Monday, November 28, 2016

Monday Afternoon Links

Miscellaneous material to start your week.

- Miles Corak asks how we should see the growing concentration of income at the top of the spectrum, and concludes that we should be concerned mostly with the breakdown between personal merit and success among the extremely privileged:
Connections matter. And for the top earners this might even be nepotism. This is not a bad thing if parents pass on real skills to their children, skills that might be specific to particular occupations, industries, or even firms. If this is the case, then it makes economic sense to follow in your father’s footsteps.
...But not all top earners got to where they are because of this sort of investment. In fact, sons of top-earning fathers who do not work at the same employer as their fathers are much more likely to fall out of the top than those who do.

Bad nepotism promotes people above their abilities by virtue of connections, and it erodes rather than enhances economic productivity. Richard Reeves of the Brookings Institution encapsulates this intuition when he speaks of a “glass floor” supporting untalented rich kids, a floor that at the same time limits the degree of upward mobility for others.

There is, however, an even larger cost. Social mobility is about a lot more than just using job contacts to make it into the top 1 percent. It is also about making investments in the health, education, and opportunities of all children and supporting families in a way that complements their efforts to promote the well-being of their kids. If the rich leverage economic power to exercise political power, they can also skew broader public policy choices—from the tax system to the education system, and other sources of human capital investment—in a way that limits possibilities for the majority.

Social mobility is turned into a race, a race through a course with many bottlenecks that the relatively advantaged are best at manoeuvring. Besides, all of this discussion refers simply to the correlation of earnings across generations, which is only a partial measure of mobility. The inheritance of material wealth, not just earnings advantage, should also be part of the way we measure and think about social mobility. Much higher incomes at the top over an extended period translate to a higher stock of wealth, and this may advantage the next generation in a way that is not tied to their earnings capacity.

All of this may start eroding the belief that labour markets are fair and that anyone can aspire to the top. It is not envy that is at the root of a connection between the well-being of the less rich and the rich, but rather a concern over fairness as equality of opportunity. If the rich cannot leverage economic power to exercise political power, then it is quite possible for the majority to live with a richer top 1 percent and be less concerned about how this minority will influence their welfare and the prospects of their children.
- Meanwhile, Meredith MacLeod reports on Credit Suisse's research showing that Canada is set to see a sharp increase in the number of millionaires over the next few years - even as Benjamin Tal notes that Canada's economy is shifting toward both part-time and lower-paying jobs. And Katie Allen rightly argues that governments which focus unduly on infrastructure as the sole basis for economic development will only exacerbate the problem by failing to account for the need for fair wages and more secure livelihoods.

- Laurie Monsebraaten reports on new research estimating the cost of poverty in Toronto alone at up to $5.5 billion per year. And the International Labour Organization assesses the cost of eliminating poverty in each country - with Canada needing to redirect only $249 million per year to lift all Canadians out of extreme and moderate poverty.

- Finally, Bruce Mutsvairo highlights the dangers of journalistic "balance" when it serves primarily to create false equivalencies and legitimize damaging policies. And George Monbiot lists the crises humanity has stumbled into, while highlighting the need for massive collective action to reverse any of them.

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