Income Inequality Impairs The American Dream Of Upward Mobility

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Illustration by Thomas James

Wednesday, October 22, 2014

Income inequality has been on the rise for decades. In the last 30 years, the wages of the top 1% have grown by 154%, while the bottom 90% has seen growth of only 17%. As the rungs of the economic ladder move further and further apart, conventional wisdom says that it will become much more difficult to climb them. Opportunities for upward mobility—the American dream—will disappear as the deck becomes stacked against the middle class and the poor. But others see inequality as a positive, a sign of a dynamic and robust economy that, in the end, helps everyone. And contrary to public opinion, mobility has remained stable over the past few decades. If the American dream is dying, is it the result of income inequality? Or is disparity in income a red herring where more complex issues are at play?

  • Gould 90px

    For

    Elise Gould

    Senior Economist and Dir. of Health Policy Research, Economic Policy Institute

  • Hanauer90px

    For

    Nick Hanauer

    Entrepreneur & Venture Capitalist

  • Conard90px

    Against

    Edward Conard

    Visiting Scholar, AEI & Former Partner, Bain Capital

  • Winship90px

    Against

    Scott Winship

    Fellow, Manhattan Institute


    • Moderator Image

      MODERATOR

      John Donvan

      Author & Correspondent for ABC News

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Gould 90px

For The Motion

Elise Gould

Senior Economist and Dir. of Health Policy Research, Economic Policy Institute

Elise Gould’s research areas include wages, poverty, inequality, economic mobility and health care. She is a co-author of The State of Working America, 12th Edition. Gould also co-authored a book on health insurance coverage in retirement; published in venues such as The Chronicle of Higher Education, Challenge Magazine, and Tax Notes; and has written for academic journals including Health Economics, Health Affairs, and Journal of Aging and Social Policy. Gould is quoted regularly by NPR, Washington Post, New York Times, Bloomberg, and Wall Street Journal, and her opinions have appeared on the op-ed pages of USA Today and Detroit News. She has testified before the U.S. House Committee on Ways and Means, Maryland Senate Finance and House Economic Matters committees, the New York City Council, and the District of Columbia Council. Gould holds a Masters of Public Affairs from University of Texas at Austin and a PhD in economics from the University of Wisconsin at Madison.

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Hanauer90px

For The Motion

Nick Hanauer

Entrepreneur & Venture Capitalist

Nick Hanauer is one of the most successful entrepreneurs, investors, and managers in the Northwest, with over 30 years of experience across a broad range of industries. He has managed, founded, or financed over 30 companies, creating aggregate market value of tens of billions of dollars, including Amazon.com, Aquantive Inc., Insitu group, Market Leader, and, most recently, the venture capital firm Second Avenue Partners. He is actively involved in a variety of civic and philanthropic activities and has served a broad range of civic organizations, including the University of Washington Foundation and the Seattle Alliance for Education. He currently serves as a director for the Democracy Alliance and as a board advisor to the policy journal Democracy. Hanauer has published two national bestsellers, The True Patriot (2007) and The Gardens of Democracy (2010), with co-author Eric Liu. In 2012, his TED talk on income inequality went viral after TED, citing it as overtly partisan, declined to publish it on their website.

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Against The Motion

Edward Conard

Visiting Scholar, AEI & Former Partner, Bain Capital

Edward “Ed” Conard is a visiting scholar at the American Enterprise Institute and the author of the New York Times bestseller Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong (2012). Since the publication of his book, he has made over 100 television appearances and debated major economists, politicians, and journalists, including Paul Krugman, Joseph Stiglitz, Robert Reich, Austan Goolsbee, Barney Frank, Fareed Zakaria, and Jon Stewart. In 2012, he was one of Google’s ten most searched authors. Prior to writing his book, Conard was a senior managing director at Bain Capital, where he headed the New York office and was responsible for the acquisitions of large industrial companies. He previously worked for Wasserstein Perella, an investment bank that specialized in mergers and acquisitions, and Bain & Company, a management consulting firm, where he headed the firm’s industrial practice. Conard recently joined the Intelligence Squared U.S. board of trustees. His views in this debate are his own.

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Against The Motion

Scott Winship

Fellow, Manhattan Institute

Scott Winship is the Walter B. Wriston Fellow at the Manhattan Institute. Previously a fellow at the Brookings Institution, his areas of expertise include living standards and economic mobility, inequality, and insecurity. Earlier in his career, Winship was research manager of the Economic Mobility Project of The Pew Charitable Trusts and a senior policy advisor at Third Way. His research has been published in National Affairs, National Review, The Wilson Quarterly, Breakthrough Journal, and Real Clear Markets, among other outlets.

