Inequality is Generational

Is inequality an economic problem? For many it is, while for others its not a serious problem so long as the lower layers of society have their basic needs covered.

According to many studies, if you are born in a family with a good economic position, it is very likely that you will keep it and so will your children. But the flip side is that if you are born in a family with a bad economic position, it is also quite likely that you will remain in such a position.

Normally when it comes to this topic, we talk about 1%. That group of executives, businessmen and political leaders that dominate our society. But the truth is that that 1% is perhaps the wrong number to focus on. In fact, the upper layer of society that is very difficult to ascend to is actually much larger,  somewhere between 10 and 20% of society.

It happens all over the world

From what we are seeing, in all the countries of the world it seems that the social class is being transmitted from father to son. Today, rich countries provide an educational system, and a system of (more or less) progressive taxes.

For example, in Italy, according to a study  by the NYT, the descendants of the families of the wealthy merchants of 1400 continue to have good economic standings. In other countries, such as China, the children and grandchildren of the Communist Party elites of Mao have maintained a good economic position as well, as is also the case in the United Kingdom or the United States.

In fact, according to a researcher at the Brookings Institution, 20% of the Americans make up the upper middle class, through the policies that are instituted. For example, the tax deduction for housing or the preferential treatment given by some universities to legacy children, in order to help social immobility.

Mathew Stewart recently published in The Atlantic about how 9.9% has become a kind of aristocracy in the country.

For example, 0.1% of society in the US owns 20% of wealth. But it the next 9.9% owns 60%. So the remaining 90% of the population ends up left with the remaining 20% ​​of wealth.

In addition, this economic capacity helps them to take their children to the best schools, and eventually to the elite universities, live in safe neighborhoods, and have access to good health. This helps them stay in that elite and keep their families in it as well.

Since the upper class is so broad, is it so difficult to achieve that status?

The economist Alan Kruguer, former adviser to President Obama, invented what has become known as the Great Gatsby curve. Basically, it shows a correlation between inequality in a society (as measured by the Gini index) and mobility in it (measured by social mobility indexes).

Basically, this curve shows that the greater the inequality in a society, the lower the social mobility. Which makes sense, since there is more road to travel between the different levels of society.

For example, for a person who was born in the economically weakest 10% of society, it would take five generations to move to the middle or upper classes on average. That is to say, it would not be his children, his grandchildren, nor his great-grandchildren, but his great-great grandchildren who would finally be in the middle class.

It may seem bad, and it is certainly worse than that of the Nordic countries, but it is equivalent to countries like Belgium, Canada, Japan or Holland, and better than in Germany and France (where six generations would be needed), let alone Colombia (the most extreme case, eleven generations).

Our economy has serious problems that have to be addressed, namely around inequality in the country. We will continue our quest to shed light on this issue.

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