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A Dream Destroyed?: Considerations of Income Mobility in the United States

October 08, 2018

Michelle Obama has called education the “single-most important civil rights issue” of today.[1] President George Bush has referred to education as “the great civil rights issue of our time.”[2] Similarly, President Trump has vocalized support for education spending, despite his administration’s efforts to pass major budget cuts for existing programs and funnel more public funds into controversial school choice programs.[3][4] Regardless, all of these statements point to a recognition that education is the proverbial ladder to a better life—to the procurement of the American Dream.  In an age in which many are questioning what it means to be an American and to pursue the Dream, economic mobility remains central to this famed ideal. But what is a better life?  And, who can realistically dream of attaining it?

Economists like Stanford’s Raj Chetty have attempted to quantify the ability of Americans to achieve a higher economic status (in absolute terms, a taller order in the U.S. than in other countries). Specifically, Chetty’s substantial research on “upward mobility,” the moving from the bottom fifth of the income distribution to the top fifth by one’s thirties, provides some guidance on the extent to which education may aid one in obtaining the American Dream.[5][6]

[Image: Graph showing lower U.S. income mobility. Source: Brookings.]

[Image: Graph showing lower U.S. income mobility. Source: Brookings.]

Chetty found that while elite institutions of higher learning boast the highest success rates, their comparatively low number of poorer students decrease their overall mobility rate.[7] Notably, many “mid-tier public schools” have similarly high rates but with the important caveat of admitting far more low-income students, arguably making them better vehicles than even the Ivies for propelling poorer kids into the middle class and beyond.[8]

These education and income gaps begin long before students ever set foot on a college campus. Referencing Chetty’s study, May Wong notes that “[c]hildren with parents who rank among the richest 1 percent of the nation’s earners are 80 times more likely to attend an Ivy League school than children in the bottom fifth of the income distribution.”[9] A number of studies show that out-of-school factors may affect one’s trajectory even more than education. [10]

In a study seeking to challenge Chetty’s work, Jesse Rothstein of UC Berkeley found that “[w]e can’t educate people out of th[e] problem [of income immobility].” [11] Rothstein finds that “[p]arental income is…more strongly associated with marriage and with the presence of spousal earnings” in areas of lower income mobility than in areas with higher mobility.[12] In other words, the presence of a two-parent household—and the expected increase in parental income—may be more important to economic mobility than even educational attainment.[13] “[I]f parental income primarily helps children by, for example, buying them access to better labor market networks, then areas where poor children do relatively well in school may not be areas where those children do relatively well in the labor market.”[14] Rothstein offers this explanation, among others, to show that the interplay of these factors is often tricky and difficult to delineate.

Further, the differences between Rothstein’s and Chetty’s work limit one’s ability to fruitfully compare one another. For example, Rothstein’s definition of intergenerational mobility is simply the ability to outearn one’s parents, which is less narrow than Chetty’s income distribution framework.[15] Further, like Chetty, Rothstein’s model is not a causal one, muddying the directionality and impact of the aforementioned inputs—which makes explaining variations between the models extremely difficult.[16] Our inability to identify and measure all the potential qualitative inputs (e.g., parenting style or peer motivation) impedes our ability to draw any definitive conclusions regarding the efficacy of these differing approaches for quantifying the viability of the American Dream.

Additional factors like “interfirm inequality”—persistent income disparities across similarly-situated groups differentiated only by their employer—may also explain these gaps.[17] Even Chetty has acknowledged that factors like geography can play an important, if not fully understood, role in income mobility, finding that “…a poor child raised in San Jose, or Salt Lake City, has a much greater chance of reaching the top than a poor child raised in Baltimore, or Charlotte.”[18][19] Perhaps government regulation can help to standardize practices in some of these areas of industry; federal minimum wage laws already help to address some of the disparities that would result if employers were left completely to their own devices.[20][21] Could fiscal or monetary policy help stabilize rates? Should leaders have already considered these options?

[Image: County-level map of U.S. income mobility. Source: Brookings.]

[Image: County-level map of U.S. income mobility. Source: Brookings.]

