Income Inequality and Income Mobility Essay ⋆ Sociology Essay Examples ⋆ EssayEmpire

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Research on income inequality within the social sciences took off as a byproduct of income taxation. Lists were published showing how many tax-paying units during a tax year had an income of a certain size. The distribution did not look like a bell-shaped curve, but was skewed at the upper end. The description of the distribution by one parameter started with Vilfredo Pareto, and his results led to the hypothesis that this statistic was more or less the same for all times and places. Later results, using better measures like the Gini coefficient, found differences between countries, leading to a hunt for explanations. Sociologists proposed basically two explanations for country-level differences in income inequality.

The first invokes economic factors, the second political ones. It has been held that in more economically developed countries income inequalities are smaller. Similarly, it has also been proposed that countries with a more peripheral (as opposed to central) place in the world economy have larger income inequalities. As to political factors, it has been maintained that in highly industrialized societies a long democratic history as well as a social democratic government, by way of various policies, have diminished income inequalities. Among these policies are progressive taxation, free secondary and tertiary education for all, and collective insurance against such matters as unemployment, work-related disabilities, and old age.

By way of quite simple comparisons and more sophisticated statistical techniques, these hypotheses have generally proved their mettle. An important issue is exactly how income inequalities are measured. If it is to be tested, an overall measure for income inequality in a country (like the Gini coefficient) will not do. Data on the income share of, say, the poorest and the richest 10 percent and 20 percent of the population are also necessary.

Sociologists have studied data on intergenerational mobility along a scale of occupational status. Blau and Duncan (1967) examined data from the USA and found a correlation between father and son’s occupational status of 0.4 (with zero indicating no correlation and unity full correlation and the strongest possible determination of son’s by father’s occupational status). When reviewing Blau and Duncan’s results, an economist suggested that occupational status as measured by sociologists is a reasonably good indicator of permanent income: not a person’s income during one particular year, but a person’s income calculated over a longer period. The interesting question is to what extent occupational correlations agree with data from long-running income panels.

Apart from depicting the USA as a much less mobile society than earlier income mobility data indicated, comparisons of US intergenerational income mobility data with those of other countries do not seem to show particularly low correlations for the USA. Research on Finland and Sweden using 3-year annual average earnings for fathers and sons found correlations closer to 0.1. Strict comparisons of a large number of countries remain a promise for the future, but it does seem that, for highly industrialized countries, low inequality in yearly income goes together with high income mobility.

Bibliography:

Blau, P. & Duncan, O. D. (1967) The American Occupational Structure. Wiley, New York.
Solon, G. (2002) Cross-country differences in inter-generational earnings mobility. Journal of Economic Perspectives 16 (3): 59-66.