April 5, 2011
This essay explores the issue of economic mobility from a variety of perspectives. It was designed to inform the work of the Economic Mobility Project (EMP), an initiative of The Pew Charitable Trusts. The essay begins by considering whether we should focus on relative or absolute mobility, and how we should collectively decide the optimal and desired levels of mobility. The essay closes with some principles and policy recommendations for promoting economic mobility in America.
The Normative Questions
Given that (a) wealth and income inequality are high by historical standards, (b) wealth inequality—which, data suggest, may matter more than income inequality in predicting mobility—has gotten worse between 1962-2004, and (c) both income and wealth inequality are not likely to significantly improve for the foreseeable future given structural changes in the U.S. economy since the early 1970s, then I believe our focus must be on relative mobility more so than absolute mobility. While both absolute and relative mobility matter in achieving the American Dream, in a highly unequal society in which some boats are lifted by economic growth but many more are not, we especially need to know why some persons succeed and others do not—what measures of relative mobility tell us.
Relative mobility should also be the focus of our efforts to achieve optimal levels of intra- and inter-generational mobility. Ideally, we would have historical data on rates of relative mobility and then strive to ensure that, at a minimum, we did not regress and, preferably, that we always progress. Data do exist and do show that since our nation was established absolute mobility has grown primarily due to robust economic growth (the rising tide indeed lifted nearly all boats), although it has declined for most families since about 1973. But we do not have such data on relative mobility. So it is difficult, in my view, to posit an optimal level of relative mobility when we do not have benchmarks.
However, we can pivot from the EMP paper by Isabel V. Sawhill, “Trends in Intergenerational Mobility,” which looks at the best available data over the last half-century and concludes that, “Although the research base for coming to any firm conclusions is limited and the studies do not all agree, taken as a whole, the current literature does not suggest that the rate of relative mobility has changed much since about 1970. If anything, relative mobility may have declined.”
Other Pew-supported research shows that about two-thirds of Americans make more than their parents in absolute dollars but fewer also move up a rung on the economic ladder. Digging deeper, though, Julia B. Isaacs in her EMP paper, “Economic Mobility Across Generations,” states that when integrating elements of absolute and relative mobility, “[O]nly half of the two-thirds of Americans who make more family income than their parents are upwardly mobile in the sense of also moving up one or more quintiles. Another one-third of Americans are either ‘riding the tide,’ that is, moving up in income without changing relative standing, or falling in relative rank despite making more than their parents in family income. Finally, one-third of Americans are actually downwardly mobile in both income and economic rank.”
In formulating optimal levels of relative mobility, other key data presented by Isaacs for the EMP should be considered as well—especially the lack of mobility or “stickiness” at the bottom rungs of the ever-widening ladder and the alarming stickiness and downward mobility among blacks:
- 42 percent of children born to parents in the bottom quintile are themselves in the bottom quintile as adults.
- Similar stickiness at the bottom of the income distribution exists when looking intra-generationally over 10-year periods.
- Racial differences in mobility are startling: 45 percent of black children whose parents were solidly middle income end up falling to the bottom quintile, while only 16 percent of white children do. And 54 percent of black children who start at the bottom remain there, while only 31 percent of white children do.
Given these data about the lack of mobility for the majority of Americans—all but one-third of Americans either stay in the same income bracket or move down, with significant levels of stickiness and differences in outcomes by race—what should be our optimal levels of mobility? While bold and somewhat arbitrary, I would suggest we nonetheless measure our progress against five quantifiable goals over the next two generations:
Click here to see the five quantifiable goals and the entire paper.