Still more studies suggest other factors like union memberships play a critical role in upward mobility, with evidence showing that the children from areas with higher union membership go on to earn more than their peers in areas of lower union-membership density. [13] If unions are as central to mobility as this study suggest, the recent Supreme Court decision in Janus v. American Federation of State, County and Municipal Employees—which weakened the bargaining power of unions—coupled with the Trump Administration’s regulatory rollbacks of worker protections could greatly alter this dynamic and fundamentally change mobility in this country.[22][23][24][25][26]

Despite the evidence against educational measures as a robust predictive indicator of mobility, politicians seem to ignore this research in favor of touting education as a panacea for the nation’s economic inequality. While the effect of educational attainment on economic mobility may be hazy, it is certainly a piece of the ever-complex puzzle. Lawmakers and employers would do well to remember that and to invest prudently in the development of our nation’s greatest human capital: its youth. The children of this country face challenges both in and out of the classroom, and attention to alleviating inequities and barriers on multiple fronts is necessary to actualize the American Dream.

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

  [1] https://obamawhitehouse.archives.gov/the-press-office/2015/02/20/remarks-first-lady-black-history-month-celebrating-women-civil-rights-mo
  [2] http://edition.cnn.com/2002/ALLPOLITICS/01/19/bush.democrats.radio/
  [3] https://www.usnews.com/news/education-news/articles/2017-04-04/trump-promises-to-spend-big-on-education-weeks-after-proposing-billions-in-cuts
  [4] https://www.theatlantic.com/education/archive/2018/02/does-trumps-education-budget-even-matter/553271/
  [5] https://news.stanford.edu/2017/01/18/stanford-research-analyzes-colleges-engines-upward-mobility/
  [6] http://www.equality-of-opportunity.org/papers/coll_mrc_paper.pdf
  [7] https://news.stanford.edu/2017/01/18/stanford-research-analyzes-colleges-engines-upward-mobility/
  [8] https://news.stanford.edu/2017/01/18/stanford-research-analyzes-colleges-engines-upward-mobility/
  [9] https://news.stanford.edu/2017/01/18/stanford-research-analyzes-colleges-engines-upward-mobility/
  [10] https://www.theatlantic.com/education/archive/2017/09/education-and-economic-mobility/541041/
  [11] https://www.theatlantic.com/education/archive/2017/09/education-and-economic-mobility/541041/
  [12] http://cdn.equitablegrowth.org/wp-content/uploads/2017/08/14161122/rothstein_mobility_april2017-wp.pdf
  [13] http://cdn.equitablegrowth.org/wp-content/uploads/2017/08/14161122/rothstein_mobility_april2017-wp.pdf
  [14] http://cdn.equitablegrowth.org/wp-content/uploads/2017/08/14161122/rothstein_mobility_april2017-wp.pdf
  [15] https://www.theatlantic.com/education/archive/2017/09/education-and-economic-mobility/541041/
  [16] https://www.theatlantic.com/education/archive/2017/09/education-and-economic-mobility/541041/
  [17] http://rooseveltinstitute.org/wp-content/uploads/2016/07/Declining-Entrepreneurship-Labor-Mobility-and-Business-Dynamism-A-Demand-Side-Approach.pdf
  [18] https://www.theatlantic.com/education/archive/2017/09/education-and-economic-mobility/541041/
  [19] http://www.equality-of-opportunity.org/assets/documents/mobility_geo.pdf (pp. 26-28)
  [20] https://www.dol.gov/general/topic/wages/minimumwage
  [21] https://www.aeaweb.org/articles?id=10.1257/app.20140073
  [22] https://www.americanprogress.org/issues/economy/reports/2015/09/09/120558/bargaining-for-the-american-dream/
  [23] https://www.supremecourt.gov/opinions/17pdf/16-1466_2b3j.pdf
  [24] https://www.theregreview.org/2018/07/18/burke-right-to-work-reaches-public-unions/
  [25] https://academic.oup.com/ser/advance-article/doi/10.1093/ser/mwx054/4739737?guestAccessKey=f83f1b9a-7981-45e4-a6fc-6095ff45e309
  [26] https://www.washingtonpost.com/politics/trump-takes-aim-at-federal-bureaucracy-with-new-executive-orders-altering-civil-service-protections/2018/05/25/3ed8bf84-6055-11e8-9ee3-49d6d4814c4c_story.html?utm_term=.d9f94e00025c

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  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>