Getting Ahead or Losing Ground

Economic Mobility in America

Report February 20, 2008 Read time:

QUICK SUMMARY

Growing income inequality and slower economic growth suggest that now is an important moment to review the facts about opportunity and mobility in America and to attempt to answer the basic question: Is the American Dream alive and well?

This 2008 report, Getting Ahead or Losing Ground, authored by a team of scholars at the Brookings Institution, was one in a series of major research products that aimed to further enlighten the public dialogue on economic opportunity. While it offered reassuring findings in some areas, in many others there was room for concern. By arming the public and policy makers with facts about the status of opportunity in America today, this report sought to stimulate and frame the debate about which policies are likely to be most effective in ensuring that the American Dream endures for the next century.

Many Americans are even unconcerned about the historically high degree of economic inequality that exists in the United States today perhaps because they believe that big income gaps between the rich and the poor and, increasingly, between the rich and the middle class, are offset by a high degree of economic mobility. Economic inequality, in this view, is a fact of life and not all that disturbing as long as there is constant movement out of the bottom and a fair shot at making it to the top. In short, much of what the public believes about the fairness of the American economy is dependent on the generally accepted notion that there is a high degree of social and economic mobility.

Foreword

This foreword is written by Strobe Talbot, President of The Brookings Institution, and Rebecca W. Rimel, President and Chief Executive Officer of The Pew Charitable Trusts.

Since our nation's founding, the promise of economic opportunity has been a central component of the American Dream. An economy that grew to be the world's biggest and most dynamic also held out the promise that hard work, vision, and risk-regardless of family background-would be rewarded. Perhaps the most remarkable byproduct of the American economic expansion over the past century has been steady growth in the share of Americans who have been able to achieve a comfortable life and have every hope of seeing their children do even better. While the American Dream remains a unifying cultural tenet for an increasingly diverse society, it may be showing signs of wear. Growing income inequality and slower economic growth suggest that now is an important moment to review the facts about opportunity and mobility in America and to attempt to answer the basic question: Is the American Dream alive and well?

Download the complete Foreword here.

Overview

For more than two centuries, economic opportunity and the prospect of upward mobility have formed the bedrock upon which the American Dream has been anchored. Indeed, a desire to escape from the constraints of more class-based societies was the driving force luring many of our ancestors to this New World, and millions of immigrants continue to flood our borders in search of the American Dream. Americans continue to believe that all one needs to get ahead is individual effort, intelligence, and skills: coming from a wealthy family is far from a necessity to achieve success in America.

Are those beliefs justified? Is there actually a high degree of mobility in the United States? Is America still the land of opportunity? With new data and analysis, this volume addresses these questions by measuring how much economic mobility actually exists in America today.

Download the complete Overview here.

Downloads Full report Key Findings Foreword Overview Appendices

REPORT CONTENTS A

The Economic Mobility of Families Across Generations

"Doing better" than one's parents has long been a key element of the American Dream. The story embedded in our history suggests any person can start from humble beginnings and achieve great wealth or at least reach the middle class. But are Americans today better off than their own parents were? How much does their eventual success depend on their family background?

The report takes a comprehensive view of economic mobility and the American Dream, asking questions about both absolute and relative mobility. The first key question is, "To what extent do American families improve their incomes over a generation?" Each generation should have higher income than the last, assuming economic growth, so the issue here is the amount of growth and how it is distributed across society. A less frequently asked question is "How often do individual Americans end up with higher family incomes than their own parents, either because economic growth has boosted their income or because that individual has moved up or down the economic ladder?" A third question ignores the overall increases due to economic growth and focuses exclusively on relative mobility: "To what extent does where one ends up in the income distribution depend on where one began?" Put differently, are the economic fortunes of children tied to that of their parents or is there a lot of movement up and down the economic ladder from one generation to the next?

Supporting Assets

Figure 1: Change in Income Distribution from Parents' Generation to Children's Generation
Figure 2: Percent of Children with Family Income above their Parents, by Parents' Income Ranking
Figure 3: Change in Median Family Income from Parents' to Children's Generation
Figure 4: Children's Chances of Getting Ahead or Falling Behind, by Parents' Family Income
Notes: Family Income Comparisons

Download the complete Economic Mobility of Families Across Generations Report here.

Download the complete Economic Mobility of Families Across Generations Executive Summary here.

Trends in Intergenerational Mobility

For more than two centuries, economic opportunity and the prospect of upward mobility have formed the bedrock upon which the American story has been anchored. Indeed, a desire to escape from the constraints of more class-based societies was the driving force luring many of our ancestors to this New World, and millions of immigrants continue to flood our borders in search of the American Dream. Americans continue to believe that all one needs to get ahead is individual effort, intelligence and skills: coming from a wealthy family is far from a necessity to achieve success and the American Dream.

