America No Longer the Land of Opportunity?

It is a well-known fact that the United States has the highest level of economic inequality of any developed country.

When faced with this reality, Conservatives will typically argue that in a country like the United States, economic inequality doesn't matter, because economic mobility is high here. People in the United States can more easily move upward in the income distribution compared to other advanced countries.

Well, a report just put out by Britain's Sutton Trust and the London School of Economics effectively punctures this myth of American economic mobility.

In fact, the United States has the lowest economic mobility of the eight advanced countries considered in the study. The measure of economic mobility considered here is "income persistence," which quantifies the extent to which a child's income depends on that of his or her parents (referred to as "intergenerational mobility"). According to the report, in the United States income persistence is roughly twice the level that exists in the European social democracies. Here is the ranking of countries from highest to lowest economic mobility, along with the income persistence index:

For the record, here is some data on economic inequality; note the apparent close correlation between egalitarianism and social mobility:

Contrary to conservative arguments, the United States not only has the highest levels of economic inequality, but also the lowest levels of economic mobility among advanced economies. Americans whose parents are at the bottom end of the income distribution tend to stay there with higher probability than elsewhere. The Scandinavian social democracies and Canada, by contrast, have not only the lowest levels of income inequality, but also the highest economic mobility. Not only are those at the bottom end of the income distribution far better off than in an economy like the U. S., but also the economic position of one's parents matters much less for the well-being of the typical Swede, Dane, or Canadian than it does for the average Brit or American.

As Britain's Independent put it

The findings challenge the idea that America is a "land of opportunity". Despite getting more than 60 per cent of people into college education for many years, the upper reaches of US society have been in effect cut off to most of the worse off since the 1960s.

If there is any silver lining for Americans, it is that, unlike Britain, economic immobility and income persistence to not seem to have gotten worse here over the past generation or so.

Nonetheless, there now seems to be a direct link between economic inequality and social mobility, as the Independent reports:

The report's authors said the increasingly rigid society was due to growing income inequality as the rich got richer and the poor struggled to break the cycle of poverty.

According to Reuters:

Co-author Stephen Machin said low income groups were managing to keep pace with middle income, but the gap between middle and high was widening rapidly and those in the very top bracket were accelerating out of sight.

The study's authors emphasize inequalities in educational opportunity. Again from Reuters:

There was a link between family income and educational achievement. . . . The study defined social mobility as the ability of lower income groups to move up the wealth ladder - primarily by staying longer in school and as a result getting better paid jobs.

And from the Times:

Professor Machin added: "[Britain has] 20 per cent of the population who are functionally illiterate. They have been let down by the school system. In Germany and Scandinavia they don't have anybody down there. They are at least getting everybody up to the same basic level."

Although the study doesn't talk about it so much, social mobility also depends on the state of the labor market, as the above Reuters quote implies. Access to high-quality education is one thing, but you also need the higher-paying jobs. This is where the stronger labor unions, higher minimum wages, and the more expansive welfare state of the European social democracies make a difference by reducing labor market inequalities. From the report, this is especially important in explaining low economic mobility in the United States:

Low mobility in Britain is partly explained by the strong relationship between parental income and educational attainment.  For the US, the picture is slightly different - parental income leads to a less marked advantage in terms of education, but this educational advantage is worth more in the labour market in the US than in the other countries.

In the United States, racial differences in economic mobility are more important (probably also related to educational and labor market inequalities, I would guess). From the report:

Another important dimension of the low mobility in the US is related to race . . . mobility is substantially more restricted for black families than white families

Finally, one of the study's coauthors argues that globalization is also a culprit:

[Machin] blamed the widening chasm on a combination of inadequate education policies and on globalization which was entrenching wealth inequalities across the planet.

So yes, Virginia, Horatio Alger is alive and well. He's just living in Oslo now.

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Comments

1 Comment

Its getting worse quickly..
The elimination of the estate tax will mean a return to the 'Gilded Age' in which the rich get richer and the poor get poorer..

A huge number of worthy Americans can no longer afford to get a college degree.. This means that our future is being squandered, just so a few people who are already rich can get richer..

Also, the elimination of the estate tax will cut off the main source of funding for charitable foundations.. (maybe that is the whole point..)

The 50 richest families in the US stays the same from decade to decade.. with only a few joining or leaving the list..

Maybe its time to move somewhere else..?

by ultraworld 2005-04-26 08:10AM | 0 recs

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