Author: Anne Marie Bonner, MS’14
On January 21, 2013, President Barack Obama, in his second inaugural address to the nation, articulated a vision of the American Dream that is frequently echoed by Democrats, Republicans and Independents alike: “We are true to our creed when a little girl born into the bleakest poverty knows that she has the same chance to succeed as anybody else, because she is an American; she is free, and she is equal, not just in the eyes of God but also in our own” (Obama para.11). Yet this American ethos, passed down from generation to generation, periodically requires reevaluation. How healthy is the American Dream in the twenty-first century? How realistic is upward socio-economic mobility for working poor and middle class families today?
There are two important, and inextricable, ways to assess economic mobility: (1) Absolute mobility measures whether an individual “has more or less income, earnings, or wealth than his or her parents did at the same age” whereas (2) relative mobility evaluates a person’s “rank on the income, earnings, or wealth ladder compared to his or her parents’ rank at the same age” (Pew 1). In terms of absolute mobility, families across the socio-economic spectrum are doing well. According to a 2012 report released by The Pew Charitable Trusts’ Economic Mobility Project, eighty-four percent of all Americans have higher family incomes and fifty percent have greater family wealth than their parents held at the same age (Pew 2).
However, in terms of relative mobility, many Americans, particularly those living in the lowest income and wealth brackets, are struggling to move up the economic ladder. Currently, “forty-three percent of Americans raised in the bottom quintile remain stuck in the bottom as adults, and seventy percent remain below the middle” (Pew 2). Imagine for a moment that there are one hundred children who are born into the lowest economic bracket of our society. Forty-three of those children will be unable to move out of that bracket in adulthood. An additional twenty-seven children will be unable to move beyond the second to lowest bracket. That means more than two-thirds of all children living in the poorest families will remain in those circumstances as adults. This phenomenon is frequently referred to as the principle of “stickiness at the ends,” which posits that people who are born at the bottom of the income and wealth distribution ladder are more likely to remain stuck at that level as adults than those who start out in a higher bracket (Pew 2). Children living in lower-middle and middle income families fair only slightly better, with half of lower-middle class children and one third of all middle class children living in the bottom two economic quintiles in adulthood (Pew 6). The socio-economic outcomes of children in each successive generation are becoming more dependent on the positions and backgrounds of their parents, as evidenced by national intergenerational elasticity rates ranging from 0.4 to 0.6, with 1.0 representing rigid stratification (Beller & Hout 26).
Recent studies suggest correlations between mobility and several external factors, including race, education, family structure, and the size and distribution of the middle class in a given residential area. There is a substantial racial gap in terms of economic mobility. Over half of African-American children born into the lowest economic quintile remain there as adults, while only one-third of White children remain in this bracket as adults (Pew 20). According to a Pew research study, a college degree is one of the “most promising ways to climb the economic ladder.” A staggering ninety percent of children with a college education who were raised in the lowest economic quintile move into higher income and wealth brackets as adults (Pew 25). The number and dispersion of middle class families in a given area also influences the level of relative mobility in that region. In a July 2013 study entitled “The Equality of Opportunity Project,” Harvard economists Raj Chetty and Nathaniel Hendren and Berkeley economists Patrick Kline and Emmanuel Saez observed a lower relative mobility rate in areas that had a smaller and less diffused middle class. For example, in Atlanta, children from the bottom quintile have only a four percent chance of reaching the top bracket in adulthood. This is contrasted with Salt Lake City, where the relative upward mobility rate is 24.9%, and the chance of a child born into the bottom quintile to reach the top quintile in adulthood is 11.5% (Chetty et al. Data Set).
Promoting greater economic mobility is a complex process, with a variety of educational, employment, political, and social dynamics simultaneously at work. Opportunity Nation is “a bipartisan, cross-sector national campaign made up of more than 250 non-profits, businesses, educational institutions, faith-based organizations, community organizations, and individuals all working together to expand economic opportunity and close the opportunity gap in America” (Opportunity Nation Who we are para. 1). This organization is currently advocating on behalf of three bills that are undergoing review in their respective Congressional committees: the Careers Through Responsive, Efficient and Effective Retraining (CAREER) Act, the American Dream Accounts Act, and the Community College to Career Fund Act.
The American Dream Accounts Act, reintroduced by Senator Chris Coons [D-DE] and Senator Marco Rubio [R-FL] in May 2013, “authorize[s] the creation of online college savings accounts combined with resources and support intended to help more students access a college education that leads to a career” (Opportunity Nation American Dream Accounts Act para. 2). This bill leverages the power of financial literacy, good savings practices and holistic academic engagement to help low-income students access higher education and move up the socio-economic ladder in adulthood. Other policies, such as the Financial Security Credit Act of 2013, focus on targeting and reducing liquid asset poverty by incentivizing savings practices among low-income households. This approach has proven to be effective in two randomized control trials in New York City and Tulsa City (Bloomberg 9). As these and other legislative proposals are reviewed and debated in Congress, policy makers from across the political and ideological spectrum continue to search for solutions to improve mobility prospects for upcoming generations.
- Beller, E. & Hout, M. “Intergenerational social mobility: The United States in comparative perspective.” The Future of Children, 2006: Vol. 16, 19-36.
- Bloomberg, Michael R. “$aveUSA Program Implementation: Insights from the Field.” New York City / Center for Economic Opportunity Social Innovation Fund. 10 November 2013. Web. 2012. <http://www.nyc.gov/html/ceo/downloads/pdf/saveusa_implementation_brief.pdf >.
- Chetty, R., Hendren, N., Kline, P. & Saez, E. “Mobility in the 100 Largest Commuting Zones.” The Equality of Opportunity Project. 10 November 2013. Web. 2013. <http://www.equality-of- opportunity.org/index.php/city-rankings/city-rankings-100 >.
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- Opportunity Nation. “Advocacy.”10 November 2013. Web. 2013. <http://www.opportunitynation.org >.
- The Pew Charitable Trusts. “Pursuing the American Dream: Economic Mobility Across Generations.” The
- Pew Charitable Trusts. 10 November 2013. Web. 2012. <http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pursuing_American_Dream.pdf >.