Many Americans are even unconcerned about the historically high degree of economic inequality that exists in the United States today perhaps because they believe that big gaps between the rich and the poor and, increasingly, between the rich and the middle class, are offset by a high degree of economic mobility. Economic inequality, in this view, is a fact of life and not all that disturbing as long as there is constant movement out of the bottom and a fair shot at making it to the top. In short, much of what the public believes about the fairness of the American economy is dependent on the generally accepted notion that there is a high degree of mobility in our society.

Supporting Assets

Figure 1: Trends in Inequality of U.S. Worker Earnings and Family Income, 1937-2005
Figure 2: Income Mobility for Sons and Daughters, 1977-2000

Download the complete Trends in Intergenerational Mobility Report here.

International Comparisons of Economic Mobility

Freedom from the constraints of aristocratic society lured many of our ancestors to cross the ocean to the New World. European visitors such as Alexis de Tocqueville marveled at the economic dynamism and social mobility of American society in the first half of the nineteenth century. More recently, immigrants continue to cross our boundaries in search of the promise of the American Dream. Given this history, many Americans believe that the opportunities for moving up the economic ladder are greater in the United States than they are in other countries. But is this widely held assumption of greater economic mobility in the United States borne out by the evidence?.

Supporting Assets

Figure 1: Perceptions of Mobility and Inequality in 27 Countries
Figure 2: Sons' Earnings are More Closely Tied to Fathers' Earnings in the United States than in Canada and Much of Europe

Download the complete International Comparisons of Economic Mobility Report here.

Wealth and Economic Mobility

The growing concern about economic inequality voiced by scholars, policymakers and journalists has been addressed primarily to inequality of income. And with good reason: as noted throughout this volume, studies confirm that over the last three decades there has been a marked rise in income inequality in the United States.

In tracking trends in economic inequality, less attention has been given to the wealth gap and its relationship to economic mobility. Yet any full consideration of economic well-being, inequality or economic mobility must include careful attention to wealth.

Understanding wealth is important to fully understand economic mobility in the United States, especially the effect of wealth on economic mobility across generations. Because the incomes of parents and children are highly correlated, it is important to ask whether there is a similar correlation between the wealth of parents and their children and, if so, what the modes of wealth transmission might be.

Supporting Assets

Figure 1: Percent of Wealth Held by Various Percentile Groups, Selected Years 1989-2004
Figure 2a: Percent of Several Financial Assets Held by Various Wealth Groups, 200
Figure 2b: Percent of Several Non-Financial Assets Held by Various Wealth Groups, 2004
Figure 3a: Household Debt as Percent of Disposable Income, Selected Years 1949-2005
Figure 3b: Household Debt as a Percent of Assets, Selected Years 1949-2005
Figure 4: Percent of Debt Incurred for Various Purposes, Selected Years 1995-2004
Figure 5: Percent of Families Holding Debt by Type of Debt and Income Group, 2004
Figure 6: Bankruptcy Rates per 1,000 People between Ages 18 and 65, 1980-2007
Figure 7: Percent of Households with Debt-to-Income Ratios Greater than 40 Percent by Income Quintile, 2004

Download the complete Wealth and Economic Mobility Report here.

Economic Mobility of Men and Women

Over the past generation, there has been a dramatic shift in women's participation in the workforce and contributions to family income. With this shift, studies of economic mobility, which have traditionally focused on the relationship of men's income to those of their fathers, have expanded to consider the experiences of women.

This chapter describes and compares men and women's economic success and income mobility across the generations: How have men and women fared economically over the past few decades? How do their incomes compare with incomes of their own parents? Do parents pass along their economic advantage or disadvantage to their sons and daughters in the same way?

Supporting Assets

Table 1: Percent Married, by Generation, Gender, and Parental Income
Figure 1: Median Annual Personal Income, Men and Women Ages 30-39 (2004 dollars)
Figure 2: Median Annual Personal and Family Income, Men Ages 30-39 (2004 dollars)
Figure 3: Family Composition for Adults Ages 30-39
Figure 4: Percent of Children with Family Income Above their Parents' Family Income, by Gender (inflation-adjusted)
Figure 5: Chances of Getting Ahead or Falling Behind in Income Ranking, by Parental Income and Child's Gender

Download the complete Economic Mobility of Men and Women Report here.

Download the complete Economic Mobility of Men and Women Executive Summary here.

