Socioeconomic mobility in the United States

The correlation between parents' income and their children's income in the United States is estimated between .4 and .6.[22]

If a parent's income had no effect on a child's opportunity for future upward mobility, approximately 20% of poor children who started in the bottom quintile (in the bottom 20% of the US range of incomes) would remain there as poor adults. At the other end of income spectrum, if children were born into wealthy families in the top 20%, only 20% would stay in that top income category if their mobility opportunities were equal to every other child's in the country.

But long-term income statistics show this isn't happening. Mobility opportunities are different for poor and wealthy children in the US. Parental incomes and parental choices of home locations while raising children appear to be major factors in that difference. According to a 2012 Pew Economic Mobility Project study[23] 43% of children born into the bottom quintile (bottom 20%) remain in that bottom quintile as adults. Similarly, 40% of children raised in the top quintile (top 20%) 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%) of children born into the top quintile fell to the bottom.[23] 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."[24]

Economic mobility may be affected by factors such as geographic location, education,[25] genetics,[26] culture, race, sex, and interactions among these,[27] as well as family wealth.[28]

Famous instances of great economic and social mobility include Benjamin Franklin and Henry Ford.[4] 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.

Intergenerational income elasticities for nine developed countries (showing the fraction of children from poor families who grow up to be poor adults)

Several large studies of mobility in developed countries in recent years have found the US among the lowest in mobility.[4][20] One study (“Do Poor Children Become Poor Adults?")[20][18][29] 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)[20] 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."[30]

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.[31] 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.[4][32]

Intergenerational immobility versus economic inequality in 2012. (Countries closest to the axis in the left bottom have the highest levels of socio-economic equality and socio-economic mobility)

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"[33]—showed "a clear negative relationship" between inequality and social mobility.[34][35] 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,[34] and the President's Economic Report to Congress.[36]

Philip Alston, the United Nations special rapporteur on extreme poverty and human rights, asserted in a 2017 report on an investigation of extreme poverty in the United States that "The American Dream is rapidly becoming the American Illusion since the US now has the lowest rate of social mobility of any of the rich countries."[37]

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[38] (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[38]) 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.[38]

Ivy-Plus admissions rates vary with the income of the students' parents, with the acceptance rate of the top 0.1% income percentile being almost twice as much as other students.[48]

Multiple reports have found that education promotes economic mobility.[49][50][51] 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 the top as an adult.[49]

Wages and earnings correlate with education. A 2009 survey of young adults[52] who worked full-time[note 1] throughout a full year[note 2] 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)[53] and less than half of what whose with a bachelor's degree earned ($45,000).[54]

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.[55] "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.[56]

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.”[57]

Others (Robert M. Hauser) have defended educational attainment as also freeing "individuals from the constraints of their social origins."[58]

Social connectedness to people of higher income levels is a strong predictor of upward income mobility.[59] However, data shows substantial social segregation correlating with economic income groups.[59]

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.[46] 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.[60]

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.[61] Research has also found that the children of black middle-class families are more likely to fall out of the middle class.[50]

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,[62][63] 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.[64][65] 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.[66] 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.[67][68][69] Unfortunately, the outcome is lower mobility, since 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.[70] Women are also more likely than men to take leave from their jobs to care for others rather than themselves.[71][72][73] 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').[74] 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.

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.[75] 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.[76]

In particular, children coming from low-income immigrant families struggle with the disadvantages of their legal status more than the average American due to the level of stress they are exposed to, most specifically through the manner in which they are perceived as well as the way in which they see themselves and their future. Scholars that have studied the social characteristics that arise from having an immigrant status have defined this state of struggle as the "master status" that anchors their decisions in every aspect of their lives, often serving as a crippling agent in their individual developments. When looking specifically into the Latino population, there is an immense hesitance in pursuing education post-high school. According to a study conducted by Abrego in 2006, Latino immigrants without a legal status were more reluctant in pursuing higher education levels, including college as compared to their legal brethren.[77] Most immigrants suffer silently in this manner due to a lack of a healthy immigrant niche construction through which they are able to assimilate accordingly and take advantage of the educational and social opportunities. In Norway for example, the government was able to facilitate increasing levels of re-distributive policies that allowed for a functional welfare state in which the immigrant population were able to lower the gaps of social class differences and becoming increasingly affluent in their ambitions of maintaining better lifestyles.[78] Hence, social mobility is the deferred offspring of many welfare states including the United States due to their low public spending incentives. Studies conducted on education spending in the United States have shown that as compared to the private funding of education, only 2.7% of the nation's total GDP is spent towards public education.[79]

Shifting the perspective to the effects immigration has placed on the existing economic status of the African-American population, there is yet even higher levels of economic bifurcations. While African-Americans occupied larger employment levels of at least 19 percent in sectors like transportation and hospital and social services during the 1990s, immigration caused a shift in this employment trend pushing them more towards private or self employment. One causing factor is the growing Puerto Rican and Mexican population who have increasingly found their employment niches in these specific sectors.[80] Another pattern seen in the economic regression of African-Americans is the invisible role of education in expanding their career opportunities. Historical data shows that the African-American's future advances were highly discounted by scholars like Orley Ashenfelter (1977) and William A. Darity (1982). Consensus studies conducted in the earlier periods of 1940 through 1960 also led many people to argue that black economic mobility through the route of education was closed.[81] Comparatively, the 1990 Census as conducted by the National Center for Health Statistics showed that African-Americans made 63 percent less than the average American due to poor health conditions driven by their unequal social status.[82] Displacement is seen even in low wage sector jobs, including janitorial positions that have become increasingly taken over by Mexicans and while African-Americas have still held these positions in the government, their economic position in considerably diminishing in this area.[83] Hence, the economic stability of African-Americans are not only challenged through their social state but by the growing migration patterns as well.

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 funding has been adopted as an additional punishment for drug offenders.
3. The war on drugs siphons drug users out of society and into prison.[84]

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, 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.[85][86] The literature that supports this claim acknowledges that nontrivial confounds are inherent to this line of inquiry, however.

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)[87]