My new book is titled Jobs with Equality. It’s available from Oxford University Press (the publisher), Amazon, Barnes and Noble, and others.

I’ve put the introductory chapter online.

Here’s a summary:

Income inequality has been rising in many of the world’s affluent countries, due to a variety of economic and social shifts. Redistribution can help, but government revenues are threatened by globalization and population aging. Like a growing number of observers, I see an increase in the employment rate as a way out of this impasse; it enlarges the tax base, allowing tax revenues to rise without an increase in tax rates. The question is: Can egalitarian institutions and policies be coupled with employment growth?

In the book I assess the experiences of rich nations since the late 1970s. I examine the impact on employment of six key policies and institutions: wage levels at the low end of the labor market, employment protection regulations, government benefit generosity, taxes, skills, and women-friendly policies.

It turns out that there is no parsimonious set of institutions and policies that have been key to good (or bad) employment performance. The comparative experience features multiple paths to employment success, including low-inequality ones. This suggests reason for optimism about possibilities for a high-employment, high-equality society.

Cover blurbs:

“This new book is a worthy successor to Lane Kenworthy’s much-acclaimed Egalitarian Capitalism. Combining academic rigor with a reader-friendly style, he explores how we might reconcile what many consider incompatible goals: more employment and greater equality. Drawing on systematic and empirically rich analyses, Kenworthy argues against any simplistic policy formula. The book makes especially lucrative reading when, in the latter half, it identifies the key ingredients of a win-win strategy. Jobs with Equality is destined to generate debate, all-the-while that it affirms Lane Kenworthy’s status as a leading scholar of social inequality.”  — Gøsta Esping-Andersen, Universitat Pompeu Fabra

“On the premise that high employment is essential to the realization of egalitarian goals in the contemporary era, this important book explores how social policies and institutional arrangements in advanced capitalist societies have affected employment growth over the last three decades. Kenworthy synthesizes existing literature and presents new empirical findings based on original cross-national data and measurements. His most important contribution is to explore multiple determinants of employment performance and interactions among these determinants in systematic fashion. Very sensibly, the analysis yields policy recommendations that are specific by institutional context. For students of comparative political economy, the particular questions that Kenworthy addresses are now settled for some time to come.” — Jonas Pontusson, Princeton University

Chapter list:

1. Introduction

PART I   EQUALITY

2. Why Should We Care About Inequality?

3. Sources of Equality and Inequality: Wages, Jobs, Households, and Redistribution

PART II   JOBS

4. Measuring and Analyzing Employment Performance

5. Low-End Wages

6. Employment Protection Regulations

7. Government Benefits

8. Taxes

9. Skills

10. Women-Friendly Policies

11. Toward a High-Employment, High-Equality Society

Just an advance notice that I’m planning to not post at all in August.

U.S. economy

Blowing in the wind, Financial Times

Behind the Bush bust, by Paul Krugman

L-ish economic prospects, by Paul Krugman

Borrowers and bankers: a great divide, by Gretchen Morgenson

The heart of the economic mess, by Robert Reich

Living standards, poverty, inequality, well-being

Understanding the demand side of the low-wage labor market, by Gregory Acs and Pamela Loprest (via Matt Lewis)

The measure of America: American human development report 2008-2009, by the American Human Development Project

Inequality and the Fannie/Freddie bailout, by Dean Baker

Disability and democracy, by Michael Bérubé

Recent trends in the variability of individual earnings and household income, by the Congressional Budget Office

Parental education and parental time with children, by Jonathan Guryan, Erik Hurst, and Melissa Kearney

Parents’ health, children’s health, and incomes: a cycle of poverty, by Janet Currie

We’re rich!!, by Chris Dillow

Women crack glass ceiling from above, Financial Times

Danes still the happiest, even if they won’t say hello at the grocery store, by Justin Fox

The strange fantasy world of the income-inequality denialists, by Justin Fox

Growing disparities in life expectancy, by Elise Gould

What do working-class voters want? They want a fair deal, by Steven Greenhouse

Unequal America, by Elizabeth Gudrais

The declining value of your college degree, by Greg Ip

Job creation?, by Paul Krugman

How much does it cost you in wages if you “sound black”?, by Steven Levitt

Framing the safety net — part 1, part 2, part 3, by Matt Lewis

Given a shovel, Americans dig deeper into debt, by Gretchen Morgenson

American murder mystery, by Hanna Rosin

The growth solution, by Carl Schramm and Robert Litan

“The culture of debt”?, by Mark Thoma

Gender equality and the math gap, by John Timmer (via Brad DeLong)

