Dodging the Hard Question on Economic Mobility

A review of Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It, by Richard V. Reeves. Brookings Institution Press (June 13, 2017) 240 pages.

In an era increasingly defined by arguments about income inequality, any discussion of improving economic mobility is a welcome one. In his recently released book, Dream Hoarders, Brookings Institution Scholar Richard V. Reeves tackles the subject head-on and finds an unlikely culprit for America’s lackluster economic mobility: the upper middle class.

The book is well researched and clearly lays out some of the ways in which members of the American upper middle class are entrenching their status by taking advantage of opportunities not available to everyone. According to Reeves’s analysis, this “opportunity hoarding” is a major reason why Americans are not as economically mobile as they have been in the past.

Because his findings and recommendations highlight the failures of the upper middle class rather than just the dreaded “one percent,” the book has garnered plenty of attention and even some controversy. But there is something interesting about the book’s premise that has received far less attention than it deserves. When Reeves discusses mobility, he is exclusively referring to relative economic mobility rather than absolute economic mobility. Reeves notes the distinction:

Absolute mobility is a measure of whether you are economically better off than your parents were at the same age. … Relative mobility is a measure of which rung of the ladder you stand on in your generation, compared to the rung your parents stood on in their own generation.

The distinction between relative and absolute mobility may seem like a wonky aside, but it is actually the central economic indicator that drives Reeves’s policy framework. It is inside this framework that injustices are identified and policy solutions are offered. Notably, Reeves is absolutely clear about this lens and even acknowledges that the focus on relative (as opposed to absolute) economic mobility is a controversial position.

There is good reason for the controversy. Early in the book, Reeves lays out the inconvenient truth:

Downward mobility is not a wildly popular idea, to say the least. But it is a stubborn mathematical fact that, at any given time, the top fifth of the income distribution can accommodate only 20 percent of the population. Relative intergenerational mobility is necessarily a zero-sum game. For one person to move up the ladder, somebody else must move down. Sometimes that will have to be one of our own children. Otherwise the glass floor protecting affluent kids from falling acts also as a glass ceiling, blocking upward mobility for those born on a lower rung of the ladder.

This narrow focus on relative economic mobility dodges the larger and more difficult question on mobility: Should our public policy be oriented toward a zero-sum game—even when absolute mobility is achievable for all? For his part, Reeves answers unequivocally in the affirmative.

From this starting point, Dream Hoarders takes a detailed look at trends regarding class separation and perpetuation (in relative terms) and chastises fellow members of the upper middle class for unfairly advantaging their own children. However, if the goal of public policy is to help people live better and more prosperous lives, the narrow focus on relative economic mobility is misplaced at best and dangerous at worst. Instead, a focus on increasing absolute economic mobility could achieve greater prosperity for everyone without success being dependent on worsening the position of some.

The primary problem with orienting public policy toward the narrow goal of increasing relative economic mobility is that it could be achieved without actually helping anyone. For example, an inheritance tax of 100 percent on all households in the top 20 percent of the income distribution (broadly, those earning more than $112,000 per year) would, on its own, go a long way to increasing relative economic mobility. By denying individuals in the top 20 percent of the income distribution the ability to perpetuate class status by giving assets (especially income generating assets such as rental properties or stocks) to their children, those children are much more likely to move out of the top 20 percent income bracket—pushing others into it (without any increases in their wealth, standard of living, or income). This (dramatic) increase in relative economic mobility would be achieved even if the revenues gained from such a tax were not redistributed somehow to those in lower income quintiles. In fact, the goal could be achieved even if those revenues were converted to cash and summarily incinerated.

That particularly effective policy change to increase relative economic mobility does not make the list of Reeves’s preferred policy prescriptions. But many of Reeves’s policy prescriptions require increased spending on new programs to aid low-income Americans; programs Reeves suggests could be financed by increasing taxes on the upper middle class. Though the details of what kind of tax instrument to use and how much to tax are left undiscussed in Dream Hoarders, this approach would have the “benefit” of killing two birds with one stone if the goal is exclusively increased relative mobility. As Reeves reminds us, “If more kids from lower-income quintiles are to move up, more of those from higher up must fall.”

Simply put, using relative economic mobility as a goal justifies a policy framework in which some people are required to lose. To be sure, most public policy choices do help some at the expense of others. Usually though, those hurt by government policies are the product of unintended consequences rather than the result of an explicitly designed policy feature. When it comes to achieving relative economic mobility, the uncomfortable reality is that it can be achieved from two different directions—helping some people move up or ensuring that others move down (or both).

