Inequality in America (and Britain)

Dr. Alan Krueger, chairman of the President’s Council of Economic Advisers, spoke yesterday at the Center for American Progress about how inequality threatens both the middle class and the economy at large.

The chart below, from his Powerpoint presentation, illustrates how America became the Western World champion of Income Inequality and more surprisingly of lack of intergenerational mobility. The children of the poor stay poor. The American Dream is dead. 

Furthermore, it is not a shock to see that the former colonial power, Britain, now the most American part of Europe, comes a close second to the US.

“The Great Gatsby Curve” - Higher income inequality associated with lower intergenerational mobility

Economist Alan Krueger, Chairman of the Council of Economic Advisers and his boss, a certain Hussein Obama

Note on the graph:

Originally from a paper by Miles Corak,  professor of economics with the Graduate School of Public and International Affairs, University of Ottawa’s, it shows a negative relationship between the Gini coefficient and intergenerational earnings elasticity.

The Gini coefficient is a standard way of measuring inequality. It is an index between 0 and 1, based on the Lorenz curve, which is the proportion of the total income earned by each percent of the population. The larger the number, the less equal the society.

Intergenerational earnings elasticity is the relationship between parents’ earnings and those of their children. In a way, it shows if children can escape their parents’ poverty. According to the 1921 song by Van & Schenck, immortalized in F. Scott Fitzgerald’s "The Great Gatsby", they can’t: “The rich get richer and the poor get children.” 

Therefore the title of the graph!

Cover of  F. Scott Fitzgerald’s "The Great Gatsby"
Inequality in America