Volvo OPINIONS Forum

ECONOMIC MOBILITY OF FAMILIES ACROSS GENERATIONS (Released
November 2007) Two out of three Americans have higher incomes than their
parents, while one-third are falling behind.

The current generation
of adults is better off than the previous one, because of real income growth,
but their incomes are more unevenly distributed. („Across Generations’
Figure 1)

Compared to their
parents, they also live in families that are smaller and where there is more
often a second earner. Women‟s incomes have grown while men‟s have
stagnated. („Men & Women’ Figures 1, 2 &3)

One’s economic position on
the income ladder in adulthood is heavily influenced by that of one’s parents.

Children born to parents
with income on the bottom rung of the ladder are highly likely (42 percent) to
also be in the bottom rung in adulthood, while those born to parents on the top
rung are very likely to stay at the top (39 percent). This is known as
“stickiness at the ends.” (‘Across Generations’ Figure 4)

The rags to riches story
is more often found in Hollywood than in reality – only 6 percent of children
born to parents at the bottom make it to the top of the income distribution. (‘Across
Generations’ Figure 4)

Of the two-thirds of
Americans who make more than their parents’ family income, one-half (or 34
percent of all Americans) are upwardly mobile, meaning they also move up at
least one rung on the income ladder ahead of their parents.

One-quarter of all
Americans (27 percent) are riding the tide – making more than their
parents‟ income but remaining on the same income rung as their parents. A
small number (5 percent) are falling despite the tide, making more than
their parents‟ family income, but slipping to a lower rung. The remaining
(33 percent) are downwardly mobile, making less than their parents and
falling down the income ladder. (‘Across Generations’ Table 1)

TRENDS IN ECONOMIC MOBILITY –
NEW RELEASE For most of our history, Americans have experienced
rapid economic growth and therefore upward absolute mobility. Over the last
generation, however, economic growth has slowed without evidence of an
offsetting increase in relative mobility.

Between 1947 and 1973,
the typical family‟s income roughly doubled. But since 1973 median family
income has slowed, increasing by about 20 percent. (‘Trends’ Table 1)

While economic growth
has slowed, income inequality has increased. As a result, an individual
family‟s fortunes have become more dependent on the opportunity to
compete with other families for the economy‟s rewards.

The hope that increased
opportunity (or relative intergenerational mobility) would offset the effects
of slower growth or more unequal incomes is not supported by most evidence. Research,
though mixed, suggests that the rate of relative mobility has not changed much
since 1970 and, if anything, it may have declined.

INTERNATIONAL COMPARISONS OF ECONOMIC MOBILITY – NEW RELEASE Recent
economic studies challenge the traditional view that the United States has more
economic mobility than other countries. In fact, the best available evidence
suggests that the U.S. stands out as having less, not more, intergenerational
relative mobility than Canada and several European countries.

About half (50 percent)
of parental earnings advantages are passed onto sons in the United States compared
to less than 20 percent in high-mobility European countries. This means that it
takes an average of six generations for family economic advantage to disappear
in the United States compared to three generations in Canada, Finland, Norway
and Denmark. (‘International’ Figure 2)

42 percent of American
men born into the poorest fifth of families stay in the bottom fifth of the
earnings distribution as adults, compared to 25 to 30 percent in some other
countries.

A smaller percentage of
Americans move from the bottom to the top fifth in one generation, than do
people in other European countries. Note that Americans making such a climb
travel a further distance in absolute dollars than do Europeans because of
greater earnings inequality in the United States. (‘International’ Table 1)

By forging a broad and
nonpartisan agreement on the facts, figures and trends related to mobility, the
Economic Mobility Project seeks 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.

WEALTH AND ECONOMIC MOBILITY –
NEW RELEASE While there is movement throughout the income and
wealth distribution, there remains considerable “stickiness” at the tails of
both distributions. Specifically, on wealth:

36 percent of children
born to parents in the bottom wealth quintile remain in the bottom as adults,
and 36 percent of children born to parents in the top quintile remain in the
top as adults. (‘Wealth’ Figure 8)

Only 7 percent of
children born to parents in the bottom wealth quintile make it to the top
quintile in adulthood.

35 percent of adult
children of parents in the bottom wealth quintile move up to the top 3
quintiles and 41 percent of those born to parents at the top move down to the
bottom 3 quintiles. Those born to parents in the middle of the wealth
distribution have an almost equal likelihood of moving up or moving down a
quintile or more.

ECONOMIC MOBILITY OF MEN AND WOMEN (Released
November 2007) Sons and daughters have fairly similar rates of mobility across
generations. That is, family incomes of both sons and daughters resemble their
parents’ to a similar degree.

One exception is lower
mobility rates for daughters of low-income parents as compared to sons of low
income parents – 47 percent of daughters born to parents on the bottom rung
stay on the bottom rung, compared to 35 percent of sons. (‘Men & Women’
Figure 5)

ECONOMIC MOBILITY OF BLACK AND WHITE FAMILIES (Released
November 2007) The American Dream is not a reality for black and white families
alike.

In every income group,
blacks are less likely than whites to surpass their parents‟ family
income and more likely to fall down the economic ladder. (‘Black & White
Families’ Figures 4, 5 & 6)

These trends are
particularly startling for children born to middle income black parents – the
analysis suggests that black parents who achieve middle income status are not
able to pass their economic advantages onto their children in the same way as
white parents.

Only 31 percent of black
children born to middle-income parents make more than their parents‟
family income, compared to 68 percent of white children. (‘Black & White
Families’ Figure 4)

Almost half (45 percent)
of black children whose parents were solidly middle income end up falling to
the bottom of the income distribution, compared to only 16 percent of white
children. („Black & White Families‟ Figure 6)

IMMIGRATION:
WAGES, EDUCATION
AND MOBILITY (Released
July 2007) Upward economic mobility remains a reality for today’s immigrants
but trends are showing signs of change.

Immigrants continue to
seize opportunities to make a better life for themselves and their families,
both upon arrival and in subsequent generations.

While second generation
immigrants continue to earn higher wages on average than non-immigrant
Americans, wages for both first and second generation immigrants are decreasing
substantially relative to non-immigrant wages, raising questions about the
degree of future potential economic mobility. (‘Immigration’ Figure 7)

EDUCATION AND ECONOMIC MOBILITY –
NEW RELEASE Regardless of parental income, adult children are more
likely to surpass their parents’ income in absolute terms if they have a
college degree and more likely to reach the top quintile if they have a college
degree.

For those born to
parents in the bottom quintile, only 5 percent of those without a college
degree make it to the top income quintile, compared to 19 percent that do have
a college degree. (‘Education’ Fig. 6)

Still, family background
plays a strong role in upward relative mobility regardless of college
education.

54 percent of those born
to parents in the top quintile who have a college degree remain at the top,
nearly triple the percentage of college graduates born to parents at the bottom
that make it to the top of the income distribution.

(‘Education’ Figure 6)

23 percent of children
born to parents at the top of the income distribution without a college
degree remain in the top quintile in adulthood, but a similar percent (19
percent) of those born into the bottom quintile that have a college
degree reach the top quintile.