REPORT CONTENTS B

Economic Mobility of Black and White Families

The American Dream that one can rise up from humble beginnings and achieve a comfortable middle-class living, if not attain great wealth, transcends racial lines. But is it a reality for black and white families alike?

This report reviews overall income trends based on Census Bureau data and provides an intergenerational economic mobility analysis based on a longitudinal data set that allows a direct match of the family income of parents in the late 1960s to their children's family income in the late 1990s to early 2000s.

In brief, the report finds a significant racial gap in mobility. Trends show that median family incomes have risen for both black and white families but less so for black families. Moreover, the intergenerational analysis reveals a significant difference in the extent to which parents are able to pass their economic advantages onto their children. Whereas children of white middle-income parents tend to exceed their parents in income, a majority of black children of middle-income parents fall below their parents in income and economic status.

Supporting Assets

Figure 1: Median Personal Income of White and Black Men and Women Ages 30-39 (2004 Dollars)
Figure 2: Median Family Income of White and Black Adults, Ages 30-39 (2004 Dollars)
Figure 3: Family Compostion of White and Black Adults, Ages 30-39
Figure 4: Percent of Children with Family Income above their Parents' Family Income, by Race
Figure 5: Children's Income, by Race, Compared to Parental Income and Generational Average (2006 Dollars)
Figure 6: Chances of Getting Ahead or Falling Behind in Income Ranking, by Parental Income and Race
Table 1: Parents' Income of White and Black Children in PSID Sample

Download the complete Economic Mobility of Black and White Families Report here.

Download the complete Economic Mobility of Black and White Families Executive Summary here.

Immigration: Wages, Education and Mobility

The idea of economic mobility in America often evokes a personal story about mobility and the American Dream. For many Americans, it is one of immigrant parents or grandparents or even one's own journey and arrival. In recent decades, immigration has been rising steadily, with nearly one million legal immigrants entering the country per year throughout the 1990s and in the early years of this century, compared to only about 300,000 per year in the 1960s.

In addition to legal immigrants, it is estimated that about 500,000 illegal immigrants now arrive each year. These numbers clearly show that the allure of the American Dream is alive and well. But is it actually working for today's immigrants? How has immigrant economic mobility changed over time? And is immigrant economic mobility similar to that of U.S. citizens?

This report explains that the American engine of economic assimilation continues to be a powerful force, but the engine is incorporating a fundamentally different and larger pool of immigrants than it did in earlier generations. The shifting educational and economic profile of today's immigrants is provoking difficult and important questions about the ability of immigrants to achieve the American Dream.

Supporting Assets

Figure 1: Annual Number of Legal U.S. Immigrants by Decade and Region of Origin, 1960-2005
Figure 2: Educational Attainment of First Generation Immigrants 25 Years and Over, by Year of Entry
Figure 3: Educational Attainment of First Generation Immigrants 25 Years and Over by Country of Origin, 2004
Figure 4: Educational Attainment for First and Second Generation Immigrants and Non-Immigrants, 25 Years and Over, 2004
Figure 5: First Generation Age-Adjusted Wages Relative to Wages of Non-Immigrants, 1940, 1970, 2000
Figure 6: Second Generation Age-Adjusted Wages Relative to Wages of Non-Immigrants, 1940, 1970, 2000
Figure 7: First and Second Generation Age-Adjusted Wages Relative to Wages of Non-Immigrants

Download the complete Immigration: Wages, Education and Mobility Report here.

Download the complete Immigration: Wages, Education and Mobility Executive Summary here.

Education and Economic Mobility

Most Americans believe that the road to achieving the American Dream passes through the schoolhouse door. This chapter examines evidence of the returns to schooling in the American economy, changes in the average level of education by various groups of Americans during the twentieth century and the role of education and family background in promoting economic mobility.

Supporting Assets

Figure 1: Median Family Income of Adults Ages 30-39 with Various Levels of Educational Achievement, 1946-2005
Figure 2: Years of Schooling Completed by Adults at the 20th, 50th, and 80th Percentiles, 1900-2000
Figure 3: High School Graduation Rates by Gender and Ethnic Group
Figure 4: College Graduation Rates by Gender and Ethnic Group
Figure 5: Percent of Children and Family Income above their Parents' Family Income, by Education Level
Figure 6: Chances of Getting Ahead for Children with and without a College Degree, from Families of Varying Income
Figure 7: Percent of Children with a College Degree by Parents' Family Income Quintile, 2005
Figure 8: Trends in Average Mathmatics Scores for 17-Year-Olds by Parents' Highest Level of Education, 1978-2004
Figure 9: Percentage of High School Class of 1992 Enrolled in Various Postsecondary Institutions