There is nothing wrong with inequality … until it starts limiting opportunity.
It is certainly one thing to live in an unequal society where the chances of changing places with the rich, of seeing your children move on and upward, are high. Indeed, if this is the case we may even want a certain degree of inequality: people would have both the incentive and the possibility to better their situation.
But it is another thing altogether to live in an unequal society where there is little chance of moving on, where there are barriers preventing our talents and energies from being rewarded, where the accident of birth determines a child’s life chances.
This type of inequality should worry Occupiers and the 99 per cent because it cuts sharply against what we commonly understand to be the American Dream.
The facts are pretty clear: the more unequal a society, the lower generational mobility.
The United States is among the most unequal and the least mobile of the rich countries, with about 50 per cent of a father’s earnings advantage (or for that matter disadvantage) being passed on to the son.
In Canada this is about 20 per cent, less than half the U.S. figure.
The reason for the difference: in the United States children of the very rich are more likely to grow up to be rich, and children of the poor are more likely to stay poor.
A study I wrote for the PEW Charitable Trusts treats this in much more detail, and also notes that the other big difference between Americans and Canadians has little to do with how the citizens of these countries define the “American Dream”. Both Americans and Canadians strive for the same things, but Canadians feel public policy is more help than hindrance. Americans don’t feel government is effective, and therefore don’t trust it.
But Occupiers are sending us a message. Canada’s better standing reflects the outcomes of a generation that went to the schools of the 1960s and 1970s, and entered the labour market of the 1990s. Occupiers came of age later, hitting the labour market of the 2000s. They are signaling the decline of the American Dream in the consciousness of that country’s citizens, but also warning Canadians that more inequality in the here-and-now sets the stage for a more rigid society tomorrow.
Miles Corak is a professor with the Graduate School of Public and International Affairs at the University of Ottawa, where he teaches economics in a way relevant for public policy. His research and views on evidence-based public policy are regularly posted at www.milescorak.com.