Monday, October 14, 2013

OECD report confirms that inequality does not incentivize upward mobility

Image: OECD member nations (blue). (source)

Defenses of inequality always invoke the same claim: high inequality makes for a strong economy. With (in theory) no ceiling and a very low floor, the rewards for success are extremely high, and the punishment for failure is extreme. This makes Americans hungry for success, and hard working citizens makes for a strong economy. We work harder than the Japanese, put in more hours than the Italians, study harder than the French, and sacrifice more than the Finns because our incentives encourage workers to do so. Nothing motivates like huge rewards for success--and a free fall into abject poverty if you fail. Incentives rule. People respond to incentives, and our incentives align to maximize economic growth. Another way of saying this is that we should value equality of opportunity and inequality of outcomes.
A recent OECD study shakes this logic to its very foundations. Researchers tested a sample of workers in each participating country in literacy, math, and problem solving with information technology. The United States performed abysmally: