It may seem to be getting harder, but in reality it's not. Rank based measures of mobility are stable. Since income inequality is up, absolute mobility has also increased.
"Based on all of these measures, we find that children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s.
"Although these rank-based measures of mobility have remained stable, income inequality increased over time in our sample, consistent with prior work. Hence, the consequences of the "birth lottery"---the parents to whom a child is born---are larger today than in the past. A useful visual analogy is to envision the income distribution as a ladder, with each percentile representing a different rung. The rungs of the ladder have grown further apart (inequality has increased), but children’s chances of climbing from lower to higher rungs have not changed (rank-based mobility has remained stable).
...
"Together, these two facts can be used to construct various measures of mobility. For example, if one defines mobility based on relative positions in the income distribution---e.g., a child’s prospects of rising from the bottom to the top quintile---then intergenerational mobility has remained unchanged in recent decades. If instead one defines mobility based on the probability that a child from a low-income family (e.g., the bottom 20 percent) reaches a fixed upper-income threshold (e.g., $100,000), then mobility has increased because of the increase in inequality. However, the increase in inequality has also magnified the difference in expected incomes between children born to low- (e.g., bottom-quintile) versus high- (top-quintile) income families. In this sense, mobility has fallen because a child’s income depends more heavily on her parents’ position in the income distribution today than in the past."
http://inequality.stanford.edu/sites/default/files/Pathways-...
Since the appropriate definition of inter-generational mobility depends upon one’s normative objective, we characterize the copula and marginal distributions separately in this paper."
It would appear we have different normative objectives.
If that is too theoretic, consider the analogy of a lottery where one group of children win automatically and an other group has say a 10% chance of winning during their life. Increasing the prize (i.e. a rise in inequity among classes) serves only to worsens the situation not only for the median and average members but the vast bulk of the lower class since those who don't rise (the vast majority) are now even worse off relatively.
Or indeed by your logic simply raising the salary of a CEO by a massive amount also raises the "absolute mobility" of all other employees
So unless mobility also raises by at least a corresponding amount, any worsening of inequality at birth will only worsen the situation by every meaningful standard. And even then it is probably a bad idea.
Yes. If I had a 1% chance of being the CEO and having my income go from $100k to $1M, my expected payoff was $900k x 1% = $9k. If my income stays at $100k but the CEO income goes to $10M, and my odds of being the CEO stay at 1%, my expected payoff is $9.9M x 1% = 99k.
My situation has not been worsened and has a possibility of being improved.
You seem to think it somehow makes me worse off if my CEO makes more money. Can you explain? Note that I'm not a person prone to envy.
Although in the CEO's case, often no further harm is done, if half of a population has a massive increase in wealth while the other half does not then then poorer half must compete for limited resources with a group that will not only drive prices up but can now purchase assets as a form of rent seeking. So in fact, greater inequality acts as currency devaluation for the disadvantaged group.
The CEO example was not meant to cause unjustified envy but to show that according to your logic, instead of ever giving employees a raise you could simply give all raises to the CEO and tell employees that by cost benefit analysis the effect is the same, that they are better off.
To put it concretely, from now on, every time you ask for a raise just ask that your boss get that extra compensation instead. I think you will find the effect is not remotely the same.
Or from now on, ask for all of your pay check that exceeds poverty line for chances at a completely fair trillion dollar lottery.
Simple cost benefit multiplication is being erroneously applied in these cases (and often is)
You are not discussing an increase in wealth at all. You are discussing a situation of declining or fixed wealth and monetary inflation. They aren't the same thing.
I agree that we should try to avoid declines in wealth. Luckily wealth has only increased in the US and globally, for folks at the bottom and the top.
Everything I said is unchanged if you replace income with utility(income).
There is a reason people are willing to buy $1 lottery tickets but not $1000 tickets. (hint: a certainty of misery or high chance of death is not compensated by a remote chance of enormous wealth of ever decreasing marginal utility)
You are simply misunderstanding the use cost benefit, I assume because it clashes with some ideological point.
But if you want to buy a one in a million chance for a trillion dollars, I have a bitcoin address you could send a million bucks too.
First of all, it's a textbook exercise in topology to show that any rational decision process must have a utility function (at least for a countably infinite set of choices).
Let me repeat the statement for utility functions. Suppose I have a 1% chance of being CEO and increasing my utility to U(CEO pay) - U(my pay). Suppose this increases to U(10x CEO pay) - U(my pay).
It's simple arithmetic that 0.01 x U(10X CEO pay) + 0.99 x U(my pay) > 0.01 x U(CEO pay) + 0.99 x U(my pay).
Rearranging the arithmetic, this is merely the statement that U(10X CEO pay) > U(CEO pay) - i.e. I'll be happier as a CEO with 10M than with 1M. Do you disagree with this statement?
In the unlikely event you are actually interested in the correct formulation, you start to find the answer here [1].
[1] https://en.wikipedia.org/wiki/Marginal_utility#Quantified_ma...