Getting Ahead: Economic and Social Mobility in America

Summary

The growing gap between rich and poor in the United States has been widely noted. To many, it is alarming and calls for strong action to address what is perceived to be an increasingly bifurcated society in which the most fortunate have prospered while the poor have been left behind. Our thesis is that this single minded focus on income inequality has led to a preoccupation with what are only the symptoms of a deeper set of forces that badly need to be understood. Where one ends up in the income distribution reflects, after all, where one began, who one's parents were, what kind of education one received, race and gender, and a host of other factors—including just plain luck. Our focus, then, is on what is happening to opportunity—to the process that causes some individuals to be successful while others fail. Understanding what lies behind any particular distribution of incomes very much influences our perceptions of whether that distribution is "good" or "bad" and what, if anything, needs to be done about it. Those who believe that the distribution fairly reflects each person's talents and energies will have one view. Those who believe it is a deck stacked to reward those fortunate enough to have stared with the right cards will have another. One cannot judge any particular distribution of incomes without knowing what produced it. Nor can one decide such important questions as whether welfare reform will help or harm poor children, whether educational resources are properly deployed, or whether inheritance taxes are too steep or not steep enough.

Why Focus on Opportunity

One good reason to focus more attention on opportunity is that Americans have always cared more about equal opportunity than about equal results. The commitment to provide everyone with a fair chance to develop their own talents to the fullest is a central tenet of the American creed. This belief has deep roots in American culture and American history and is part of what distinguishes our public philosophy from that of Europe. Much of that history has revolved around a struggle to level the playing field by reducing discrimination against previously excluded groups and by extending education to an increasingly broad segment of the population. This theme is elaborated in chapter 2, which concludes that substantial progress has occurred on both fronts—to the point where all but 13 percent of the population now graduates from high school and the access of women and minorities to most jobs and educational opportunities has improved dramatically.

Americans' traditional concern about opportunity is only one reason to give it greater attention. Another is that the current emphasis on income inequality begs the question of how much inequality is too much. Virtually no one favors a completely equal distribution of income. It is understood that some inequality in rewards is what drive individual effort and, as such, is essential to economic growth. Many would argue that current inequalities far exceed those needed to encourage work, saving, and risk taking, and that we need not worry about the optimal degree of inequality in a society that has clearly gone beyond that point. But the argument is hard to prove and will not satisfy those who are persuaded that inequality is the price we pay for a dynamic economy and the right of each individual to retain the benefits from his or her own labor. In light of these debates, if any public consensus is to be found, it is more likely to revolve around the issue of opportunity than around the issue of equality.

Still another reason to focus on opportunity is that it suggests a redirection of public policy from treating symptoms to treating underlying causes. As long as inequality of results is perceived to be the problem, a more progressive system of taxes and transfers will seem the logical solution. We do not argue against such progressivity. One should not deny the unfortunate various forms of assistance, it is obviously better if one can prevent misfortune in the first place. Some argue that giving disadvantaged families more income is the best way to secure more equal opportunities for children. But our reading of the literature on the ability of income transfers per se to accomplish this objective suggests this view may be naive (see chapter 9).

The distribution of income has often been compared to a ladder. Right now, the rungs on the ladder are far apart. Both in comparison to other industrialized countries and to our own past history, the United States has a lot of inequality. We believe a shorter ladder with more closely spaced rungs would be preferable, but our focus in this book is much more on who gets to occupy which rungs. It is not only the distribution of income that should concern us but also the system that produces that distribution. As noted in chapter 3, justice and inequality can be compatible—if the rules that determine who wins and who loses are perceived to b e fair. Imagine a society in which incomes were as unequal as they are in the United States but in which everyone had an equal chance of receiving any particular income—that is, in which the game was a completely unbiased lottery. Although some, especially those who are risk adverse, might blanch at the prospect of losing, and might wish for a more equal set of outcomes a priori, others might welcome the chance to do exceedingly well. But no one could complain that they hadn't had an equal shot at achieving a good outcome. So fairness is critical and the rules governing who wins matter more now than in the past precisely because the rewards are so much more unequally distributed. When the stakes are high, when incomes are very unequally distributed, then the way the game is played warrants special scrutiny.

There exists, within the social science literature, a wealth of information on the topic of economic and social mobility—that is, on what determines who gets ahead. In his excellent review of hit literature, Robert Haveman notes that this body of work has had far less impact in influencing social policy than might have been expected. Some of the most interesting work was done in the 1960s and 1970s by Christopher Jencks and his colleagues. Jencks's major and somewhat controversial conclusion at the time was that most of the variation in men's incomes had to be ascribed to luck, and that if the public wanted to reduce inequality it would have to redistribute income, not just schooling or early childhood experiences.

