The Land of Opportunity or Inequality? What the 'Great Gatsby Curve' Graph Shows
One graph claims to show the inverting relationship between inequality and opportunity. The Great Gatsby Curve sheds light on one of the key issues of our time.
Inequality is one of the key issues of this year’s presidential election. It was the underlying issue behind the primary campaign of Bernie Sanders and has been mentioned often in the general election by both major candidates.
Indeed, income inequality in the United States is as high as it has been since the 1920s according to economist Thomas Piketty. The growth of inequality has been pronounced since the 1970s both in scale and in speed. An occurrence so remarkable it has been called The Great Divergence.
What effect might this massive inequality have on us? What does this mean for us other than having to hear politicians ramble on? Will we have to settle for a new economic order in which massive inequality is the norm? Will it affect our way of life?
According to labour economist Alan Krueger, income inequality can have negative effects on social mobility. Effects negative enough to turn Scandinavia into the land of opportunity; and to leave the United States behind most of Western Europe in terms of mobility at birth. He explains the effect in his 'Great Gatsby Curve' graph; named ironically for the rags to riches title character of The Great Gatsby and his ability to advance in an unequal society.
On the vertical axis is the social immobility of a child born in each country. The higher it is the more influence your parents income has on your earnings as an adult. The lower it is, the more likely you are to move out of the income bracket that you are born into. On the other axis is the Gini coefficient, a measure of inequality in a country. The higher it is, the more concentrated wealth and income are.
The graph shows that among many countries there is a relationship between high income inequality and low social mobility. The countries in the lower left with the lowest inequality also have the highest mobility. The countries at the top right with the highest inequality have the least social mobility. As inequality increases, the chances of making much more money than your parents did decreases.
What does this mean for the current discussion of inequality? It means that if nothing is done the tendency of income to concentrate is liable to become more pronounced, as is the belief of Alan Krueger. He adds that the effect has likely already slowed the growth of the US economy, and could demoralize workers. It also means that inequality is only half the story, social mobility – and the policies which make it possible – have to be considered as well in the discussion.
Graph by BoogaLouie - Graph was creating using Excel. Source of data is Inequality from generation to generation the United States in comparison, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=20700242
“Income Inequality in the United States, 1913-1998" with Thomas Piketty, Quarterly Journal of Economics, 118(1), 2003, 1-39 (Longer updated version published in A.B. Atkinson and T. Piketty eds., Oxford University Press, 2007) (Tables and Figures Updated to 2015 in Excel format, June 2016)
Krueger, Alan B. "The Rise and Consequences of Inequality in the United States." (2012): n. pag.Https://www.whitehouse.gov/sites/default/files/krueger_cap_speech_final_remarks.pdf. The White House. Web. 23 Aug. 2016.
Malcolm Gladwell teaches "Get over yourself and get to work" for Big Think Edge.
- Learn to recognize failure and know the big difference between panicking and choking.
- At Big Think Edge, Malcolm Gladwell teaches how to check your inner critic and get clear on what failure is.
- Subscribe to Big Think Edge before we launch on March 30 to get 20% off monthly and annual memberships.
Neuroscience research suggests it might be time to rethink our ideas about when exactly a child becomes an adult.
- Research suggests that most human brains take about 25 years to develop, though these rates can vary among men and women, and among individuals.
- Although the human brain matures in size during adolescence, important developments within the prefrontal cortex and other regions still take pace well into one's 20s.
- The findings raise complex ethical questions about the way our criminal justice systems punishes criminals in their late teens and early 20s.
Three scientists publish a paper proving that Mercury, not Venus, is the closest planet to Earth.
- Earth is the third planet from the Sun, so our closest neighbor must be planet two or four, right?
- Wrong! Neither Venus nor Mars is the right answer.
- Three scientists ran the numbers. In this YouTube video, one of them explains why our nearest neighbor is... Mercury!
A new method of growing mini-brains produces some startling results.
- Researchers find a new and inexpensive way to keep organoids growing for a year.
- Axons from the study's organoids attached themselves to embryonic mouse spinal cord cells.
- The mini-brains took control of muscles connected to the spinal cords.
SMARTER FASTER trademarks owned by The Big Think, Inc. All rights reserved.