Inequality and Social Mobility

It should be obvious to anyone with a brain that higher inequality leads to less social mobility. Apparently a study was needed. The graph below represents the correlation between income inequality and social mobility between generations and has been somewhat sarcastically labeled the "Great Gatsby curve".

High school dropout rates increase with income inequality | VOX, CEPR’s Policy Portal

Compared to other developed countries, the US ranks high on income inequality and low on social mobility. This could be particularly concerning if such a trend is self-perpetuating. In this column, the authors argue that there is a causal relationship between income inequality and high school dropout rates among disadvantaged youth. In particular, moving from a low-inequality to a high-inequality state increases the likelihood that a male student from a low socioeconomic status drops out of high school by 4.1 percentage points. The lack of opportunity for disadvantaged students, therefore, may be self-perpetuating. 

Figure 1. The Great Gatsby curve in the US