Even more controversial than Jencks's work has been the publication of The Bell Curve by Richard Herrnstain and Charles Murray. These authors believe that IQ or cognitive ability is both critical to and increasingly important for success. They argue that such ability is largely inherited and that efforts to intervene, to ensure better outcomes for the initially disadvantaged are, for this reason, likely to be ineffective. In a curious way and for different reasons, both the Jencks and the Herrnstein-Murray views are pessimistic about our ability to change outcomes by modifying the education system or other early experiences. Jencks's argument is that initial advantages and disadvantages are not that important; Herrnstein and Murray say that they are critical. Jencks would deal with the problem by redistributing income after the fact; Herrnstein and Murray by accepting and then learning to live with inequality. But neither appears to believe it is possible, through public policy, to create significantly more opportunity. Our view is more optimistic. We believe more can be done to increase opportunity.

Whatever their views, both Jencks and Herrnstein and Murray are to be commended for putting these issues on the public agenda. The remarkable fact is how little serious scrutiny they have received outside of the academy. The public may give lip service to the idea of equality of opportunity, but few stop to ask what that should mean in practice and how much of it this country actually has. In particular, too little attention has been given to the critical role played by social origins and inherited ability in determining who ends up where in the distribution of income. Yet it is these deepest of inequalities that have frustrated attempts to provide a greater degree of opportunity. Education is supposed to be the great leveler in our society, but it can just as easily reinforce these initial inequalities. Any attempt to give every child the same chance to succeed has to come to terms with the diversity of both early family environment and inherited abilities and with the need for unequal treatment in favor of the most disadvantaged. Numerous programs—from Head Start to extra funding for children in low-income schools—have been created in efforts to even the playing field. But even where such efforts have been effective, they have been grossly inadequate to the task of compensating for difference in early environment. The result is that the distribution of income is not just unequal. It is to a greater extent than our public rhetoric would suggest, predictable. The winners and losers are not drawn equally from all sectors of society. In short, understanding the facts about the actual distribution of opportunity is a necessary prerequisite to reshaping the public debate on these issues.

Overview of the Remaining Chapters

In chapters 2 and 3, we reexamine the country's concern with various inequalities, first in a historical and then in a normative context. In chapter 4, we begin to look at the evidence. We focus first on what is known about how much people move up and down the economic ladder during their adult years. This is sometimes call intergenerational mobility. In chapters 5 and 6, we focus on intergenerational mobility—that is, on the extent to which children can, or do, escape their origins by doing better or worse than their parents. In chapter 7, we look at the prospects for upward mobility among the most disadvantaged—welfare recipients, in particular. In chapter 8, we examine the role of the education system in opening up opportunities. In chapter 9, we focus on the reasons why family background is such a strong predictor of adult success. Finally, in chapter 10, we consider the implications of these findings for policy and for the future.

Intragenerational Mobility (Chapter 4)

People move up and down the economic ladder throughout their working years. Those at the bottom of the income scale often move up as they accumulate skills and experience, add more earners to the family, or find better jobs. Those at the top may move down as the result of a layoff, divorce, or business failure. Thus, any snapshot of the distribution of incomes in a single year is likely to be a misleading indicator of the distribution of incomes over a lifetime. For example, in a society in which everyone was poor at age 25 but rich by age 55, the distribution of annual incomes would be very unequal but the distribution of lifetime incomes quite equal. This society would be one in which there was a lot of income inequality (as conventionally measured) but simultaneously a lot of opportunity.

Studies of income mobility in the United States suggest that such opportunities do exist. Large proportions of the population move into a new income quintile each year, with estimates ranging from 25 to 40 percent. This evidence indicates that lifetime incomes are indeed more equally distributed than the annual data suggest.

It is also true that income inequality as conventionally measured has been increasing since the late 1960's and that this has not been accompanied by any increase in mobility rates. Thus, growing annual income inequality implies growing lifetime income inequality as well.

To return to our ladder analogy, many people move up and down it over the course of their lifetimes. That fact is not in dispute. However, the amount of movement between the rungs has not changed over the past few decades. What has changed is the position of the rungs. They are now farther apart. The distance between those perched at the top and those on the bottom is greater than ever.

Intergenerational Mobility (Chapters 5 and 6)

Although there is no evidence of increasing opportunities to move up the ladder over one's working life, a rather different story merges when we turn our attention to what is happening to incomes across generations. Data for the somewhat longer period of time needed to span several generations highlight two important trends that re affecting opportunities for younger generations. On the one hand, they are being negatively affected by a slowdown in the rate of economic growth, which in the past ensured that each generation would have opportunities to move into jobs paying more than those held by their parents. At the same time, younger generations are benefiting from the greater openness of the social structure. Inherited advantages of class play a smaller role now than they used to in shaping the success of individual Americans, with larger numbers now moving beyond their origins. In this sense, opportunity has increased.

