Income Inequality?

Over the past decade or so, there’s been a great deal of talk about income inequality and also, to a lesser degree, about intergenerational mobility, that is, the changes in a family’s economic status between successive generations. What’s been surprising to some, and what many better-off Americans have trouble believing, is that the United States is no longer the leader in inter-generational family wealth/income upward mobility. A variety of studies over the last decade has shown that the United States had about one third the mobility of Denmark and less than half that of Canada, Finland and Norway. France, Germany, and Sweden also had higher mobility, with only the United Kingdom of this group being less mobile than the U.S. Less than four percent of Americans born to a family with income in the bottom fifth end up in top fifth.

Forty-two percent of U.S. children born to parents in the bottom fifth of the income distribution remain in the bottom, while 39 percent born to parents in the top fifth remain at the top.

Studies of wealth and income inequality all find that education and parental income play a significant role in determining the income mobility of their children, but there’s one factor that’s all too often downplayed, and that’s the role of family. First of all, the relative stagnation of middle and lower class wages, the rising costs of living, and, frankly, rising expectations – have all made it more and more difficult for families, especially families with children, to live on a single income. Today, men’s earnings still constitute the majority of total family income, but their share has dropped from 75 percent of average family earnings to 61 percent. In other words, for most families, even holding the same income position as one’s parents, let alone obtaining upward family income mobility, requires a couple’s combined earnings. Two-partner families increase, on average and over time, their assets by 16% more a year than single parent families.

But those figures ignore another aspect of family – and that’s the support, financial and otherwise, that doesn’t show up on balance sheets or in statistics. When parents help a couple over a hard financial period, or a medical catastrophe, or even lend a car when one breaks down, these acts of support often prevent the total disintegration of a family’s well-being. Obviously, such support is easier to give and obtain in families with higher incomes, yet this kind of support is even more comparatively valuable for lower middle class and working class families

Unfortunately, as a result of a number of factors, including the fact that financial problems are the largest single cause or marriage break-ups, marriage rates have plummeted in the lower-income socio-economic groups, resulting in a comparatively larger number of single-parent families. While such families have always had a harder time economically and especially in providing the additional education for children that is necessary for their economic success, this change makes it even harder for families in such groups to improve the financial situation.

This is rapidly becoming a vicious circle, because economic inequality reduces marriage rates and educational opportunities for the poorest members of society, which in turn makes it ever harder for them to escape poverty, while improving the opportunities for wealthier families to remain prosperous, even when the efforts and abilities of their offspring may well be less than those of others lower on the economic totem pole.

And, unless we find a way to break this cycle, income inequality and the concomitant anger and resentment of the less-fortunate will continue to increase, and, with it, social unrest and violence.

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