Women are now equal as victims of poor economy, by Louis Uchitelle

Happiness, meaning, and knowledge, by Will Wilkinson

Two views on luck and redistribution, by Will Wilkinson

Health care

Single-minded, by Jonathan Cohn

Means testing, for Medicare, by Tyler Cowen

Underinsured, by Ezra Klein

While the U.S. spends heavily on health care, a study faults the quality, New York Times

Education

Obama’s no-brainer on education, by Jonathan Alter

Can young Americans compete in a global economy?, by Elizabeth Cascio (via Mark Thoma)

How to learn the right lessons from other countries’ schools, The Economist

Beyond silver bullets: pre-K effectiveness, by Sara Mead

Crime and punishment

Reversing mass imprisonment, by Bruce Western

Unions

So you want to know more about unions?, by Nathan Newman

It’s time to make union membership a civil right, by David Sirota

Taxes

An updated analysis of the presidential candidates’ tax plans, by Len Burman and others

Evidence shows that tax cuts lose revenue, by the Center on Budget and Policy Priorities

Does business really want low tax rates?, by Howard Gleckman

Tax receipt: knowing what you paid for, by Jim Kessler and Tess Stovall

Government spending

Real fiscal responsibility, by Brad DeLong

Globalization

How to raise African wages 840 percent, by Chris Blattman

Can the U.S. bring jobs back from China?, BusinessWeek

Migration: a turning tide?, The Economist

Diverging interests: company and country at a crossroads, by Ralph Gomory and William Baumol (via Justin Fox)

The death of the globalization consensus, by Dani Rodrik

Don’t cry for Doha, by Dani Rodrik

U.S. politics

One simple way to predict a victor, by Clive Crook

More on McCain’s economic policy, by Brad DeLong

What did Reagan accomplish?, by Brad DeLong

Where should Barack Obama be campaigning?, by Brad DeLong

Presidential economics: do parties matter?, by Philippa Dunne and Doug Henwood (via Brad DeLong)

Presidential elections inequality: the electoral college in the 21st century, by FairVote (via Matthew Yglesias)

Left-right ideology of voters, congressmembers, and senators, by Andrew Gelman

A short primer on McCainomics versus Obamanomics: top-down or bottom-up, by Robert Reich

Is Obama the most liberal senator?, by John Sides

Can progressives unite, or will it be the same old bit-politics story?, by Theda Skocpol

Abroad

How can we end poverty? The determinants of development, by Raphael Auer

Europe’s Roma, The Economist

In some parts of the world, family planning is still a distant dream, The Economist

Women have long been held back in Germany, but that is now changing, The Economist

Iceland’s blend of old and new, by Thorvaldur Gylfason

A new fashion catches on in Paris: cheap bicycle rentals, New York Times

France to let companies scrap 35-hour week, New York Times

Why Darfur still bleeds, New York Times

China’s inequality looms large as a policy challenge, by Alan Wheatley

Miscellaneous

Random walks by young economists, by Angus Deaton (via Chris Blattman)

The case against meat, by Ezra Klein

Cheap wine, by Steven Levitt

What if the candidates pandered to economists?, by Greg Mankiw

Having kids makes you happy: true or false?, Newsweek

We expect that each generation of Americans will have higher incomes than preceding ones — that, in other words, there will be upward absolute intergenerational mobility. Data from a report by the Economic Mobility Project suggest some reason for concern.

The data are for various generations of families with a man in his thirties, thereby holding stage of the work career constant. The question is how much family income (adjusted for inflation) increases across generations, with a generation defined as 30 years. As the following chart shows, the median income of these families increased by about $12,000 between 1964 and 1994. Between 1974 and 2004, in contrast, it increased by only $4,500. The gain from generation to generation declined. And this is despite the fact that a growing share of these families have two earners rather than just one.

This could be because economic growth slowed. Or it could be due to rising inequality; a larger and larger share of the economy’s growth has gone to families at the high end of the distribution and less and less of it to the rest.

The second chart here suggests that rising inequality may have been more important than slow economic growth. From 1964 to 1994, the average annual growth rate of GDP per capita was 2.2% and the growth rate of median income for families with a man in his thirties was 0.9%. From 1974 to 2004, GDP per capita grew at an annual rate of 2.0% while median income for families with a man in his thirties grew at 0.3%. The drop in income growth across generations was much sharper than the drop in growth of the economy.

Upward mobility is a key element of the American ethos. Slowing inequality’s march would help (more here and here).

Here is the conventional wisdom about income inequality in the United States compared to other rich countries:

The U.S. is the most unequal.

However, these data are based on households’ income in a single year. Averaging income over multiple years tends to reduce measured inequality. This is because of mobility; some people move up and/or down in the distribution over time. If the United States has more such mobility (relative intragenerational mobility) than other countries, the conventional single-year measure shown in this chart may overstate U.S. inequality relative to other countries.