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Declared Winner: Against The Motion

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Voting Breakdown:
 

54% voted the same way in BOTH pre- and post-debate votes (40% voted FOR twice, 10% voted AGAINST twice, 4% voted UNDECIDED twice). 46% changed their minds (15% voted FOR then changed to AGAINST, 5% voted FOR then changed to UNDECIDED, 2% voted AGAINST then changed to FOR,0% voted AGAINST then changed to UNDECIDED, 11% voted UNDECIDED then changed to FOR, 11% voted UNDECIDED then changed to AGAINST) | Breakdown Graphic

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    45 comments

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    • Comment Link sherry cat Sunday, 03 May 2015 09:40 posted by sherry cat

      I think the debate left out the tidal wave of influence that the super wealthy has on advancing their corporate/economic/political interests on our society. I think that the priorities of the super wealthy don't usually include dwelling on the well being of the low income or poor among us and I think that this inevitably leads to income inequality and loss of opportunity for many Americans. I would recommend Robert Reich's film, Inequality for All.

    • Comment Link David Monday, 27 April 2015 00:02 posted by David

      Sociological data clearly provides an answer.

      "... Middle-class parents who stress the values of self-control, curiosity, and consideration are cultivating capacities for self-direction...

      while Working class parents who focus on obedience, neatness, and good manners are instilling behavioral conformity."

      -Melvin Kohn and Dennis Gilbert: The American Class Structure In An Age Of Growing Inequality

      I'm for the motion. We are producing cogs not innovators. Perhaps those for the motion didn't think to look at psychological data.

      If your against the motion I'd ask you to reconsider your probably not going to be a king.

    • Comment Link Susan Carlsen Tuesday, 06 January 2015 16:34 posted by Susan Carlsen

      I was totally disheartened by the outcome of the debate since so much emphasis was placed on social status and moving up the career ladder. One of the commentators said that look at Japan who didn't have the type of innovations that the US has, and all I can say is and nobody called him on it? Before Japan took on the US model they were number one in tech innovation, their cars were better, their electronics were second to none.

      If I really believed it, I would be totally disheartened, but since then I've talked to others who agree that most workers don't want the stress of chasing the carrot, they just want to do their job and go home and be with their families. They want food on the table, shelter over their heads, decent clothes and good health. They want their kids to have more opportunities than they had, which could mean anything. Social status doesn't even enter into this. Those people who think that maintaining the carrot provides incentive to innovate and be progressive, are the same people who say that our current income disparity isn't a bad thing. Except for all the people who do their work for them, maybe that would be true. But all the people who do the actual work would disagree.

    • Comment Link Mike Sunday, 04 January 2015 20:52 posted by Mike

      When I was in my career development phase working for a Fortune 5 Corporation, my wages were based on a National wage. I moved to an area that had a 30% higher cost of living. I did that as I thought I could survive 3 years, well, a recession hit and my 3 years turned into 7. The impact of the low income nearly wrecked our family. Working long hours took me away from my children and I never recovered the missing relationship.
      With the Globalization(Corporations having tax incentives to shut down manufacturing in the USA) people are not able to find jobs that pay well. Places like New York, Washington DC, and other large cities are doing OK, especially New York with the Financial schemes of the Stock Market, outrageous compared to the people who actually build things or create something that is not moving money around.
      We have multiple members of the families working two and three jobs, usually in excess of 60 hours a week. Very low wages, $8 an hour, no benefits or affordable health care and the children are not benefiting from parental presence.
      Look beyond New York in small town America, you will find poverty and people working hard but getting no where.
      They all cannot move to New York.
      Corporations via ALEC has pushed Right to Work for less money are killing the middle class. We are moving away from Democracy to a Plutocracy run by Oligarchs like the Koch's.
      We better fix it before some of the 300 million guns the poor have become instruments to implement more equality.

    • Comment Link HDismuke Friday, 26 December 2014 21:50 posted by HDismuke

      I'm very suspicious of this poll and this site. And I'm surprised I found it on NPR. If it's bought off then who obviously can do that? It's all great that the 'well to do' are in good shape and this trend may be more for them but there are an awful lot of people in debt in this country. Much of it done reluctantly by they're own hands controlled by the system. You can include the debt of poor education as well into that mix. Another product of a poor community. But when it comes down to the nitty gritty, people are not stupid. We ARE the one's who are sitting on the pulse.

    • Comment Link Marlea Friday, 26 December 2014 14:23 posted by Marlea

      You are not talking about values!!! But statistics. Every business now hires lawyers and accountants to squeeze every penny out of every worker. That has changed.

