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. President George Bush has referred to education as “the great civil rights issue of our time.” 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. 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.
[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. 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.
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.” A number of studies show that out-of-school factors may affect one’s trajectory even more than education. 
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].”  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. 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. “[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.” 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. 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. 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. 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.” 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. 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.]
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.  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.
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.
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 http://www.equality-of-opportunity.org/assets/documents/mobility_geo.pdf (pp. 26-28)