Income Inequality, Equality of Opportunity, and Intergenerational Mobility

TLDR

Increasing inequality in high‑income countries, especially the United States, is likely to limit economic mobility for the next generation unless public policy reforms enhance disadvantaged children’s human capital. The study examines the drivers of opportunity linking inequality to intergenerational mobility, aiming to explain why the United States differs from other countries, how mobility will evolve amid rising inequality, and how the top 1 % experience a distinct process. Evidence shows that higher inequality correlates with lower intergenerational earnings mobility—the Great Gatsby Curve—and that family, labor‑market, and policy interactions, which vary by country, are likely to reduce or at best maintain mobility for Americans entering a more polarized labor market.

Abstract

My focus is on the degree to which increasing inequality in the high-income countries, particularly in the United States, is likely to limit economic mobility for the next generation of young adults. I discuss the underlying drivers of opportunity that generate the relationship between inequality and intergenerational mobility. The goal is to explain why America differs from other countries, how intergenerational mobility will change in an era of higher inequality, and how the process is different for the top 1 percent. I begin by presenting evidence that countries with more inequality at one point in time also experience less earnings mobility across the generations, a relationship that has been called “The Great Gatsby Curve.” The interaction between families, labor markets, and public policies all structure a child's opportunities and determine the extent to which adult earnings are related to family background—but they do so in different ways across national contexts. Both cross-country comparisons and the underlying trends suggest that these drivers are all configured most likely to lower, or at least not raise, the degree of intergenerational earnings mobility for the next generation of Americans coming of age in a more polarized labor market. This trend will likely continue unless there are changes in public policy that promote the human capital of children in a way that offers relatively greater benefits to the relatively disadvantaged.