    • Comment Link Webster Tuesday, 16 December 2014 13:01 posted by Webster

      It's a shame that the "for" team didn't use the Saez data (which the "against" team cited repeatedly) more constructively and strategically against the "against" team. I am shocked at the results.

    • Comment Link Andrew Saturday, 13 December 2014 17:58 posted by Andrew

      I find it really shameful that the parroting of factually false CEO to worker incomes of 300 or 500 to 1 continually go unchallenged.

      These numbers come from cherry picking the very highest paid CEO's at the very largest companies in the world, and comparing them not to workers at those companies, but to all workers. It is simply false that these ratios exist generally.

      Salary surveys at salary dot com put the median CEO salary at $740K, and all income with bonuses at about $1.1 million. That is less that 80 times the absolute minimum wage, and right around 40 times the median income.

      It's just a lie, and it needs to be called out instead of being given a pass.

    • Comment Link Aune Saturday, 13 December 2014 17:43 posted by Aune

      Why isn't student debt taken into any consideration?

    • Comment Link Jen Thursday, 11 December 2014 00:56 posted by Jen

      Maybe if income inequality doesn't CAUSE decreased mobility, could it be a matter of CORRELATION instead of causation with both inequality and decreased mobility being caused by something else? Seems that even if the data doesn't point to causation, the two still go hand in hand. Maybe the wrong question was asked.

    • Comment Link Joseph Hinton Sunday, 07 December 2014 21:47 posted by Joseph Hinton

      Never have I been more disappointed in a vote result. It really makes me think either Bain Capital bought off the audience or the score keeper. Or, my fellow Americans are even more stupid than I thought.

    • Comment Link Jessie Henshaw Saturday, 29 November 2014 08:03 posted by Jessie Henshaw

      THINK about the question you're asking,... really!

      "Income inequality" actually **IS** "upward mobility". The one is the pursuit of the other.

      Next time ask: "Is upward mobility tending to weaken society"

    • Comment Link Jessie Henshaw Saturday, 29 November 2014 07:29 posted by Jessie Henshaw

      The odd thing is the obvious answer, that income inequality is the main pursuit of everyone, and the people who are good at it use "compounding". That's the whole answer. When your income grows over time in proportion to your income (i.e. multiplies in relation to itself) it naturally creates exploding inequity. That's the ideal of everyone who cares about accumulating wealth, most everyone. It's the **procedure** that causes the unequal advantage. It's not a politics, a policy a privilege or a productivity.... It's a *procedure*.

      Where it becomes painful for a society then becomes the real question, as given the general encouragement of compounding... creating ever growing inequality is the natural way our economy works.

      Where it becomes painful is of course when the economy as a whole stops being able to grow as before. It's that slowing of the whole system's effort to grow that leaves the vast majority witn non-growing or shrinking incomes, and on balance causes the interests of society to be are ever more dominated by the super-rich.

      ***Think scientifically*** http://synapse9.com/signals/2014/11/08/simple-reality-the-cause-is-environmental-drag/

    • Comment Link Lindsay Wednesday, 19 November 2014 11:31 posted by Lindsay

      I have listened to almost every debate and highly enjoy your program. IQ2 my favourite podcast, hands down. However I have to say that I was very disappointed in this debate that "the American dream" was not clearly defined from the outset and that the panelists/debaters veered off into murky territory, grasping at straws and adding unrelated rhetoric that had nothing to do with defending their stance "for" or "against" whether or not "income inequality impairs the American dream of upward mobility". Maybe the panelists had difficulty because the proposition was poorly written to begin with-- the obvious reply is "no", nothing can impair anyone's "dream" since it is a dream after all, no matter how it is defined. To me, this proposition is like asking, "So as a poor person, do you begrudge the wealthier-than-you and blame them that your dreams never panned out?"

      One other thing: If we define "the American dream" being defined as "the ideal that every US citizen should have an equal opportunity to achieve success and prosperity through hard work, determination, and initiative", all one needs to do is look over sees to understand that 'prosperity and 'success' have nothing to do with money. As an ex-pat living in France, for me it would be proposterous to ask a French man or woman if they had hopes of a "French dream".

      I hope the definition of 'success' and 'prosperity' will be redefined in our country (for starters... how well each of us raises our children, how each of us takes care of our ageing family, how well we continue to grow our economy in smart ways). Of course I'm not implying that the French do any better, but I look forward to the day when we as Americans refocus our obsession with making a handsome pay check and replace it with goals that would probably make us feel much happier and fulfilled as individuals and as a society.

