Socio economic mobility in the United States

Popular belief

The American Dream Report, a study of the Economic Mobility Project, found that Americans surveyed were more likely than citizens of other countries to agree with statements like

and less likely to agree with statements like

In the US only 32% of respondents agreed with the statement that forces beyond their personal control determine their success. In Europe, in contrast, majorities of respondents agreed with this "fatalistic" view in every country but three (Britain, the Czech Republic and Slovakia). The Brookings Institution found Americans surveyed had the highest belief in meritocracy—69% agreed with the statement "people are rewarded for intelligence and skill"—among 27 nations surveyed.

Another report found such beliefs to have gotten stronger over the last few decades.

Current state

The correlation between parents' income and their children's income in the United States is estimated between .4 and .6. If adult income had only a chance relationship to childhood circumstances, approximately 20% of children who started in the bottom quintile would remain there as adults. According to a 2012 Pew Economic Mobility Project study 43% of children born into the bottom quintile remain in that bottom quintile as adults. Similarly, 40% of children raised in the top quintile will remain there as adults. Looking at larger moves, only 4% of those raised in the bottom quintile moved up to the top quintile as adults. Around twice as many (8%) children born into the top quintile fell to the bottom. 37% of children born into the top quintile will fall below the middle. These findings have led researchers to conclude that "opportunity structures create and determine future generations' chances for success. Hence, our lot in life is at least partially determined by where we grow up, and this is partially determined by where our parents grew up, and so on."

Economic mobility may be affected by factors such as geographic location, education, genetics, culture, race, sex, and interactions among these, as well as family wealth.

Famous historical cases

Famous instances of great economic and social mobility include Benjamin Franklin and Henry Ford, Additional popular examples of upward social mobility between generations in America include Abraham Lincoln and Bill Clinton, who were born into working-class families yet achieved high political office in adult life. Andrew Carnegie, arrived in the U.S. as a poor immigrant and rose to become a steel tycoon, perhaps the wealthiest man in America, and its leading philanthropist.

Comparisons with other countries

Several large studies of mobility in developed countries in recent years have found the US among the lowest in mobility. One study (“Do Poor Children Become Poor Adults?") found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation. The four countries with the lowest "intergenerational income elasticity", i.e. the highest social mobility, were Denmark, Norway, Finland, and Canada with less than 20% of advantages of having a high income parent passed on to their children. (see graph) Nobel Prize-winning economist Joseph Stiglitz contends that "Scandinavian countries changed their education systems, social policies and legal frameworks to create societies where there is a higher degree of mobility. That made their countries more into the land of opportunity that America once was."

According to journalist Jason DeParle

At least five large studies in recent years have found the United States to be less mobile than comparable nations. A project led by Markus Jantti, an economist at a Swedish university, found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. That shows a level of persistent disadvantage much higher than in Denmark (25 percent) and Britain (30 percent)—a country famous for its class constraints. Meanwhile, just 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes. Despite frequent references to the United States as a classless society, about 62 percent of Americans (male and female) raised in the top fifth of incomes stay in the top two-fifths, according to research by the Economic Mobility Project of the Pew Charitable Trusts. Similarly, 65 percent born in the bottom fifth stay in the bottom two-fifths.

In 2012, a graph plotting the relationship between income inequality and intergenerational social mobility in the United States and twelve other developed countries—dubbed "The Great Gatsby Curve"—showed "a clear negative relationship" between inequality and social mobility. Countries with low levels of inequality such as Denmark, Norway and Finland had some of the greatest mobility, while the two countries with the high level of inequality—Chile and Brazil—had some of the lowest mobility. The curve was introduced in a speech by chairman of the Council of Economic Advisers Alan Krueger, and the President’s Economic Report to Congress.

Decline

Some studies have found that not only is the degree of social mobility in the US not large but it has either remained unchanged or decreased since the 1970s. Other research shows that economic mobility in the U.S. increased from 1950 to 1980 but has declined sharply since 1980.

The centrist Brookings Institution said in March 2013 that income inequality was increasing and becoming permanent, sharply reducing social mobility.

Absolute mobility

Even though mobility has gone down, most Americans still have more income than their parents. A 2007 study "Economic Mobility Project: Across Generations", using Panel Study of Income Dynamics, found 67% of Americans who were children in 1968 had higher levels of real family income in 1995–2002 than their parents had in 1967–1971 (although most of this growth in total family income can be attributed to the increasing number of women who work since male earnings have stayed relatively stable throughout this time) As to whether this figure is higher or lower than other countries is difficult to say as this type of measure has not been done for other countries.

Intragenerational mobility

Another form of mobility—"intra-generational"—is the change in class and/or income experienced by individuals during their lifetime. Intra-generational mobility renders the meaning of "short-term" inequality ambiguous, since high intra-generational mobility suggests that those who are currently less well-off (for instance the young) will move up the class or income scale later in life.