Despite Reeves’s certitude in the righteousness of his policy goal—asserting that his proposals are “simply about fairness”—he insists that we should not aim at post hoc ways to rectify inequality, but rather focus on how to narrow the gap in the accumulation of human capital. Here again though, there are two ways to narrow that gap. For his part, Reeves almost exclusively focuses on the side of the ledger that aims to make it easier for those at the lower end of the income distribution to move up. That is, the proposals are generally aimed at better preparing low income children for the labor market rather than policies aimed at ensuring the downward mobility of upper middle class children. Other than ending legacy admissions to universities and arguing for a fairer allocation of internships, Reeves lets children of the upper middle class largely off the hook (except, perhaps, for a bigger tax bill to fund more government programs).

Given this focus, most of Reeves’ policy prescriptions would actually be equally effective in working toward an increase in absolute mobility as well. One of Reeves’s suggestions, ending exclusionary zoning practices, for instance, is a terrific idea that could remove some of the cost barriers that make it difficult for low income families to move into neighborhoods with less crime and better schools. In general, policy ideas can (and should) be debated on the merits, weighing the economic costs and potential benefits of new government programs. This type of evidence-based policymaking, however, can only be evaluated effectively when one has a clear picture of what counts as a “benefit.” When increasing relative economic mobility becomes synonymous with a policy’s “benefits,” the window for acceptable policy options becomes dangerously large. Judging by the fact that Reeves mostly focuses on helping low income families develop human capital, it seems as though little substance would be lost by adopting the goal of increasing absolute economic mobility instead.

The danger of designing policy around a zero-sum game, however, becomes clear when Reeves attempts to set up boundaries for which types of policies to address relative economic mobility are fair game and which ones are off limits.

As mentioned previously, there are ways in which relative economic mobility could be quickly and easily accomplished if it were our sole guiding policy goal. Even when the discussion centers on the inequality of human capital development, policies could be implemented to rectify this inequality by simply disallowing certain activities that disproportionally help the upper middle class. Reeves even mentions one such policy: eliminating unpaid internships—an idea Reeves describes as one that he suspects would make society fairer, but the implementation of which would be too “draconian” and “illiberal.”

But one policy scholar’s “draconian” and “illiberal” policies are another’s pathway to increasing relative economic mobility. Despite referencing multiple philosophers in an attempt to establish a clear distinction, the basis for deciding which policies to achieve greater relative economic mobility are justified and which ones are not remains unclear. This fuzziness raises some uncomfortable questions as to how far government should go to increase relative mobility. Reeves points out that “Even if the motives and means adopted by the affluent are entirely noble and fair … the result is the reproduction of status over time.” The potential consequences of government “correcting” for a state of affairs that came about through both motives and means that were “entirely noble and fair” sounds much like the opening of a Pandora’s policy box.

In responding to the assertion from the Heritage Foundation’s David Azerrad that “there is little appetite in America for policies that significantly restrict the ability of parents to do all they can, within the bounds of the law, to give their children every advantage in life,” Reeves assures readers: “Nobody sensible is in favor of new policies that block parents from doing the best they can for their children.” One sentence later, he continues, “But we should want to get rid of policies that allow parents to give their children an unfair advantage and in the process restrict the opportunities for others.”

The problem is, in the zero-sum game of relative economic mobility, every advantage restricts the opportunity of others. Perhaps recognizing the conundrum, Reeves spends about two pages on an attempt to establish himself as the moral arbiter for which parental advantages (that restrict opportunity for others) are fair or unfair.

In an example to provide some context to the discussion, Reeves notes, “We would look kindly on a father who helps his son get picked as starting pitcher for his school baseball team by practicing with him every evening after work. But we would likely feel differently about a father who secures the coveted lot for his son by bribing the coach. … So where is the line drawn?” Where indeed. The father who paid an athletic coach to help his son with his throw wasn’t mentioned, nor was the father who asked an athletically gifted friend to help with training at no cost. Advantages to be sure, but are they fair or unfair in this zero-sum game?

Here, Reeves turns to philosophers Harry Brighthouse and Adam Swift for guidance: “Their suggestion is that while parents have every right to act in ways that will help their children’s lives go well, they do not have the right to confer on them a competitive advantage, in other words, to ensure not just that they do well, but that they do better than others.” Reeves casually notes, “The trouble is that in the real world this seems like a distinction without a difference.” As residents of the real world, this “trouble” poses a real problem.