The Role of Economic Growth

Young men, born after about 1960, are doing less well than their father's generation did at the same age. In the past, a strongly growing economy guaranteed each generation better economic prospects than the previous one. The growth of the economy has always been an important source of upward mobility, a reason that children tend to be better off then their parents. In a dynamic economy, a farmer's son can become a skilled machinist and the machinist's son the founder of a computer company. Indeed, scholars who have compared the United States to other industrialized countries have discovered that the primary, and perhaps the only reason for greater mobility in the United States is that, until recently, it experienced faster growth than the other countries of Western Europe. Contrary to popular ideology, it is this economic dynamism rather than any inherent social fluidity or lack of class barriers that is primarily responsible for America's reputation as the land of opportunity. But sometime in the early 1970s, America's economic escalator slowed to a crawl.

The period from the end of World War II to about 1973 was an especially impressive one from an economic standpoint. Productivity grew by 3.0 percent a year between 1960 and 1973. But the good news didn't last. After 9173, productivity growth slowed to 1.1 percent a year. Because the compensation of workers tends to track how much they produce, real wage growth slowed commesurately. The effects have been felt especially by young men without much education. The combination of slower growth and a distribution of wage gains that have favored women over men and the college-educated over those with high school degrees has left poorly educated men with real incomes that are less than half of what they otherwise would have earned.

More generally, with a slower economic growth rate, it is fare more difficult to provide ever-expanding opportunities to each new generation of workers. The youngest generation is discovering this first-hand; young men, in particular, are earning less than their fathers did at comparable ages.

The Role of Class

It is often said that Americans would rather talk about sex than money, but it is also true that they would rather talk about money than class. That class matters in the United States, and matters as much as it does in the older democracies of Western Europe, may come as a surprise to many. But the evidence is clear. Both incomes and occupations are correlated across generations. For example, men with white collar fathers are almost twice as likely as those with blue collar origins to end up in upper white collar jobs. The good news is that class plays a smaller role than it used to in shaping the success of individual Americans. Larger numbers now move beyond their origins. This trend has been evident for at least the last three generations, and one study suggests it dates back to the mid-19th century. It appears to have been driven by the broadening of educational opportunities to more and more Americans, the decline of self employment where inheritance of a business or a trade may be important, and the increased emphasis on merit is assigning occupational roles. Whatever the reasons, the importance of class in the United States has declined.

Both these factors—the slowdown of economic growth and the declining importance of class—have affected prospects for the youngest generation. The good news is that individuals are increasingly free to move beyond their origins. The bad news is that fewer destinations represent an improvement over where they began. For those concerned about the material well-being of the youngest generation, this is not a welcome message. But for those concerned about the fairness of the process, the news is unambiguously good.

What About the Underclass (Chapter 7)

Just as American's have been loathe to believe that class matters in the United States, so too have they resisted the idea that there might be a group of individuals permanently stuck at the bottom of our society with little or no opportunity to improve their lot. Yet research completed in the past decade suggests that such a group may indeed exist. It is concentrated in neighborhoods characterized by high rates of poverty, joblessness, dropping out of school, and single-parent families. Although still relatively small (about three million people in 1990, according to some estimates), it is larger now than it was in 1970.

Many members of this group, and their children, are on welfare. And many of them remain dependent on public assistance for long periods. But with enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, society's expectations for this group have changed. It is now hoped that most mothers on welfare will find jobs that will enable them to support their families.

We examine the extent to which this hope is likely to be realized and conclude that welfare reform couldn't have come at a better time. With a strong economy, and new welfare rules that require or encourage work, many former or would-be recipients appear to have found jobs or some other means of support. However, it is too early to declare victory. States have not yet had to dig deeply into the more troubled portions of their caseloads. And any faltering of the economy would further undermine their ability to move recipients into the labor market. Among those recipients who do find jobs, the evidence suggests that if they work full time and continue to collect the assistance for which they remain eligible (such as food stamps and the Earned Income Tax Credit), their incomes will be sufficient to move them a bit above the poverty line—depending on family size and availability of subsidized child care. But several recent studies also suggest that these workers are not likely to be upwardly mobile. Most will earn low wages for the balance of their adult years. And the most disadvantaged segments of the current caseload—those mostly likely to be part of the so-called underclass—may not be capable of even this degree of self support. Whatever their fate, the real tragedy is the too-frequent inheritance of multiple disadvantages among their children, many of whom seem condemned to repeat their parents' lives.

Education and Opportunity (Chapter 8)

No discussion of social mobility in America would be complete without assessing the role of the education system in opening doors for those from diverse backgrounds. We know that education is more important than ever in today's economy. The most direct evidence of this is the growing wage premium received by those with a college education. But it is also true that mobility, both over the life cycle and across generations, is much greater for those with college degrees. And lack of education is a critical barrier to upward mobility for those at the bottom end. of the labor market. In short, education is more than ever the stratifying variable in American life.

