Economy
3:58 am
Tue January 28, 2014

Researchers Examine Gap Between Rich And Poor

Originally published on Tue January 28, 2014 7:20 am

Transcript

STEVE INSKEEP, HOST:

NPR's business news starts with income inequality.

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INSKEEP: President Obama has dropped a few hints that one of the themes of his State of the Union address tonight will be the growing gap between the rich and the poor. He recently called economic mobility and inequality the defining challenge of our times. So is it?

Harvard researchers have been examining this question, including a co-author of a study, Nathan Hendren.

So, when you looked at social mobility, ability for people to rise from one class to another, what did you find?

NATHAN HENDREN: Right. So we found that if you explore the patterns of nobility over time, there hasn't actually been a whole lot of change in the United States. So the way to think about it is people are climbing up and down the ladder at the same rates as ever before, but because income equality has increased, the difference in outcomes to rich versus poor kids has increased.

INSKEEP: Let's talk a little bit more about this and bring another voice into the conversation. David Wessel is a regular guest on this program. He is director of the Hutchins Center at the Brookings Institution, a contributor to The Wall Street Journal.

David, good morning.

DAVID WESSEL: Good morning.

INSKEEP: Should I be bothered by this finding, that mobility is not getting any worse but still, there's a far greater gap between rich and poor than there used to be?

WESSEL: I think you should. One of the contributions this study has made is to destroy a myth that is widespread in Washington, that it's harder for kids to rise out of poverty into the middle class.

INSKEEP: Mm-hmm.

WESSEL: But the consequences of losing what they call the birth lottery are greater. And they also point out that it was and is harder to rise from poverty to the middle class or from middle class to wealth than it is in other countries.

INSKEEP: Wait a minute. Other countries, you're saying that France, England, Germany, wherever we're talking about, it's easier there to ride from poverty or to rise from the middle class to wealth?

WESSEL: Correct. The notion that America is a special place where any kid can grow up to be president is very important to the American psyche, but when you look at the data, it's harder to rise from the bottom to the middle or from the middle to the top in the U.S. than in other rich countries around the world.

INSKEEP: Nathan Hendren, you say things have not really changed that much in terms of social mobility in the United States. Are we falling behind? Are other countries getting any better at this?

HENDREN: Yeah. I think, you know, just to put some statistics on what David was saying, kids born to the bottom fifth of the income distribution in the United States have about an 8 percent chance of reaching the top fifth when they grow up. If you make comparisons to other countries, that actually ranks about as low as it gets amongst developed countries.

In Denmark, that same statistic is 16 percent. So 16 percent of their kids born in the bottom fifth of the income distribution reach the top fifth.

INSKEEP: I'd like to know this is completely different than the America you grew up thinking you were growing up in, Nathan Hendren, because it's different than what I learned when I was a kid.

HENDREN: Absolutely. You know, I grew up thinking that the United States is a place where people have greater opportunities. And what I interpreted that to mean was that people who were born into poverty had a higher chance of reaching the top regions of the income distribution. And I think what's really surprising throughout this study is the extent to which that's not true when you make comparisons relative to other countries.

INSKEEP: David Wessel, what are Republicans and Democrats saying and thinking about when it comes to inequality and mobility?

WESSEL: Well, there is a substantial amount of agreement. Republicans Marco Rubio and Paul Ryan and Chuck Schumer - Democratic senator - and Barack Obama, all agree that they would like to do things to make social mobility greater, to make it easier for people to climb from the bottom and the middle to the top. They disagree on what to do about it. Oversimplifying only a little, the Republicans think the government ought to step back and people ought to do more for themselves. And the president is likely to emphasize both the responsibility of parents - which is something he talks about quite a bit, but also what the government can do to increase the chances that poor kids can make it to the middle class. Better pre-K, better access to college, removing the barriers to people getting jobs, particularly those who have been out of work for a long time. All those things that the government can do to speed up the escalator of mobility.

INSKEEP: What do you think is beyond the government's control here?

WESSEL: I think that there's evidence that parents matter, and being born to parents who are married, who haven't been to jail, who read to you, who make sure you go to school, who help you avoid getting pregnant as a teenager, who keep you out of jail, those kids are more likely to make it. The government can do things to encourage good parenting, but I think even among liberals there's agreement now that parents have a responsibility to their kids and that some parents are failing in their duty.

INSKEEP: When we talk about things the government can do - and Nathan Hendren -having done this study, what would you recommend?

HENDREN: Well, you know, I think that's the hardest question. I think there's a lot of good evidence out there that suggests the quality of schools matters a lot and areas that have a higher fraction of their kids in public schools tend to have higher rates of upward mobility.

INSKEEP: Meaning that when more students are attracted to the public school system it's a sign the public school system is pretty good and is doing very well for a wide range of students.

HENDREN: Yeah, that's the basic idea. Now, you know, that's not a story for or against, say, a voucher program or other programs that could improve the quality of access to a good education, but I think it suggests, and is consistent with a large range of other studies, that suggest that the quality of the schooling system and the schools that people go to matters a lot for improving upward mobility.

INSKEEP: So are different parts of the country more mobile than other parts?

HENDREN: Absolutely. So if you look across the United States, that 8 percent statistic I was talking about before - the fraction of kids going from the bottom fifth to the top fifth - that varies from about 4 to 5 percent in places like Charlotte and Atlanta, up to about 12 percent in places like Salt Lake City, San Francisco, Dubuque, Iowa. These places are much more mobile. So it varies by a factor of three, the extent to which kids are rising out of poverty across areas.

INSKEEP: David Wessel of the Brookings Institution and The Wall Street Journal, thanks to you.

WESSEL: You're welcome.

INSKEEP: And also, thanks to Nathan Hendren, an assistant professor of economics at Harvard and co-author of a study on social mobility. Thanks to you.

HENDREN: Thanks a lot. Transcript provided by NPR, Copyright NPR.