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Comparing Income Mobility and Income Inequality

"Income inequality and economic immobility are often lumped together, but they shouldn’t be.

"Consider the two concepts positively: Income equality is about bridging the gap between the rich and the poor, while economic mobility is about elevating the poor as rapidly as possible. Finding ways to increase economic mobility should be our greater concern.

"For instance, while we have talked incessantly about the disproportionate gains of the top 1 percent, the wage slowdown in the United States in recent decades is a bigger problem for most people. Since 1973, for workers as a whole, wages have stagnated largely because of a severe productivity slowdown.

"The consequences have been startling. Data from the Economic Report of the President suggests that if productivity growth had maintained its pre-1973 pace, the median or typical household would now earn about $30,000 more today. Those higher earnings would constitute a form of upward mobility. For purposes of comparison, if income inequality had maintained its pre-1973 trend, the gain for the median household would be about $9,000 in income this year, a much smaller figure.

"Those changes in productivity and inequality trends aren’t entirely separate, but accelerating the growth of productivity has the potential to do more for upward economic mobility than redistributing money from the top 1 percent."

~ Tyler Cowen, Professor of Economics, George Mason University

Source: His April 5, 2015 New York Times column, HT His Marginal Revolution blog.

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