Inequality Starts At Home

Part of the reason for inequality is not some evil manipulation of society and the market.  It grows from simple positive feedbacks. People with a better combination of talent, initiative, and persistence, abetted by a supportive home environment, tend to get better educational opportunities.  Better education tends to produce higher income occupations.  Higher income occupations are not only better paying, they last longer because the physical demands of the jobs tend to be lower and the healthcare available is better.  A longer work life, coupled with higher pay, leads to accumulating more wealth.  And – as they say – wealth has its privileges, including investment returns.  After tax returns on capital have been good, and add to wealth.  And the cycle repeats with the children of these people, by providing a home environment and educational framework which nurtures the next generation.  This is no new insight.  Many parents realize this and work so their children will have opportunities that exceed theirs.  Immigrants come to the U.S. to participate in this ‘virtuous cycle’ of benefits.  This dynamic is documented in many places, most recently in the Bain Consulting study which we’ll be covering shortly, and which overlaps our review of the factors creating inequality in our society.  Again, this is only PART of the cause of inequality, but it is notable, especially in light of the other factors which exacerbate the value of the “organic inequality” derived from these advantages. 

Better home environment leads to increasing inequality, across generationsAs always, we appreciate your contribution to this analysis and welcome suggestions to improve it.