More on income inequality

Miles Corak, a professor of economics at the University of Ottawa, writes that, if the American dream means “being able to succeed regardless of the economic circumstances in which you were born,” we will have better luck achieving it in Canada and other countries with less economic inequality than in the USA.

A child’s prospects are actually more fluid elsewhere, not just in the most equal countries, like Denmark or Sweden, but even in countries like Canada that have moderate levels of inequality, as I demonstrate in a forthcoming paper in the Journal of Economic Perspectives.

American children raised at the top, and at the bottom, are more likely to land on the same rung of the income ladder as their fathers than their Canadian counterparts. More than one-quarter of sons raised by fathers in the top 10 percent stay in the top 10 percent as adults, and another quarter fall no further than the top third. Meanwhile, half of those raised by fathers in the bottom 10 percent remain at the bottom or rise no further than the bottom third. In Canada there is less stickiness at the top, and children raised in the bottom are more likely to rise to the top half in earnings.  

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The belief that talent is bred in the bone, and that opportunities are open to anyone with ambition and energy, also has a dangerous corollary. When the lens of public policy is focused on the plight of the poor, this belief can help revive the laissez-faire conception of the poor as “undeserving,” the authors of their own predicament. Yet we actually know a good deal about why children of the poor have a higher chance of being stuck in poverty as adults.  

The recipes for breaking this intergenerational trap are clear: a nurturing environment in the early years combined with accessible and high-quality health care and education promote the capacities of young children, heighten the development of their skills as they grow older, and ultimately raise their chances of upward mobility.  

Talent is nurtured and developed, and even genes are expressed differently depending upon environmental influences.  

It is not just demography and inbred entrepreneurial spirit that make the tie between parent and child incomes stronger in America than any other rich country to which it is commonly compared. Differences in public policies also play a role. Less inequality makes opportunity-enhancing policies that are of relatively larger benefit to lower-income families easier to introduce and sustain.

You can read more here.