The Realities of American Economic Mobility

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The Realities of American Economic Mobility

America is known as the "land of opportunity." At a time when Europe and Asia were defined by rigid class systems, the United States offers the promise of economic opportunity and economic mobility, regardless of the income or circumstances of one's parents.

A 2011 study by the Pew Charitable Trusts reflects that this is still a widely held belief. The study reported that over 40 percent of Americans believed that hard work, ambition, and drive are among the most important factors for creating economic advancement.1 Those who believed that one of the most important determinants of success is growing up in a wealthy family amounted to only 10 percent. And interestingly, Americans are unique in this high level of belief that individual effort determines success.

But now, some are beginning to question whether we are still experiencing the same historic levels of economic mobility, and whether the same opportunities are available to people at all socio-economic levels. To a large extent, the answer depends how mobility is measured or defined.

There are two main ways mobility is measured: absolute and relative.2 A third scale measures changes as compared to other countries, although conclusions from this type of comparison can be misleading.

Absolute mobility is a measure of the actual financial progress a person makes over time. This progress can be measured against two different standards:

  • One is intra-generational mobility, which analyzes the change in a person's income as compared to a previous point in his or her life.
  • The second is inter-generational mobility, which compares the income of adult children relative to that of their parents.

These comparisons offer a snapshot of economic mobility, revealing whether or not successive generations are improving their economic well being. If an entire population's standard of living is rising from one generation to the next, there is a high level of absolute inter-generational mobility. The degree of absolute mobility is determined by the percentage of adults whose inflation-adjusted incomes exceeded that of their parents when they were the same age.

An examination of absolute inter-generational mobility in the U.S. reveals high degrees at all income levels. The overall proportion of Americans whose real incomes exceed their parents' real incomes by $1,000 or more is 83 percent.

For those born in the bottom quintile, that figure is 91 percent. Not surprisingly, for those who were born in the top quintile, where raising one's real income becomes increasingly more difficult, the figure drops close to 70 percent, which still demonstrates a high degree of absolute mobility...

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