this: Divorce transforms one household with above-average median household income into two households with below-average median household incomes, dragging the national median down. Two single parents remaining in two households has the same effect, as compared to what would happen if they married and formed one household. As my former American Enterprise Institute colleague Nick Schulz explains in his short AEI book Home Economics, changing family structure accounts for much of the supposed income stagnation or decline in the last 40 years.
Increasing income inequality, as Kaus points out, is not just an American phenomenon, but has been occurring in many nations with a variety of public policies. And so is declining social mobility. Here is his most profound point:
“[D]eclining mobility is also what you would expect if the meritocracy were working perfectly, without race or class prejudice (and inequality were stable or even shrinking). In a meritocracy, after all, the best rise to the top, the least talented and industrious wind up at the bottom. At some point, after a number of decades, maybe most of the talented will be at the top and the untalented at the bottom! Or at least, once the meritocratic centrifuge has sorted everyone out, there won't be that many talented people at the bottom to rise in heartening success stories (and those stories that do turn up will mainly involve immigrants). Worse, if you grant that a reasonable share of 'merit' is inherited, then you are going to wind up with a more static class structure for generation after generation. This is the scenario outlined by Harvard psychologist [and co-author with my American Enterprise Institute colleague Charles Murray of The Bell Curve] Richard Herrnstein. Just because it's profoundly depressing doesn't mean it's not true. Yes, luck still plays a big role. No, genes aren't everything, or even maybe a majority of everything. But they're something, and we should think about Herrnstein before we whine that people aren't rising to or falling from the top as much as they used to.”
In other words, there tends to be a tradeoff between fairness and mobility. If you get more of the first, you get less of the second. An exquisitely fair society will have less social mobility than a more unfair one.
But high levels of immigration may produce more social mobility. That's a little inconvenient for Kaus, a longtime critic of mass low-skill immigration. He points out that comprehensive immigration legislation--one of Obama's purported solutions for income inequality--may actually increase income inequality in the short run by reducing low-skill Americans' incomes. But of course it tends to increase immigrants' incomes far above the levels they would have in their countries of origin and in the longer run can produce impressive upward mobility. The prime example is the Ashkenazi Jewish immigrants of what I call in my recent book, Shaping Our Nation, the Ellis Island period (1892-1914, 1919-24), many of whom within a single generation rose from poverty to affluence and many of whose descendants did so within the next one or two generations. It might be an interesting exercise to determine how many of those currently in the Forbes 400 list of the richest Americans have ancestors (many but not all of them Eastern European Jewish immigrants) who had poverty incomes 100 or 120 years ago; my guess is that it's a pretty high percentage. Other immigrant groups have had less but still considerable upward social mobility; Italian-Americans (of whom I'm one) have above average household incomes today but most of their Italian ancestors started out with poverty incomes in the Ellis Island period. We're certainly seeing great upward social mobility among Asian immigrants and their offspring today, though considerably less among (the recently sharply reduced number of) Hispanic immigrants. Tilting our immigration laws toward high-skill immigrants and away from extended family reunification of low-skill immigrants--which I favor--might increase upward social mobility over the next generation.
Kaus concludes by calling for policies that would produce more social rather than economic equality and by noting that increasing income equality “is the Great MacGuffin of the Democratic base. It's a goal they will never reach. ... But that doesn't matter because the goal itself holds their coalition together and gives them a reason to go on.” If you don't know what a MacGuffin is, read Kaus's blog post or the interesting Ace of Spades blog post he links to.