Does the U.S. improve if we measure inequality using income averaged over a longer period of time?

Markus Gangl (University of Wisconsin), Joakim Palme (Institute for Futures Studies in Stockholm), and I have a paper that averages income over 18 years in Germany, Sweden, and the United States. Eighteen years isn’t a full work life, but it’s the best we can do with existing panel data sets. The following chart shows the findings. As the number of years over which income is averaged increases, the amount of measured inequality decreases. But it decreases at the same rate in each of the three countries. America’s position does not improve.

The full paper is here.

__________

* These numbers are my calculations from the Luxembourg Income Study database. To make them as comparable as possible to the data in the second chart here, they’re for households with a head age 25 to 59. Income is with government transfers included and taxes subtracted.

Income inequality in the United States is typically measured with data from a survey that asks around 50,000 households what their income was in the previous year. According to these data, inequality has increased sharply since the 1970s (see the second chart here).

But this survey includes different households each year. It therefore misses any mobility — movement of households up and down in the distribution over time — that occurs. If mobility has increased, the conclusion that there is more inequality might be misleading. Even if the gap between the top and bottom increases over time, if households change places with greater frequency, the inequality of their average income — “true” inequality — may have stayed more or less the same. Rising mobility can offset rising single-point-in-time inequality.

The type of mobility at issue here is relative intragenerational income mobility. Has it increased in recent decades?

To find out, we need panel data — data for the same households (or individuals) over a number of years. There are three main sources of such data. Each suggests the same conclusion: relative intragenerational income mobility in the United States has not increased.

A standard way to assess mobility is to divide households into quintiles (five equally-sized groups) based on their income at the starting time point. Then we look at the share of each of these groups that moves up (or down) in the distribution between time 1 and time 2. More movement indicates more mobility.

One source of data is the Panel Study of Income Dynamics (PSID), a panel survey of nearly 8,000 households begun in 1969. The following chart shows the share in each of the bottom four quintiles that moved up over three successive decades beginning in 1969. (There’s no significance to the choice to show movement up; the graph could just as well show the share moving down. The point is whether the shares increase over time.) The shares were calculated by Katharine Bradbury and Jane Katz. (See also this earlier analysis by Peter Gottschalk and Sheldon Danziger.) There is no indication of an increase in mobility from the 1970s to the 1980s to the 1990s.

A second data source is income tax returns, which are analyzed in a U.S. Treasury Department report (see table A-5). The data are from a sample of returns filed by taxpayers age 25 or older in the initial year. Here too the period examined is roughly a decade. In this study there are two periods: 1987-96 and 1996-2005. The next chart shows the shares moving up in each of the two periods. Again the data do not indicate an increase in mobility.

A third data source is Social Security earnings records. These records are available since 1937. Wojciech Kopczuk, Emmanuel Saez, and Jae Song have used them to study changes in earnings mobility. They conclude that “short-term and long-term mobility among all workers has been quite stable since 1951.”

The fact that all three data sources suggest the same conclusion doesn’t necessarily mean it’s correct, but it offers good reason to favor that conclusion. Rising income and earnings inequality in the United States does not appear to have been offset by increased mobility.

Income inequality in the United States has increased since the 1970s. Has that increase been offset by mobility?

It could be. Half a century ago Milton Friedman (in Capitalism and Freedom) suggested sensibly that a proper understanding of inequality requires taking mobility into account:

“A major problem in interpreting evidence on the distribution of income is the need to distinguish two basically different kinds of inequality: temporary, short-run differences in income, and differences in long-run income status. Consider two societies that have the same distribution of annual income. In one there is great mobility and change so that the position of particular families in the income hierarchy varies widely from year to year. In the other, there is great rigidity so that each family stays in the same position year after year. Clearly, in any meaningful sense, the second would be the more unequal society.”

Some find the following metaphor (originally from Joseph Schumpeter) helpful. Think of an apartment building with units of varying size and quality. It has a few penthouse suites that are large and feature lots of amenities, a multitude of modest two-bedroom units, and a number of barebones single-room units. This is inequality. Suppose, however, that the residents regularly switch units. Most people live much of the time in the low- or mid-level units, but they go back and forth between these, and many occasionally get to live in a penthouse suite. This is mobility. (Specifically, it’s relative intragenerational mobility.) This mobility reduces the amount of inequality — true, genuine, long-run inequality — among the residents.

Income mobility does reduce income inequality. When inequality increases, however, mobility has to also increase if it is to offset that rise in inequality.

This is a simple, perhaps obvious point. But it’s an important one. The rest of this post illustrates it with the aid of some graphs.