    • Comment Link Jason Tuesday, 18 November 2014 10:25 posted by Jason

      The question was bad because both sides acknowledged that at the present moment statistics can not prove that income inequality has a negative or positive affect on economic mobility.

      A better question would have been, Can the 100 fold increase to CEO salaries be used in a way that is more beneficial to our society as a whole? Or simply we could ask, does anyone need more than, let us say, 5 billion dollars? If resources were collected from the rich, they should be dedicated to improve education of our people, which is not a hand out because you still have to work for you grades.

    • Comment Link James Monday, 17 November 2014 12:58 posted by James

      What I found lacking was a discussion about consumption, and about barriers to mobility. I do not have a problem with 1% receiving most of the income, if it is all reinvested, but it is not, it is consumed and consumed in a manner so as to impede the American Dream. The increasing conspicuous consumption of the wealthy is a major part of the problem in that marginal individuals can by simply being part of the correct (wealthy) be successful, not on the basis of any great new innovation, but simply because they have access to Capital. And also, the creation of artificial barriers to the American Dream as it relates to income inequality was not mentioned. Historically College was not a requirement for many good jobs, ranging from Lawyer to President. The artificial barriers to employment which require ever increasing levels of education to gain entry into humble fields, such a Library Science, Education, Psychology & Business are just a few examples of Professions which not too long ago required a BA, and without any significant increase in actual duties, or educational needs have become rather expensive fields to get into, with relatively low pay, and thus have become the realm of the highly dedicated impoverished (massive student loans) and the wealthy (parents paying the cost), with a few bright scholarship students thrown in.

    • Comment Link Cobra Thursday, 13 November 2014 23:47 posted by Cobra

      This is a complicated topic. I think it's worth noting that California and Texas are pursuing vastly different strategies to improve mobility. So far California has been able to grow it's poverty rate to 3rd world levels... 24% once you calculate cost of living. Texas has the same huge wave of Latino immigrants, yet has been able to improve the poverty rate down to 16%.

      I also think that a lot of what Nick was talking about has nothing to do with inequality and everything to do with a lack of competition. Our economy just has WAY too many industries that are virtually owned by a handful of super large corporations.

      Think about it.... if the average CEO in 1950 made 8 times more than the average worker, but today it's 32 times... wouldn't the most likely cause be the fact that the company itself is X times larger? I mean say General Electric has 50,000 employees in 1960... yet today they have 360,000. Doesn't that have an effect?

      Also... nobody mentioned that over half the people and two thirds of the children in poverty are single mothers... which also may explain their lack of resources, emotional stability, and educational outcomes.

    • Comment Link Jesse Wednesday, 12 November 2014 14:51 posted by Jesse

      Germany has the same level of income inequality but wages at 20% lower than ours? Well Germany also has a halfway decent healthcare system, AMAZING public transportation infrastructure and free higher education. They are also not engaging in neoliberal, imperialism, destroying developing economies and the lives of farmers and indigenous people abroad. "Real American inequality" should take the lives of these people and the lack of public services into account.

      Japan is not seeing the same economic growth or employment rate gains as the US? They have a shrinking population and their employment rate is already maxed out. They can't be any more employed. This was a red herring.

      Finally, why didn't we talk about downward mobility? There have been record level bankruptcies (20% in 2008) and a historic level of private debts. This debate was not arbitrated in a way that gave the for side a chance to properly refute the bogus claims made by the against side.

    • Comment Link Kevin Friday, 07 November 2014 12:08 posted by Kevin

      The 'for' side really let the 'against' side take control of the debate. Comment by Vaid Theaga put it really well. There is a trade-off between growth and improving life standards for mid to low income people. Other developed nations wisely opted to make that trade-off. This should have been major argument and was totally avoided. Also missing in the debate was politics. IQ2US had a recent debate on whether unlimited political spending gives you an unfair influence in the political system. This should have been a major point in this debate. The wealthy can rewrite the rules how they see fit. Even if the general population wants to move towards trading off growth for better standards of living for the masses, the wealthy will not allow it. Conrad wants to talk about how our economy shouldn't be artificially forced in any direction. The wealthy have been shaping our economic environment like a bonsai tree. I think Hanauer sees this and I applaud him, but it was on him to bring it up in this debate.

    • Comment Link JD Thursday, 30 October 2014 08:01 posted by JD

      I had an ugly idea after watching this.
      It is a brutal war and an arms race, but it pushes mankind further
      instead staying stagnant. Consider the huge technological progress
      during WWII: computers, rockets, radars, nukes. Millions of people
      giving their extreme best and beyond that. What if the current "status
      drive" and inequality are pushing Americans to a similar level of
      risk-taking and productivity? Unlike in the more leisurely EU and Asia?

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