I have long asserted that the most relevant predictor of your success as a farmer was if your father (or father-in-law) was a successful farmer. While our profession may be an extreme due to the nature of landowning, it is not alone.
The advantages of a privileged background don’t stop at graduation. Tufts economist Linda Loury suggests that half of all jobs in the U.S. are found through family, friends, or acquaintances. Canadian economists Miles Corak and Patrizio Piraino look at how often men end up working at the same company where their father worked, finding that as many as 40 percent have done that at some point. The proportion rises to 70 percent among the top 1 percent in income distribution. This helps to explain why the relationship between the earnings of parent and child is even higher at the top end than it is across the population at large, according to Corak. One-third of successions between chief executive officers in publicly listed companies in the U.S. involves an incoming CEO related by blood or marriage to the old CEO, the founder, or a large shareholder. That’s bad news for the share price, according to Francisco Perez-Gonzalez of the NBER, but clearly good news for the newly appointed relative. [More]The longer I look at this troubling (to me, anyway) trend the less sure I am if it is correctable (assuming we can agree on what correct looks like). There seems to be a snowball effect that can only be overcome by astonishingly poor choices of the wealthy (NBA stars, for example) or extraordinary rare coincidences of luck and opportunity - usually in a developing economy or entertainment industry.
But wealth inequality feeds income inequality to accelerate the trend. The American economy is already past the peaks we have seen historically.
The debate rages, and rightly so, about possible cures or even the advisability of a cure. I don't see our tax system getting radically more progressive anytime soon. More to the point, I don't the the old reliable equalizer, education, packing the same therapeutic power as before as systemic changes in our workforce lower the value of many degrees, and higher education costs spiral beyond the payback threshold.
The biggest question for me is how our economy will look and work after another decade or so of lop-sided growth?