To begin, imagine 100 households at two points in time. Suppose, for simplicity, that there are five different incomes in the society at time 1 and one fifth of the households have each of these incomes. (It’s not important for the illustration, but the incomes I use in these charts are the average after-tax incomes of the five quintiles of the U.S. income distribution in 1979 and 2005. The data are here.)

In one scenario, shown in the first chart, no household’s income changes from time 1 to time 2. Each household’s average income is therefore the same as its income at each point in time. “True” inequality — inequality when income is averaged over time 1 and time 2 — is the same as single-point-in-time inequality.

In another scenario, depicted in the second chart, the income levels stay the same at the second point in time. The level of single-point-in-time inequality is thus the same at time 2 as at time 1. But some of the households switch places. Some that start with the lowest income move up to the lower-middle, others to the middle, and a few to the top two incomes. Similarly, some that begin at the top stay there, while others move down.

For each household, the plus (+) and hollow circle (o) indicate its income at time 1 and time 2, respectively, while the solid marker (♦) is its average income. The pattern of the solid markers makes it clear that inequality of average income is lower in this scenario than in the first chart; lots of households’ average income is in between the five levels of the first chart. The Gini coefficient confirms this. The Gini is a standard measure of inequality; it ranges from zero to one, with larger numbers indicating greater inequality. The Gini for average income in the mobility scenario is .286 (second chart), compared to .320 in the no-mobility scenario (first chart).

Now consider what happens when single-point-in-time inequality increases from time 1 to time 2, as has happened in the United States since the 1970s.

The third chart shows a society in which inequality increases from time 1 to time 2 and there is no relative mobility. With the rise in single-point-in-time inequality, inequality of average income is greater than in the first chart. The Gini is .373 in the third chart, compared to .320 in the first chart.

Can mobility offset this rise in inequality? The fourth (and last) chart shows a scenario in which single-point-in-time inequality increases exactly as it did in the third chart but there is relative mobility. The amount of mobility is the same as in the second chart; the same number of households move up or down among the quintiles and by the same (relative) amount.

Mobility does reduce “true” inequality compared to the no-mobility scenario depicted in the third chart. But the Gini coefficient for the fourth chart is much larger than for the second chart. These two scenarios have the same amount of relative mobility. But with single-point-in-time inequality having risen in the fourth scenario between time 1 and time 2, the same degree of relative mobility does not produce the same amount of “true” inequality (inequality of average income).

The bottom line: Income mobility helps to reduce income inequality. But if single-point-in-time inequality rises, mobility can only offset that rise if it too increases.

Single-point-in-time income inequality has risen sharply in the United States since the 1970s. Has mobility increased too? Stay tuned.

Has income inequality increased? Is inequality greater in the United States than in other affluent countries? Answering these questions requires taking mobility into account. Over the next few weeks I’ll put up several posts on this.

When social scientists or policy makers talk about mobility, they often mean different things. Here are a few key distinctions:

1. Income or occupation?

Traditionally, sociologists have tended to examine occupational mobility while economists have been more interested in mobility of earnings and income. In recent years this distinction has faded somewhat, with scholars in both disciplines concentrating mainly on income and earnings.

2. Intergenerational or intragenerational?

Intergenerational mobility refers to movement between generations. The question is typically something like: How does a person’s income compare to that of her/his parents? Intragenerational mobility, in contrast, refers to movement up or down within generations — over the life course. Research on intragenerational mobility examines how people fare during their working career compared to how they were doing at, say, age 18 or 25 or 30.

3. Absolute or relative?

Absolute intragenerational mobility refers to changes in income compared to the income one started with. Suppose a person begins her working career with an income of $25,000. If a decade later her income is $30,000 (adjusting for inflation), she has experienced upward absolute intragenerational income mobility.

Relative intragenerational mobility refers to the degree to which individuals move up or down compared to others in their cohort. Suppose a person’s income increases from $25,000 at the start of his working career to $30,000 a decade later, but most people who began their work life around the same time experience a larger increase. The person has experienced upward absolute mobility but downward relative mobility.

For intergenerational mobility, the distinction between absolute and relative is analogous. If a person’s inflation-adjusted income is $30,000 and her parents’ was $25,000 at a comparable point in life, she has experienced upward absolute intergenerational income mobility. Because of economic growth, we expect that such upward mobility will be the norm. The interesting question concerns the degree of upward absolute mobility and how it changes over time.

Relative intergenerational mobility depends on one’s place in the distribution. If a person’s income puts him at the 75th percentile of the distribution and his parents were at the 50th at a comparable point in their lives, he has experienced upward relative intergenerational mobility.

Relative mobility is a zero-sum phenomenon. If one person moves up in relative terms, another by definition must have moved down. Absolute mobility is not zero-sum. Both are of interest.