Economic Mobility Across Generations in the USA

The Great Recession notwithstanding, can you still bootstrap yourway to success in America? After all, America is built on the idea of equal opportunity, regardless of economic status at birth. If you work hard enough, even if you were born in poverty, you too can be rich.

But is that reality? Analysis of intergenerational income and wealth by the Pew Center on the States revealed that even though most Americans have higher family income than their parents did, it's still tough to climb that economic ladder for some:

Pursuing the American Dream: Economic Mobility Across Generations, the latest research from The Pew Charitable Trusts, shows opportunity is not the same for everyone. While 84 percent of Americans have higher family incomes than their parents did at the same age, those born at the top and bottom of the income ladder are likely to stay there as adults.

"The ideal of the American Dream is complex and we see again that one’s ability to achieve it is impacted by race, education, and family background,” said Erin Currier, manager of Pew’s Economic Mobility Project.

Pursuing the American Dream uses the most current data to measure mobility by family income and family wealth, furthering the project’s understanding of how closely tied a person’s place on the economic ladder is to that of his or her parents. The research shows that:

- African Americans are still less likely to exceed their parents’ income and wealth than are whites and they are more likely to be stuck at the bottom of the economic ladder across a generation.

- A four-year college degree promotes upward mobility from the bottom and prevents downward mobility from the middle and the top.

- Most sons are meeting or exceeding the earnings of their fathers at the same age. However, the sons’ earnings represent a smaller proportion of family income than did men’s earnings in the fathers’ generation.

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I am sorry, but if the data is right, the conclusion is wrong. The majority of people born in the bottom quintile improve their lot. The same statement holds for the second quintile.

Now, take a look at the "Failure Rate" of the fourth and fifth quintile. Combined, 56% of them do worse than their parents. The conclusion I reach is that it is relatively easy to improve your financial lot in life but difficult to maintain it.
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Looks like this is about income rather than wealth. If you're born into the top group, you can live a very comfortable life by spending wealth rather than earning income. Of course your parents might not like that and insist that you don't but it is an option and might explain some of the lower income of adult children in the top group.

Is it possible to move up? Sure. I was born in the bottom 20% and have moved up to the second to the top group but I don't know many who went to the same terrible quality schools that made it too. Most still live in the same tiny town in Alabama making close to minimum wage either at the broom factory or as a general laborer. It doesn't look like any of their children are going to do better but hopefully at least a few do.

Of course none of this measures happiness. While I will say that people in my current economic level are happier than those I grew up with, there is still plenty of misery to go around. Instead of being upset at driving an eight year old car, they're upset about having a tv that isn't as large or as flat as what's currently popular.
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Not sure what this article is supposed to be pointing out. Seems like common sense to me. Most of the time the children of parents of the bottom quartile are able to move up. Most of the time the children of parents in the top quartile end up less well off. Becoming a millionaire is harder if you start off poor than if you start off wealthy.

Research was needed to find this?
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The information is even less meaningful that you'd think. If mobility is totally random, 50% of people would be better off than their parents (equal chance of moving up or down). However, since this measure _family_ income, the rise of dual income families makes it relatively expected that the average family income would rise. Increased dual incomes also means it's very possible (and true for most people, according to other research) that real wages can be declining while family income rises.

Taken in total, it's probably a bad sign that only 40% of the people that start in the top quintile, stay there. That suggests there's a downward bias. In fact, looking at all the quartiles, there's a downward bias everywhere except the bottom.
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