The Ladder

A Blog from New America's Asset Building Program

Understanding and Promoting Economic Mobility

Published:  September 1, 2011

Economic mobility in early twenty first century America is at the core of our work. It has also become a hot topic among bloggers, people in the policy and advocacy worlds, government officials, and the media. How are we faring compared with past generations and what can we expect for future generations? As this short and accessible video from Pew’s Economic Mobility Project demonstrates, one key issue hampering this discussion is the difficulty of adequately defining economic mobility itself.

 “Economic mobility is the ability to move up and down the income ladder during one’s lifetime and across generations. So having an understanding of economic mobility is therefore having an understanding of the health and status of the American Dream.” 

 

The video uses the analogy of an escalator to illustrate two ways of thinking about economic mobility: absolute and relative mobility. To visualize absolute mobility, we see an upward moving escalator with a line of people standing neatly in place. Everyone moves at the same pace and arrives at the top in the same order as when they hopped on at the bottom. In the second scenario, relative mobility is an escalator more accurately reflects the experience of real life: people are able to move about and may switch places. Upward relative mobility allows the last person to get on to jump ahead and arrive closer to the top than their original position would allow. In the context of economic mobility, this would mean that a person born to low-income parents in the U.S. has just as good a chance of moving up the income ladder than someone born to high income parents. Unfortunately, this is not the case due to a variety of factors.

“The [Economic Mobility] project has identified a series of factors, including education, savings, and neighborhood poverty, that influence economic mobility.”

These external factors greatly affect access to true economic mobility. Returning again to the escalator analogy, imagine navigating a crowded escalator at rush hour in a major U.S. city’s subway system (I won’t name names). Unlike the orderly lines shown in the video, on real escalators there are people sprinting up the left-hand side elbows and backpacks flying, while others, burdened by heavy bags, small children, high heeled shoes, or fatigue  cling to the right-hand banister as they ride to the top. To complicate matters, travelers with massive suitcases or oblivious iPod-wearers who have mixed up right and left will inevitably cause a blockage and the flow of sprinters will grind to a halt, to the tune of vocal indignation.  These barriers on the escalator (a bag or an elbow to the face or more serious problems like someone falling or the escalator breaking) are analogous to the myriad barriers to economic mobility people in the U.S. face. Fewer opportunities for education and job training, discrimination due to race, gender, or a disability and the absence of a personal financial safety net (in the form of savings or financial literacy) can significantly hamper people’s movement up the income ladder.

Pew’s overview of the Economic Mobility Project says, “Americans have historically shown tolerance to accept high levels of income inequality.” They attribute this willingness to accept inequality as a simple part of life to the staunchly held faith in the fairness of the American Dream – namely equal opportunity for income mobility over time and across generations. Americans are also inclined to overestimate wealth equality, as this graph depicts.

http://assets.motherjones.com/politics/2011/inequality-page25_actualdistribwithlegend.png

The tendency to assume that the country is somehow more equitable than in reality is worrisome, given that the Pew video clearly shows relative mobility in the U.S. is inconsistent at best – some people from the bottom echelon of income earners will move up or at least their children will, but many will remain stuck – a phenomenon they characterize as “stickiness at the ends” (since high income people tend to stay high income as well). If we were sure that everyone had an equal opportunity to move up and succeed economically, there would be less cause for concern.  But as researchers at New America and elsewhere have documented, the inequality of both income and accumulated wealth are not going away on their own and in some instances are worsening.

Despite the apparent nonchalance about inequality (as long as it’s, you know, the fair kind of inequality), Pew’s 2011 polling of opinions about economic mobility reveals that Americans are very keen on a government that supports individuals in achieving economic mobility goals. They found that 83% overall (with 91% of Democrats and 73% of Republicans) want a government that provides opportunities to the poor and middle class to improve their economic situation, prevents them from falling behind, or a government that does both of these things. Researchers and advocates need to help connect the dots between asset building initiatives and successful economic mobility.

We collaborated with the Economic Mobility Project on a report showing the critical role that savings plays in promoting economic mobility. That research found that children of high-saving, low-income parents were MUCH more likely to be upwardly mobile than the children of low-saving, low-income parents. In essence, programs and policies that support the savings goals of low-income people have a potentially profound impact on their children’s economic mobility. For us to fully enable the American Dream, we have to understand what economic mobility is and how best to support it. Pew has done outstanding work on behalf of the former cause here. Now we need others to step to the plate to address the issues that contribute to income and wealth inequality in the first place.

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