How strong Intra-generational mobility is in the US is disputed. Supporting relatively high levels of intragenerational mobility, Thomas A. Garrett reported on a US Treasury study of income mobility from 1996 to 2005. This found "There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period"; 80 percent of taxpayers had incomes in quintiles as high or higher in 2005 than they did in 1996, and 45 percent of taxpayers not in the highest income quintile moved up at least one quintile. Fewer than half (between 40–43%) "of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of the individuals in the top 1/100th percent in 1996 remained in the top 1/100th percent in 2005." The study reassured Americans "the opportunity for upward mobility" in America despite their concern about the "long-term trend of increasing income inequality in the U.S. economy" After-tax income of the top 1% earners has grown by 176% percent from 1979 to 2007 while it grew only 9% for the lowest 20%.

However others describe the data as reflecting less mobility. A 2007 inequality and mobility study found the pattern of annual and long-term earnings inequality "very close", and the population at top income levels in America "very stable" and had "not mitigated the dramatic increase in annual earnings concentration since the 1970s." A 2011 CBO study on "Trends in the Distribution of Household Income Between 1979 and 2007" also found multi-year household income distribution in America "only modestly" more equal than annual income.

Given the fairly substantial movement of households across income groups over time, it might seem that income measured over a number of years should be significantly more equally distributed than income measured over one year. However, much of the movement of households involves changes in income that are large enough to push households into different income groups but not large enough to greatly affect the overall distribution of income. Multi-year income measures also show the same pattern of increasing inequality over time as is observed in annual measures.

In other words, "many people who have incomes greater than $1 million one year fall out of the category the next year—but that’s typically because their income fell from, say, 1.05 million to 0.95 million, not because they went back to being middle class."

Economist Paul Krugman complains that conservatives have resorted to "extraordinary series of attempts at statistical distortion" in claiming high levels of mobility.

Studies by the Urban Institute and the US Treasury have both found that about half of the families who start in either the top or the bottom quintile of the income distribution are still there after a decade, and that only 3 to 6 percent rise from bottom to top or fall from top to bottom.

While in any given year, some of the people with low incomes will be "workers on temporary layoff, small businessmen taking writeoffs, farmers hit by bad weather"—the rise in their income in succeeding years is not the same 'mobility' as poor people rising to middle class or middle income rising to wealth. It's the mobility of "the guy who works in the college bookstore and has a real job by his early thirties."

Causes and issues

Explanations for the relatively low level of social mobility in the US include the better access of affluent children to superior schools and preparation for schools so important in an economy where pay is tilted toward educated workers; high levels of immigration of unskilled laborers and low rate of unionization, which leads to lower wages among the least skilled; public health problems, like obesity and diabetes, which can limit education and employment; the sheer size of the income gap between the rich which makes it harder to climb the proverbial income ladder when the rungs are farther apart; poverty, since those with low income have significantly lower rates of mobility than middle and higher income individuals. The factors which affect social mobility vary across the United States as does social mobility which in favored areas is much higher than in less favored areas.

Education

Multiple reports have found that education promotes economic mobility. The report “Pursuing the American Dream: Economic Mobility Across Generations” found that a four-year college degree promotes upward mobility from the bottom and prevents downward mobility from the middle and top. For instance, having a four-year college degree makes someone born into the bottom quintile of income three times more likely to climb all the way to top as an adult.

Wages and earnings correlate with education. A 2009 survey of young adults who worked full-time throughout a full year, found the median income of whose without a high school diploma ($21,000) was below the poverty level for a family of four ($22,050) and less than half of what whose with a bachelor's degree earned ($45,000).

The difference has worsened since 1979 when the average college graduate made 38% more than the average high school graduate. By 2011 college graduates averaged made 75% more income. "Mobility" to the "class" of college graduates has declined. Those born with parents who graduated from college have far better odds of graduating from college than those born to high school graduates.

Some scholars (such as Isabel Sawhill) have complained about the effect of education on mobility

“At virtually every level, education in America tends to perpetuate rather than compensate for existing inequalities. The reasons are threefold. First, the K through 12 education system is simply not very strong and thus is not an effective way to break the link between parental background and a child’s eventual success. … Second, because K–12 education is financed largely at the state and local level, resources devoted to education are closely linked with where people live and with the property wealth of their neighbors. For this and other reasons, poor children tend to go to poor schools and more advantaged children to good schools. … Finally, access both to a quality preschool experience and to higher education continues to depend quite directly on family resources.”

Others (Robert M. Hauser) have defended educational attainment as also freeing "individuals from the constraints of their social origins."

Poverty

Comparing the US with one high-mobility state (Denmark), journalist Kevin Drum concluded that lack of mobility for the poorest children in the United States seems to be the primary reason for America's lag behind other developed countries. A study from the Economic Mobility Project found that growing up in a high-poverty neighborhood increases Americans’ risk of experiencing downward mobility and explains a sizable portion of the black-white downward mobility gap. The report’s analysis also showed that black children who experience a reduction in their neighborhood’s poverty rate have greater economic success in adulthood than black children who experience poverty rates that increase or are stable.

Gender and race

Reports analyzing the economic mobility of African-Americans compared to that of whites have found stark differences. One report found that 53 percent of blacks born in the bottom income quintile remain there as adults, while only 33 percent of whites do. Research has also found that the children of black middle-class families are more likely to fall out of the middle class.

