Absolute versus relative mobility: A Primer

Posted by: Michael Mandel on May 16

I’m coming back to the same point because it’s an important one: Absolute mobility matters more than relative mobility.

*Absolute mobility means that living standards are increasing in absolute terms: You are better off than your parents, and your children will be better off than you.

*Relative mobility means that if your family is poor, you have a decent chance of moving up the relative income ladder. That is, the rank order of people in society is malleable.

The two have very little to do with each. You can have an economy with a lot of absolute mobility, and little relative mobility. Or an economy with a lot of relative mobility, and little absolute mobility.

Most writers blur the distinction. Brad DeLong does a better job of laying out the issues:


Personally, I vote with Brad's last thought, and against Krugman and Easterlin. Over the long run, dreaming bigger dreams and posing more complicated problems is the right thing to do.


Reader Comments

Jack Krupansky

May 16, 2005 03:23 PM

I would surmise that there's a categorical difference between what any given family hopes to achieve and what kind of overall wealth distribution is healthiest for the economy.

For example, I suspect that in the late 1990's we had an unstainable bulge of higher-income workers while at the same time we had the beginnings of a much more sustainable surge in lower-middle class workers (which I might call "the rising class"). As the pace of growth peaked with the boom in 2000, a modest slackening of demand had to come at somebody's expense and the sad fact is that energetic younger and lower-income workers are more than happy to fill in for any "loss" of higher-income workers. Some of us are indeed "mobile", but in the reverse direction, even as lower-income groups are enjoying more generous opportunities.

Ongoing business restructuring over the next two or three years (airlines, technology, telecom, cars, etc.) and general corporate "cost-cutting" will probably further shift the overall distribution from upper-middle to "rising class". Both will likely experience a change in mobility, but in opposite directions.

Children of "boom" workers are likely to experience better relative mobility in their own careers even as their parents may simultaneously experience negative relative mobility as a result of corporate "cost-cutting" and even though it is technically illegal for businesses to engage in age discrimination. Children of rising class workers will likely experience better absolute mobility relative to their parents even as the children of boom professionals experience lower absolute mobility than their parents.

It will be rather crazy over the next two decades, in both an absolute and relative sense.

-- Jack Krupansky

Patrick Trombly

August 6, 2006 12:02 AM

Even before you research the question, common sense tells you absolute mobility has risen substantially. Almost all the growth companies have been the producers of luxury goods - the kind of goods that one person doesn't consume more of just because he's rich. Starbucks - do the rich drink more coffee? Polo - do the rich change their clothes several times a day? Toll Brothers - the rich might have more houses but not in affluent bedroom communities surrounding major US cities.

And the raw data clearly show upward mobility in the absolute sense. Not only university economics department studies, Federal Reserve studies, Treasury studies, but private sector studies. All these "new millionaire households" - there are over half a million new ones each year - were by definition previously not millionaires. And before you chime in about housing prices, this is excluding home equity. Seriously, it's about 1/11th of the country, over half of whom were middle class 10 or 20 years ago.

Krugman attempts to mask this by referring to things only relative to the top.

My first problem with Krugman is not his present explanation that he is more concerned with the relative than the absolute but that before he was cornered on the issue his references to the relative were deliberately made in such a way as to make the casual reader, who lacks either or both the time or inclination to seek the raw data, believe that what he was saying was true of the absolute.

My second is that he refers only to the top 1% or 5% - - in terms of the top 10% or 20% relative mobility hasn't changed at all, and is the same as it is in Scandinavia, as Sawhill et al pointed out, while the income "gaps" among the groups are bigger in the US now than in the US before or in Scandinavia now - to wit, pretty high. So, to get from 70th to 20th is as easy here now as it was here then and as it is in a socialist country now, but here now that gap is $45K whereas it was $15K in the US then and is $12K in Scandinavia now. That means that if Bob is in the 70th percentile in the US now, his father Fred was in the 70th percentile in the US a generation ago, and Sven is in the 70th percentile in Scandinavia now, Bob's chances of increasing his income by $45K are the same as Fred's chances of increasing his income by $15K, and are the same as Sven's chances of increasing his income by $12K.

Which would YOU rather be?


September 26, 2008 08:42 AM

can yuo relat the metaphor of an 'irish coffee' to explain the character of south arfica companies inthe post-apartheid context, with reference to absolute and relative mobality. thank yuo for yuor article they are very interesting to read they make me come back for more.





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