Nearly three-quarters of individuals born into the bottom half of the income distribution improved their economic standing relative to their parents by at least one percentile, yet less than half moved up more than 20 percentiles, and fewer than two in five moved into the top half of the distribution, according to a new report issued by The Economic Mobility Project, an initiative of The Pew Charitable Trusts.
The report is authored by economist and Economic Mobility Project advisory board member Bhashkar Mazumder. It introduces two new measures of relative upward mobility, which captures the extent that children can rise above their own parents' income position when compared to their peers, and also explores various factors that might account for some of the differences in upward mobility rates by race.
“This study allows us to look at mobility through a higher-powered lens,” said John E. Morton, managing director of Economic Policy at Pew and director of the Economic Mobility Project. “While this report confirms earlier project findings that most Americans are moving up the ladder, it also finds that the number of rungs that many Americans climb is fairly modest, particularly for those at the bottom.”
According to the report, 71 percent of children born into the bottom half of the income distribution exceeded their parents' income by at least one percentile. However, the magnitude of their upward movement was not large. Fewer than 40 percent from the bottom half move to the top half of the distribution and only about 45 percent of those born into the bottom half move up 20 percentiles or more.
"Overall, it appears that there is only a limited degree of upward economic mobility for those who start from a disadvantaged background," said report author Mazumder. "It is also clear that good health, and the acquisition of academic skills as reflected by test scores during adolescence, play an important role in explaining upward mobility."
The more granular level of analysis conducted by Mazumder uncovered considerable differences in the mobility rates for men and women. Only 27 percent of men born into the bottom quintile stay there as adults compared to 41 percent of women. Further, 51 percent of men born into the bottom half surpassed their parents' income by 20 percentiles or more compared to only 38 percent of women from the same group.
Similar to the gender gap, the report shows a pronounced racial gap in upward mobility rates. While the vast majority of blacks born into the bottom half of the income distribution exceed their parents' income rank, only 35 percent of blacks exceed their parents' position by 20 percentiles or more; this compares to 50 percent of whites in the same circumstance. White men experience the highest rate of upward mobility out of the bottom quintile, followed by white women, black men and finally, black women.
“These findings lend urgency to the need for debate about policy solutions to address the lack of mobility affecting large numbers of Americans,” said Morton.
The report also sought to identify the key underlying factors that might explain differences in rates of economic mobility between races. When comparing blacks and whites, test scores can explain the entire black-white upward mobility gap. That is, both black and white children with the same test scores experience similar rates of upward mobility. Further, among those who finished four years of college, there is no racial gap in mobility, with both blacks and white experiencing high rates of upward movement.
Even when accounting for a child's family structure at age 14, the racial gap in upward mobility rates remains; and for both races, upward mobility rates are similar whether the child is in single- and two-parent families. Further, while measures of good health and high self-esteem in adolescence seem to positively influence upward mobility, they do not explain the difference in mobility between blacks and whites.
This report drew upon the National Longitudinal Survey of Youth (NLSY), which began with a sample of individuals who were between the ages of 14 and 21 as of January 1, 1979 and who have since been tracked through adulthood. The analysis is restricted to the sample of youth who were living at home with their parents during any of the first three years of the survey and for whom family income was directly reported by the parents in any of these years. Respondents also must have stayed in the sample to adulthood and been interviewed in one of the surveys beginning with 1998 and ending in 2004.
Comprised of a Principals' Group of experts from The American Enterprise Institute, The Brookings Institution, The Heritage Foundation and The Urban Institute, with guidance from an Advisory Board of leading academics and economists, the project seeks to investigate the status of economic mobility in America.
More information about the project is available at www.economicmobility.org.
By forging a broad and nonpartisan agreement on the facts, figures and trends related to mobility, the Economic Mobility Project hopes to focus public attention on this critically important issue and generate an active policy debate about how best to ensure that the American Dream is kept alive for generations that follow.