Economy
6:09 pm
Thu January 23, 2014

Study: Upward Mobility No Tougher In U.S. Than Two Decades Ago

Originally published on Fri January 24, 2014 4:32 pm

A new study finds that contrary to widespread belief, it's no harder to climb the economic ladder in the United States today than it was 20 years ago.

But the study did find that moving up that ladder is still a lot more difficult in the U.S. than in other developed countries.

Economists have been looking into the issue of U.S. economic mobility for a long time. But they've often been hampered by the lack of adequate data, says Gary Solon, an economics professor at Michigan State University. He calls the study released this week much more comprehensive than anything that's come before.

"The unusual thing is that this research team has gotten cooperation from the Internal Revenue Service to access tax return data, which of course are not generally available to researchers," Solon says.

The researchers, led by Raj Chetty of Harvard University, looked at low-income people born in the early 1970s, and how likely they were to advance to top income brackets. The researchers then compared their economic mobility with that of people born later.

"What we found is that mobility has remained remarkably stable," says Harvard's Nathaniel Hendren, a co-author of the study. "The chance in which kids can climb up or down the income ladder has remained pretty stable over the last 20 to 25 years."

The report comes at a time of growing concern about economic mobility, and deep political divisions about how to address it. There is a widespread belief that the United States has become a much more classbound society, a place where rising above your station has become a lot harder.

The study "addresses a very burning question about whether the recent rise in inequality has substantially changed economic mobility," says David Autor, an economics professor at the Massachusetts Institute of Technology. "And at least in the short time window in which they're able to look, the answer is no. So that's good news."

The bad news is that growing income inequality has made the gap between income levels much wider than in the past, Autor says. A person who's born at the bottom and stays there is further behind than ever before.

"The costs of immobility have risen, because the lifetime difference in earnings now between someone born at the bottom quartile versus top quartile is much, much greater than it used to be," Autor says.

The study also contained some other disturbing findings. It said economic mobility in the United States remains behind that of other wealthy countries. An American born at the bottom has about an 8 percent chance of rising to the top, it found; the odds are twice that in Denmark.

"The political rhetoric has gone down a path of saying, 'Oh, maybe it's getting harder to move up in the income distribution,' " Hendren says. "But the sad fact is that it's always been very hard in the United States relative to other countries, and it hasn't gotten any better, it hasn't gotten any worse."

But the study also says economic mobility varies a lot from place to place in the United States. Rates of advancement in the Seattle, Washington, D.C., and San Francisco metro areas compared favorably with European countries. But many parts of the Southeast and the Rust Belt look more like the developing world.

"In areas, say, like Charlotte, N.C., kids born in the bottom portion of the income distribution have about a 4 to 5 percent chance of reaching the top," Hendren says. "But kids born in, say, Salt Lake City, have about an 11 percent chance of reaching the top if they're born to a poor family."

The study doesn't try to find out why economic mobility varies so much. But it does note that there's a strong correlation between advancement and certain kinds of social factors: the quality of schools, the degree of racial segregation, and whether you grew up in a two-parent household.

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Transcript

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A study released this week is shedding new light on economic mobility in the United States. Those two words have been in the news a lot lately, as President Obama has tried to focus attention on the issue. The new study, prepared by a group of economists, came to a surprising conclusion. It is no harder to climb the ladder now than it was 20 years ago.

But, as NPR's Jim Zarroli reports, moving up is still a lot harder in the U.S. than it is in other developed countries.

JIM ZARROLI, BYLINE: Economists have been looking into the issue of U.S. economic mobility for a long time. But Gary Solon, professor of economics at Michigan State, says they've often been hampered by the lack of adequate data. Solon say the study released this week is much more comprehensive than anything that's come before.

GARY SOLON: The unusual thing is that this research team has gotten cooperation from the Internal Revenue Service to access tax return data, which of course are not, you know, generally available to researchers.

ZARROLI: The researchers were led by Raj Chetty of Harvard. They looked at low-income people born in the early 1970s, and how likely they were to advance to top income brackets. And then they compared them to people born later.

Nathaniel Hendren of Harvard is a co-author of the study.

NATHANIEL HENDREN: What we found is that mobility has remained remarkably stable. The chance in which kids can climb up or down the income ladder has remained pretty stable over the last 20 to 25 years.

ZARROLI: The report comes at a time of growing concern about economic mobility and deep political divisions about how to address it. There is a widespread belief that the United States has become a much more class-bound society, a place where rising above your station has become a lot harder.

David Autor is a professor economics at MIT.

DAVID AUTOR: It addresses a very burning question about whether the recent rise in equality has substantially changed mobility. And at least in the short time window in which they're able to look, the answer is no. So that's good news.

ZARROLI: The bad news, Autor says, is that growing income inequality has made the gap between income levels much wider than in the past. A person who's born at the bottom and stays there is further behind than ever before.

AUTOR: The costs of immobility have risen because the lifetime difference in earnings now between someone born at the bottom quartile, versus top quartile, is much, much greater than it used to be.

ZARROLI: The study also contained some other disturbing findings. It said economic mobility in the United States remains behind that of other wealthy countries. An American born at the bottom has about an eight percent chance of rising to the top; the odds are twice that in Denmark.

Again, Nathaniel Hendren.

HENDREN: The political rhetoric has gone down a path of saying, oh, maybe it's getting harder to move up in the income distribution. But the sad fact is that it's always been very hard in the United States relative to other countries, and it hasn't gotten any better, it hasn't gotten any worse.

ZARROLI: But the study also says economic mobility varies a lot from place to place in the United States. Rates of advancement in the Seattle, Washington, and San Francisco metro areas compared favorably with European countries. But many parts of the Southeast and the Rust Belt look more like the developing world.

HENDREN: In areas, say, like Charlotte, North Carolina, kids born in the bottom portion of the income distribution have about a four to five percent chance of reaching the top. But kids born in, say, Salt Lake City, have about an 11 percent chance of reaching the top if they're born to a poor family.

ZARROLI: The study doesn't try to find out why economic mobility varies so much. But it does note that there's a strong correlation between advancement and certain kinds of social factors: the quality of schools, the degree of racial segregation, and whether you grew up in a two-parent household.

Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.

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