 The idea of the American dream is that through your own energies, through your talents, you can become all that you can be in American society. You can lift yourself up by your bootstraps. And in some measure, for some people, Jay Gatsby, the protagonist of F. Scott Fitzgerald's 1920s novel, encapsulates that, my reading of the novel, of course, is that in a cruel way, that book shows us not just the promise but the perils of the American dream and how inequality subverts that long-held belief and brings it into question. My name is Miles Korak. I'm what's called a labor economist. I work in the area of the economics of work and pay at the Graduate Center of the City University of New York, here in New York City, where I have the privilege of teaching many PhD students in the economics program, but also a lot of people in the liberal studies program interested in economics. One of the areas of my research has gotten a good deal of attention, particularly since the mid-2010s or so when President Obama made it part of his political agenda, is something that his administration called the Great Gatsby Curve. And the Great Gatsby Curve, it ranks countries in two dimensions. In one dimension, imagine ranking countries from the most equal to the least equal. And you could use any type of statistic associated with inequality. A common one is the so-called genie coefficient. And if you rank countries, at least speaking here, of the relatively rich countries, the members of the OECD, you'd find that countries like Denmark, Norway, Finland are the most equal. And countries like the United Kingdom, Italy, and the United States are the most unequal. And then a bunch of other countries in the middle, Japan, Germany, Canada, Australia, and many other countries, somewhere between those two poles. That we've known for a long time. And Americans have, for the longest time, I think it's fair to say, accepted that their country is relatively more unequal than many other countries. Because with that inequality came a promise of mobility, that people can move up and down the income ladder. And their children will certainly do better than they did. And basically, positions and ranks change. There's a good deal of fluidity in what we call social mobility. And so the Great Gatsby Curve also ranks these countries in another dimension by the degree of social mobility. But now it turns out, probably contrary to the expectations of many, some decades ago, maybe not so much now with the popularity of the curve, it turns out that the most unequal countries are also the least socially mobile countries. And the most equal countries have the most mobility. So your past is your destiny more so in countries like the United States, than in Canada, than in Denmark, or Norway, or Finland. And so the Great Gatsby Curve, which as I drew it, is actually a line, relates these two rankings of countries. The fact that social mobility is lower when income inequality is higher. And this has profound public policy implications if we more clearly understand the causes of that. The Great Gatsby Curve, I think, puts out three challenges for the research agenda that follows from this descriptive result. One is, what kind of inequality matters? Two, what kind of social mobility do we care about? And three, which cross-country comparisons are most judicious, from which we can learn the most for public policy. So that's the Great Gatsby Curve from the literature and from the statistics I've been engaged with. And the late economist Alan Kruger, who was part of the Obama administration, was the first to give it that name, although it existed in the literature for some ten years before that. So I consider the Great Gatsby Curve to be, on the one hand, a framing for public policy discussion, and on the other hand, a framework for pursuing important and relevant research that can better inform public policy. Now, the American Dream is a concept that has a lot of a motive impact in the United States and in other countries. But I would ask people thinking about that concept and trying to relate to the Gatsby Curve. I think the research asks them to be a little bit more precise about what they mean by social mobility, how social mobility relates to an even broader philosophical concept, equality of opportunity, and how equality of opportunity speaks to the American Dream. So the idea of the American Dream is that through your own energies, through your talents, you can become all that you can be in American society. You can lift yourself up by your bootstraps. And in some measure for some people, J. Gatsby, the protagonist of F. Scott Fitzgerald's 1920s novel, encapsulates that, my reading of the novel, of course, is that in a cruel way, that book shows us not just the promise but the perils of the American Dream and how inequality subverts that long-held belief and brings it into question. So metaphorically, yes, the Great Gatsby Curve speaks to that notion of social mobility, but I think if you're a researcher and you're going to pursue informative public policy research, we have to unpack what people think the American Dream means for us economists as theorists, as statisticians. And it seems to mean three things when I read the public policy discussion. One, it means economic growth, the idea that the future will be better than the past, the idea that there is hope for a better tomorrow, if not for me, at least for my children. And so we have to ask ourselves what are the determinants of economic growth and particularly inclusive economic growth. And this gets reflected in the literature in a focus on measures of mobility as absolute mobility, as what fraction of children are doing better than their parents. That's one aspect of the dream and it's certainly a dream that I think reflects the concerns, maybe even the biases, the feelings of parents that they want their children to do better than they did, that they want their children to have a better life economically, a life that's more secure and a life of recognizing their dignity. But I'm not so sure necessarily that it fully captures how the children themselves think. Do they feel better off because they've done better than their parents? It's also comparisons to their peers that matter. And so I think in its weakest sense, absolute mobility is important and it reflects inclusive growth. Only about 50% of American families see their children economically