Brighthouse and Swift go further and assert, “It would be a little odd, perhaps even a little creepy, if the ultimate aim of her endeavors were that her child is better off than others.” Reeves describes this mentality as “too harsh” and closes the discussion rather abruptly, stating, “Although I think Brighthouse and Swift go too far, they are onto something important with their distinction between the kind of parental behavior that merely helps your own children and the kind that is ‘detrimental’ to others. That’s what I call opportunity hoarding.” But recall, Dream Hoarders centers on relative economic mobility—a zero-sum game where any advantage that helps a child is necessarily detrimental to others.

After two pages of discussion, Reeves has landed, it would seem, exactly back at square one: An unclear definition for what counts as “fair” or “unfair” in the zero-sum game of relative economic mobility. The risk of leaving this important definition unclear when discussing government action is difficult to overstate.

One possible way to mitigate the danger of drastic policy changes in an attempt to increase relative economic mobility is to identify a concrete and achievable goal for what level of relative mobility Reeves would like to achieve. Developing a benchmark would help to filter out proposals that would be particularly radical in nature. But a concrete and achievable goal seems unlikely—at least as long as Reeves and others who share his goals accept nothing short of utopianism.

After quoting President Obama’s second inaugural address, in which he notes, “We are true to their creed when a little girl born into the bleakest poverty knows that she has the same chance to succeed as anybody else,” Reeves notes that this is “Utopian, of course. … But this is useful utopianism.” However, when success is defined in terms of relative economic mobility, rather than say, absolute mobility, only quite radical policy solutions could perform the function of ensuring the exact same chance to succeed as anybody else.

Reading that passage and thinking through the potential consequences of such a position calls to mind the great economist and political philosopher Thomas Sowell. Few voices have issued clearer warnings about the dangers associated with the pursuit of utopian policy goals. In a speech discussing his 1999 book, The Quest for Cosmic Justice, Sowell summarizes the work with three propositions that are highly relevant to the current discussion:

• The impossible is not going to be achieved.
• It is a waste of precious resources to try and achieve it.
• The devastating costs and social dangers that go with these attempts to achieve the impossible should be taken into account.

The warnings should not be easily dismissed—particularly when Reeves prefaces some of his policy prescriptions with statements such as “Improving parenting is not just a private matter. It is a legitimate goal for public policy” or “… I make the argument that has ruined a few dinner parties: we need more downward mobility from the top. … We would likely be more relaxed if society were more equal, since the fall would not be so great.”

Although Reeves clearly articulates his respect for a market economy, his trust in redistribution and centralized planning as a means to establish a near utopian classless society are impossible to ignore. The dangers of playing a game where some must lose, especially in pursuit of this particular goal, are not to be taken lightly. The 20th century is littered with examples of radical ideas in pursuit of similar goals leading to devastation. The policy prescriptions offered in Dream Hoarders are not exactly radical, but the same cannot be said about its core premises— particularly when brought to their logical conclusions.

Now, perhaps it would be justified to consider such radical premises if economic growth were so robust as to achieve universal rates of absolute mobility over multiple generations. It would be silly to limit our public policy discussions to absolute economic mobility alone if this were the case, but, in fact, we are far from such a state of affairs. Recent research from the team at the Equality of Opportunity Project, led by Raj Chetty, has estimated that rates of absolute economic mobility in the United States have fallen to about 50 percent—meaning only half of kids are earning more than their parents (in inflation adjusted income) were at the same age.

Estimates vary, however. Research from Scott Winship suggests the figure is closer to 68 percent once family size, a better inflation calculator, and government transfer payments are taken into account. Specifics aside, any percentage under 100 is difficult to see as something other than deeply disappointing. But it also provides a concrete policy goal—one that does not require any losers. Economic growth is not a zero-sum game and neither is aiming to ensure that everyone is (at least) better off than their parents were at the same age.

Overall, Richard Reeves has provided a thoughtful and thorough analysis of class structure and class perpetuation in America. Sadly, the exclusive focus on relative economic mobility as the ultimate goal for public policy steers the discussion toward a dead end. Rather than becoming mired in debates about what kinds of parental advantages are fair or unfair and how much some should lose so others can “win,” our public policy should aim to ensure an equal opportunity for everyone to climb the income ladder, no matter in which income quintile they happened to be born. Of course, there is certainly room for debates about how public policy can help those at the bottom of the income distribution, but our policy framework should center around absolute mobility—a positive-sum framework in which everyone can win.