The real question, though, is who gets a good education? If education simply reflects the initial advantages of being born into a well-laced family, then it will have limited effects in spreading opportunities through the population. Indeed, it may actually reduce opportunity by certifying the essential advantages.

Research on this question is mixed and open to varying interpretations. Even among those with comparable backgrounds, extra education contributes to later success in the labor market. And to this extent it contributes to opportunity. At the same time, educational outcomes are powerfully influenced by family background, this influence appears to be growing.

Because schooling is financed largely at the local level, the kind of education a child gets in the United States has always depended on where his parents could afford to live. Buying a house in the right neighborhood—and above all, one with good schools—is the quintessential way of providing a better future for one's children in this country. We examine the extent to which this dependence of schooling on residential location constrains opportunity and conclude that, in general, more money is spent to educate children in more-affluent neighborhoods. We also note that there is no clear association between money spent on education and educational achievement. Still, resources matter—or, more to the point, they should matter. To the extent that they do not, it is an indictment of the effectiveness of the entire system of public elementary and secondary education. The failure of schools to impart the knowledge and tools that children need for success in today's labor market puts the heaviest burden on those from disadvantaged families who, if they are going to learn these skills, are going to learn them in school or not at all. Their more-privileged counterparts have other sources of learning—their families and communities—which will always give them an edge; but if schools were more effective, these advantages would not loom so large. So, inequities in school finance, combined with the general underperformance of the schools, leave less-advantaged children far behind in the competition for good jobs once they reach adulthood.

In addition to its disproportionate impact on the least advantaged, the poor performance of schools has another corollary: the devaluation of a high school diploma and the increased reliance on higher education to signal that one has the competencies needed by employers. Yet it is at the college level that costs to students and parent become most significant and family resources have their strongest effects on access.

We conclude, then, that the rhetorical commitment to equal opportunity in the United States is not matched by a similar commitment to providing all children with a good education.

If there is any public good that should be made an entitlement, and not remain contingent on local fiscal capacity, it is K through 12 education. But providing a more equitable source of financing must be pursued in tandem with reforms that ensure those resources are effectively used. Similarly, providing more access to college through grants, subsidized loans, tax credits, or other means is desirable, but only under two conditions: first, if such assistance is structured in ways that improve student performance at the precollege level, and second, if care is taken to prevent this from fueling a new burst of tuition increases by colleges and universities. Without these safeguards, we will simply end up spending more to provide our youth with the skills that they should have acquired in high school. The most important agenda, however, is to restore the value of the high school diploma itself by improving the performance of students and schools at every level. This conclusion is doubly warranted in an economy that is growing more slowly than in the past and providing its greatest rewards to those with the most skills—making upward mobility even more dependent on education than has been true historically.

Why Family Background Matters (Chapter 9)

Despite its importance, no amount of educational opportunity is likely to compensate completely for differences in family background. social origins will almost surely continue to exert a powerful influence on educational outcomes and later success in the labor market. An obvious question, then, is why is this relationship so strong? What accounts for the fact that children from poorer families do not fare well later in life as those from more-affluent backgrounds?

In chapter 9, we consider three possible answers. The first is that well-placed parents can pass on advantages to their children without even trying: they have good genes. The second is that they have higher incomes, enabling them to provide better material environments for their children. The third is that they are simply better parents, providing their children an appropriate mix of warmth and discipline, emotional security, intellectual stimulation, and coaching about how to relate to the wider world.

Although it is difficult to disentangle the separate influence of each, we conclude that the role of material resources has probably been exaggerated. Genes clearly matter. We know this from studies of twins or sibling who have been raised apart. However, IQ or other measures of ability are at least somewhat malleable, and differences in intelligence are only a very partial explanation of who ends up where on the ladder of success. good parenting and an appropriate home environment are much harder to measure but are probably critical, especially during the preschool years.

What Should be Done? (Chapter 10)

We conclude that improving education—especially preschool and primary education—is critical to realigning American practice with the now-tarnished rhetoric about opportunity. This will require that school resources be more equitably distributed and, at the same time, that these resources be more effectively used. In addition, providing children, including the very youngest infants and toddlers, with an appropriate home environment is key to their later success. Learning does not begin at age five, or even at age three.

We also believe that maintaining the current safety net is important, but note that providing still more income to disadvantaged families may not be the best way to change their children's life chances. Supplementing the incomes of the poor, especially the working poor, may be desirable for lots of reasons—including a sense of fairness—and it may even have some modest effects on child outcomes, but it should not be touted as the primary solution to the problem of unequal opportunity.