better off than they were. And that holds for other countries. I'm Canadian and there are Canadian data on this and the figures are not that different. But surely it's the weakest test of what the American dream means. It means not just that the economic escalator is moving up, but I think the American dream also means that there's a shuffling around on the stairs of the escalator of which families occupied the bottom stairs in one generation and which end up occupying the bottom stairs on the next generation, even if everyone is better off. And so I think the Great Gatsby Curve also asks us to encapsulate the American dream in terms of relative mobility and the role of inequality in determining positions in ranks. If the American dream has faded in the United States, I think it has a lot to do with the dynamics of income and income inequality at the top of the income distribution and at the bottom of the income distribution. And a growing insecurity for the broad middle. I think if you look at American society for the broad middle, let's say those families that start off above the bottom 10% of the income distribution, but below the top 10%, there's an amazing reshuffling of positions. Almost to the point that family background is not related to childhood outcomes. And the United States shares that with other countries. I spoke earlier about the importance of judicious comparisons, so I've always felt that a Canada-United States comparison is the most judicious. Two countries that share a common conception of what the American dream means. Two countries that have similar labor markets. Two countries in which there's a lot of policy spillovers in learning. And also for Canada, a great deal of mobility in that middle. But mobility breeds insecurity. What a high degree of mobility says is that in spite of doing everything right, a parent doesn't have much control on the outcomes of his or her children. That doesn't matter so much if the distance between the steps on the income ladder are not that great. But it matters a great deal if those steps are wider and wider. And that's what's happened in the United States for the great swath of the middle class, a growing insecurity that inequality breeds in spite of a great deal of mobility. But where the Great Gatsby Curve puts the United States, a country with high inequality and low mobility, is because of what I call cycles of privilege and cycles of poverty. The disproportionate inability of Americans to bust out of the bottom of the income distribution and see their children move up. And so upward mobility, both in a relative and an absolute sense, also matters in this public policy conversation. And the flip side of that is cycles of privilege, where the rich and the well-to-do have strong floors that prevent them from drifting down. And this, in fact, was Jay Gatsby's great undoing that the rich had built fortresses around their status with a growing sense of entitlement. That's true as much in Jay Gatsby's New York of the 1920s, as it is in our New York of the 2020s. And so in the United States, much stronger cycles of privilege, much stronger cycles of poverty are what question the American dream in its deepest sense and raise important public policy concerns. And these are very different. Inequality breeds a sense of entitlement amongst the rich, but also a sense of shame amongst the poor. And so battling low social mobility also involves doing something about inequality of outcomes at the two extremes of the income distribution. So you can say that these intergenerational dynamics reflect the polarization that we see in American society in many ways, that there are floors at the top and ceilings at the bottom. Obviously, everything is statistical here. We're not talking in a deterministic way. But that polarization as it's reflected in intergenerational mobility has something to do with, on the one hand, intermarkets function in the United States, the payoffs to skills to position and to privilege, but also to do with the long historical legacy of race in the United States. And so the big elephant in the room in understanding why the United States occupies the position it does on the Great Gatsby Curve is the treatment of minorities and the historical legacy of black Americans. Social mobility is lowest in the United States in some parts of the South. Also in some parts of the North where public policy did not keep up with the great migration that happened to northern cities and disadvantaged the black communities. Canada, for example, shares so much with the United States when you draw a map that focuses on local measures of intergenerational mobility. In fact, it's hard to discern a national border between the two countries when you look at up to a thousand regions between them. The difference is that the historical groups that have suffered in Canada are mostly indigenous populations in outlying rural areas that make up at most 3% of the population. In the United States, I mean one in seven people have a starting point in life that is disproportionately disadvantaged and Americans are still dealing with that legacy. The other thing that makes the United States different, of course, is just the amazing inequality at the top of the income distribution. And the public policy suggestion that all people have to do is get more education to ramp up their skills and take advantage of this globalized high technology economy works for some but not for others. I think public policy certainly has to address the nature of payoffs in a degree. I mean it's one thing to live in the top 1% in the city of Toronto but a whole other thing to live in the top 1% on the island of Manhattan. And we have to wonder about how that inequality at the top, we as economists, we as social scientists have to wonder how that inequality at the top bleeds into political influence and the choice we make as a policy community. I mean in some sense I believe labor should have preference over capital and that implies that what's due through justice can't be offered through charity and the United States so much of income distribution, of public good is in the hands of private provision while at the same time the tax system is skewed so much towards the benefit of the rich. And so I think the Great Gatsby Curve takes us into these very concrete policy discussions if we do pay attention to what kind of inequality matters for social mobility.