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A public policy blog from AEI
There are two ways to define economic mobility: 1) absolute mobility, whether each generation is financially better off than the one before; and 2) relative mobility, whether you can change your income rank vs. your parents. Most Americans probably think both measures important. We want to be more prosperous than mom and dad, but also be able to change our circumstances and make our dreams come true.
“Only in America,” as boxing promoter Don King likes to say. Or as the tagline for Rocky puts it: “His whole life was a million-to-one shot.” But of course, we would prefer better odds for most of us and our kids.
A San Francisco Fed study — using data tracking families since 1968 — looks at both versions of the American Dream, finding one healthier than the other. Looking at absolute mobility, researchers Leila Bengali and Mary Daly find the United States “highly mobile.” Over the sample period, 67% of US adults had higher family incomes than their parents, including 83% of those in the lowest birth quintile, or bottom 20% (versus 54% for children born into the top quintile, or top 20%.)
But with relative mobility, the study’s finding are “not so encouraging.” For folks born in the middle three quintiles, there is significant mobility. Kids born to parents in the middle move “freely across income quintiles.” But for kids born to parents in the top or bottom of the income distribution, life is “sticky,” as economists put it. For those born into the lowest quintile, 44% are still there as adults with 22% rising just to the second quintile. Similarly, the study points out, “children born into the top quintile, 47% are still there as adults. Only 7% fall to the bottom quintile.”
Can’t a good education — as well as a powerful left hook — counteract the stickiness of birth circumstances? Yes. The study points out that 30% of bottom-quintile kids who graduate college rise to the top quintile vs. 5% who don’t graduate college. But here’s your trouble: While over half the kids born into the top 20% get a degree, only 7% of those born into the bottom 20% get one.
Bengali and Daly:
This indicates that birth circumstances contribute to the stickiness at the top and bottom/ of income distribution, either directly or through differential access to education. … In this case, an individual’s ability to reach the highest economic ranks of society seems at least partially determined by the income rank into which they were born.
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