Despite the increased presence of blacks and women in the work force over the years, women and non-whites hold jobs with less rank, authority, opportunity for advancement and pay than men and whites, a "glass ceiling" being said to prevent them from occupying more than a very small percentage in top managerial positions.

One explanation for this is seen in the networks of genders and ethnic groups. The more managers there are in an employees' immediate work environment, the higher the employees chances of interacting and spending time with high status/income employees, the more likely these employees are to be drawn on for promotion. As of the 1990s, the vast majority of all clerical and office workers are women, but made up less than half of all managers. Less than 15% of all managers were minorities, while roughly a quarter of all clerical and office employees were. The networks of women and minorities are simply not as strong as those of males and whites, putting them at a disadvantage in status/income mobility.

For women, another explanation for this "glass ceiling" effect in the American work force is the job-family trade off. While both men and women feel that a conflict exists between job and family, women with children, particularly married women, are more likely to either temporarily leave the labor force or cut back on employment by using flex time, working part-time or part of the year. Unfortunately, lower mobility results as part-time employment is usually lower paying employment, with less chance of promotion into a higher status job or likelihood of a return to full-time employment for at least a few years.

Taking a leave from the work force tends to decrease human capital when it comes to finding a job. Women are also more likely than men to take leave from their jobs to care for others rather than themselves. Knowing this, employers are wary of hiring and promoting women in the work force.

Others have pointed out that men have statistically been willing to accept job conditions that women were not, such as working outside in extreme weather, working where you can become physically dirty on a regular basis, working more hours, etc. This is based on survey information, and shows that it is difficult to make direct comparisons ('apples to apples'). Conservatives also question the extent of gender discrimination arguing that competition between firms would lead them to bid up wages of any group if they provided the same or better value of work for less pay as employees.

Immigration

According to economist George J. Borjas, most immigrants to the US are at "a sizable earning disadvantage" compared to native-born workers, and the earnings of different groups of immigrants vary widely. Borjas found that intergenerational upward economic mobility averaging a 5% to 10% in increase in income from the first to the second generation of immigrants although there was wide variation among ethnic groups. Other research suggests that length of time resided in the U.S. narrows the occupational gap between Hispanic immigrants and non-Hispanic whites and U.S.-born Hispanic counterparts. Overcoming language barriers and adjusting to the new environment and culture to American society creates barriers for new immigrants, and "there is significant economic 'catching up' between the first and second generations" (second generation being defined as child with at least one parent not born in the United States). This intergenerational mobility includes poor as well as middle income groups, although among the high income Borjas noted a regression towards the mean or equalizing tendency in income/status, whereby children of very successful immigrants tended to have lower, not higher, incomes/status than their parents, becoming successful but not as successful.

Impact of incarceration

According to some researchers, America's high incarceration (imprisonment) rate, and "War on Drugs" policies, have created an underclass with severely limited social mobility. Within the United States the prison population has been steadily increasing since the early 1970s and has now surpassed two million, making it the highest per capita rate in the world. This boom has been fueled to a large extent by the War on Drugs starting in the 1980s. In addition to the mobility handicaps of imprisonment, this "war" has effectively created a poor, immobile class by denying one of the most important tools for social mobility—education—in a number of ways

1. The drug war has combined with public school zero-tolerance policies to remove tens of thousands of adolescents from their public schools.
2. Denial of higher education has been adopted as an additional punishment for drug offenders.
3. The war on drugs siphons drug users out of society and into prison.

The lack of education for convicted felons is compounded with difficulties in finding employment. These two factors contribute towards a high recidivism rate and downward social mobility.

Tax expenditures

Tax expenditures, partial exemption of the poor from taxation through reliance on progressive income taxes rather than sales taxes for revenue or tax rebates such as the earned income tax credit loosely correlate with income mobility with areas which tax the poor heavily such as the Deep South showing low mobility.

Other factors

Significant correlations have been found between intergenerational mobility and economic inequality, economic and racial residential segregation, measures of K-12 school quality (such as test scores and high school dropout rates), social capital indices, and measures of family structure (such as the fraction of single parents in an area)

History of study

Sociologists Blau and Duncan collected mobility data along with the U.S. Bureau of the Census in 1962. The data included information on occupational family backgrounds. In 1962, 56.8% of sons with fathers who had occupations in upper nonmanual ended up with occupations in the same level. Only 1.2% of sons with fathers who had farming occupations ended up in upper nonmanual occupations. In 1973, these differences increased. 59.4% of sons with fathers in upper nonmanual occupations achieved occupations of this same level and 0.9% of sons with fathers in farming occupations ended up in upper nonmanual occupations. However, the occupational structure is more rigid towards the top and bottom. Those in lower nonmanual occupations, and upper and lower manual occupations were more likely to be vertically mobile. Upper nonmanual occupations have the highest level of occupational inheritance. In the 1980s studies found that only 20 percent of the income gap persisted between generations in America, according to the Christian Science monitor. However, by 2003 improvements in econometrics showed that poverty could endure over several generations.