Last month, I wrote using data to shed light on the extent of the demographic and economic disparity between Brunswick and St. Simons Island. Then, in my most recent column, I presented the traditional theory that inequality of income or wealth is a natural consequence of healthy capitalism, and so, we should not invest great resources in trying to create economic equality.
Most folks subscribe to this traditional view, at least in part. Individuals will always exhibit differences in ability and effort, and we should expect these differences to lead to inequality of outcomes.
Where many economists diverge from this no-cause-for-alarm line of thinking, however, is in a scenario like we see in Glynn County, where we face incredibly vast inequality and where our economic division is highly correlated with a factor not determined by ability or effort — in our case, race. Here, it becomes clear that more is at play than the natural forces of capitalism, and many believe this is when inequality becomes detrimental to growth within a capitalist system.
To understand this view of inequality, it is important to recognize a key characteristic of wealth and poverty: They are dynamic. An individual may move up or down the proverbial socioeconomic ladder several times during her lifetime, as long as the ladder remains unobstructed. And, as long as the ladder remains unobstructed, poverty is only a temporary state and one that can certainly be overcome with sufficient effort.
This is called social mobility, and it is the idea upon which much of the traditional capitalist view of inequality is based. One man’s success is another man’s incentive to climb the ladder. Persistent inequality does not imply persistent poverty, for today’s poor are tomorrow’s rich.
Data show, however, that this is not the story for many Americans living in poverty, according to the 2011 paper “Recent developments in intergenerational mobility,” authored by Sandra E. Black, Paul J. Devereux and published in the Handbook of Labor Economics. In the U.S., there is a 50 percent likelihood that an adult son remains on the same rung of the ladder as his father, the paper shows. This figure is 30 percent in the U.K. and even lower in other European countries.
Poverty in the U.S. is persistent, which gives rise to the notion of a poverty trap. A family living in poverty is often forced to consume its resources rather than invest them, and so over time, the family struggles to increase its wealth. Climbing the socioeconomic ladder becomes nearly impossible.
Moreover, a study conducted by the federal reserve, “The decline in intergenerational mobility after 1980,” shows that social mobility declines as income inequality increases. This is the crux of economists’ argument that inequality is a threat to our economic well-being. A wider the gap between rich and poor indicates a stronger poverty trap.
Fed economists Jonathan Davis and Bhash Mazumder suggest in the paper this trend is not due to the observed inequality of outcomes — that some are rich and others are poor — but to an underlying inequality of opportunity. When compared with wealthier families, poor families have limited access to necessary tools for climbing the socioeconomic ladder, such as quality education, or transportation, or finance options.
The ladder of the poor American is not unobstructed, and for many poor Americans, poverty is not a temporary state. Our inequality is not simply a product of healthy capitalism.
It is, therefore, healthy that we continue conversations around how to bridge Glynn County’s four-mile gap.
Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.
Reg Murphy Center