Making Economic Mobility a Priority
Economic opportunity and upward mobility have formed the foundation of the American Dream for centuries and remain at the core of our nation۪s identity. Yet research shows that the ability to move up the economic ladder from one generation to the next is more limited in the United States than many think. Policy can make a difference. A bipartisan group in Congress wants to make sure it does.
The best available data on economic mobility reveals a very mixed picture of Americans۪ access to opportunity. On the one hand, there is a glass half full, because the majority of Americans have higher inflation-adjusted family incomes than their parents did at the same age, and this is true across all income levels.
But there is also a glass half empty, because Americans raised at the top or bottom of the economic ladder are highly likely to stay there as adults, a phenomenon called “stickiness at the ends.” Seventy percent of children raised in the bottom fifth of the income distribution will remain below the middle of the income ladder as adults. Among children raised in the top fifth, 63 percent will never fall below the middle. This stickiness challenges the notion that the United States promotes equality of opportunity.
Economic mobility in other industrialized countries also calls into question the ability of many Americans to significantly improve their economic prospects. A recent study of economic mobility across ten industrialized nations found a stronger link in the United States between the financial circumstances of parents and that of their children than in any other country investigated.
The variation found in outcomes across these countries suggests that policies and institutions can, and do, influence economic mobility. As such, mobility is not pre-determined. Understanding the drivers of mobility can enhance opportunity.
Pew۪s research identified a host of factors that can help push Americans up or down the economic ladder. Of particular importance are access to postsecondary education, personal savings, and neighborhood poverty.
Postsecondary education is extremely powerfulpromoting upward mobility from the bottom and protecting against downward mobility from the top and middle. According to Pew۪s research, having a college degree triples the chances that someone raised in the bottom of the income distribution will rise to the top.
Personal savings are also influential for families across the income distribution. When families are able to create their own safety nets, they are less likely to be derailed by financial emergencies and are more equipped to make mobility-enhancing investments, such as college, for themselves or their children.
In contrast, one of the most powerful forces for downward mobility is growing up in a high-poverty neighborhood. Americans raised at the middle or top of the income ladder who spend their childhood in a high-poverty neighborhood are 52 percent more likely to be downwardly mobile. Neighborhood poverty during childhood also explains a significant portion of the downward mobility gap between black and white Americans.
Given these data, it۪s important to analyze the degree to which national policy is able to enhance mobilityand who benefits from the investments currently made. The federal government spends a great deal to encourage movement up the income and wealth ladders. But the vast majority of that spending is delivered through the tax code and therefore largely misses families at the bottom who don۪t owe federal income taxes. Our nation۪s leaders need to take mobility into account when they develop and evaluate new federal policies. And there are tools available to help them do that.
In 2009, a group of bipartisan advisers to Pew۪s economic mobility project drafted a set of policy recommendations to enhance U.S. economic mobility. The group called for a “portfolio shift” in federal investments to better target low- and moderate-income families. Public opinion polling suggests that Americans support this goal, with an overwhelming 83 percent wanting the government to boost mobility for the poor and the middle class, a view that cuts across party lines.
Mobility issues also have received increased attention from opinion leaders and policymakers on both sides of the aisle in Congress. Pew is proud to be working with Senators Sherrod Brown (D-OH), Jerry Moran (R-KS), and Ron Wyden (D-OR) on the new Economic Mobility Caucusa bipartisan effort to tap the best-available economic data, consult with leading mobility experts, and create a new platform for dialogue and action on how to promote opportunity for all Americans.
The interpretations may vary, but the facts on U.S. economic mobility are not disputed. And the development of this new policy forum is an important step forward in developing new national policies that can enhance mobility and uphold the promise of the American Dream.
Erin Currier is the director of economic mobility at The Pew Charitable Trusts.
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