John E. Morton on the Economic Mobility Project

John E. Morton

Managing Director, Pew Economic Policy Group

Economic Mobility Project

Increasingly, people worry that the American Dream—children living a better life than their parents—may be slipping away. But is this perception accurate? What does the hard data suggest? Separating myth from reality is the goal of a nonpartisan effort called the Economic Mobility Project, a unique collaboration between Pew and leading economists and social scientists from four well-known think tanks: the American Enterprise Institute, the Brookings Institution, the Heritage Foundation and the Urban Institute.

With issues like the economy and home ownership at the center of the 2008 presidential race, the Economic Mobility Project is providing some surprising new data on Americans’ potential to climb the socio-economic ladder, particularly in recent years, and how the United States compares to other nations with regards to economic mobility. This summer, the Washington, D.C.-based project begins turning its attention to policy solutions on which leaders of both political parties could agree.

We spoke recently with John Morton, managing director, Economic Policy, about this groundbreaking project.

Also: Read an article from the New York Times Magazine that discussues a study from the Economic Mobility Project.

Questions and Answers

Question

What is economic mobility?

Answer

It is the ability of an individual or a family to move up or down the economic ladder, between or during a generation. It is important to recognize that mobility works in both directions. While the American Dream is premised on the aspiration of climbing up the ladder, the data show that certain segments of society actually experience downward mobility. 

Economic mobility can be measured several ways. The first is over time, whether movement is within or across generations. Mobility can also be measured in absolute or relative terms.  Absolute mobility describes a dynamic in which a rising tide is lifting all boats, but it does not capture the likelihood that boats are changing places in the harbor. Relative mobility looks at the way one boat might be rising higher than the others, but it does not assess what is happening with the overall tide. The project has helped crystallize these concepts for the public and policy makers.

Question

Compared to the more basic issue of income inequality in America, why does economic mobility matter?

Answer

The project does not take a position on income inequality, that is, the distribution of wealth. We do think it’s an important topic, yet we believe that economic mobility is an equally, if not more, important issue. It cuts to the heart of the American Dream and people’s underlying belief in the unique promise of the American economic system.

Question

The perception among Americans is that the American Dream is increasingly hard to attain. Are they right, and if so, why is that happening?

Answer

There is a very high level of economic anxiety in the nation right now, a lot of it having to do with rising income inequalities. For many, this has translated into a perception that the American dream is fading.

But has there been a decrease in generational mobility over the last 30 years? The verdict is still out. We’ve actually seen fairly strong levels of upward mobility for most people in American society, with about two out of three families doing better in real terms than they were a generation ago. However, we are seeing some very troubling numbers in pockets of the population, and we think the public and policy makers should pay more attention to these.

Question

And what are those pockets?

Answer

In America if you’re a child born to a family whose income is in the bottom 20 percent of distribution, you have a 42 percent likelihood of being in that quintile as an adult. That number is much higher in the United States than it is in many other developed economies, by the way. That is a troubling finding, for it calls into question the extent to which the American Dream is accessible for a very large percentage of our population.

When we say that 42 percent of that bottom quintile remains in the bottom quintile a generation later, we do not mean that they remain destitute or very poor. The overall tide of the economy may be rising, but relative to others in society, they remain at the bottom. Thus, the active and very nuanced debate that often plays out in policy circles is around this question: should we be focused primarily on policies to support overall economic growth that allows all boats to rise or should we be focused on redistributing the economic gains of some to others.

A second area of concern is related to race and mobility. We’ve known for a long time that there is a group of people who are stuck at the bottom of the ladder. But the project research also finds that nearly 45 percent of children born to African American middle-income families fell to the bottom quintile by the time they were adults. This is in some ways a far more devastating finding because it suggests that middle-income African American families are unable to pass on their middle-income status to their children.

Question

What did your research find about the impact of education?

Answer

The common belief is that education is the great equalizer, and our project’s results proved that to be true. If you are a child born to parents whose income is in the bottom 20 percent, you have about a 6 percent likelihood of ending up in the top income bracket as an adult—this is a “rags to riches” story. Now, if you ask “If that child is born to low-income parents and gets a college education, what is the likelihood that he or she will make it to the top 20 percent?” That number jumps from 6 percent to 19 percent. By the way, the child also has a 20 percent likelihood of making it to the second quintile and also to the third quintile, so you could say the child has a 60 percent chance of making it to the middle income level or above.

However, there is an interesting comparison: a child born to top income quintile parents in the 1970s who does not get a college education still has a 23 percent likelihood of staying in that top quintile as an adult. I think the most important lesson here may be that education matters, but family matters more.

Question

What does the sum of the findings mean in a greater political context? Do you see this issue playing a significant part in the race for the White House?

Answer

While we are hopeful of generating a more bipartisan debate around fundamental issues of mutual concern to both parties, we are quite pleased that as they hit the campaign trail, both presidential candidates have already referred to our work and have spoken to their commitment to enhancing economic mobility for all Americans.

Question

On your Web site, the project notes that “the present moment provides a unique opportunity to refocus attention and debate on the question of economic mobility.” How best should policy makers go about that?

Answer

The first step is to establish a bipartisan fact base from which that policy discussion can begin—something to which we are contributing. The second step is understanding the key tools that people need or use to achieve upward mobility. That is a discussion we are having now, and it will drive the research we conduct in the project, looking at the main indicators of mobility in America.

Together with the Heritage Foundation, we are examining at the effects of education, health care, family structure, savings rates and financial literacy on economic mobility. We are boiling these down to a set of 8 to 10 factors that are most critical to a person’s economic mobility. Our report on this research will likely be out this summer. Then we will turn our attention to advancing policy solutions to address economic mobility.

For the project’s reports and data, visit the Economic Mobility Project’s Web site.