The American Myth of Mobility Gets Another Nail In Its Coffin


Nothing I haven't been saying for years, but more data is nice.

Even in a growing economy, only about a third of Americans can be considered upwardly mobile -- meaning they will end up with more inflation-adjusted income and a higher relative economic standing than did their parents. The rest are maintaining their standing or falling behind; about one-third slip down the income scale over the course of a generation.

Sounds bad, but not awful. One third up, one third down, one third even.

Not so fast:

When specific groups are considered, the news is even more unsettling. Men in their 30s have experienced a sustained slide in their inflation-adjusted incomes, which fell by 12 percent between 1974 and 2004.

And most shocking of all: About 45 percent of middle-income African American children end up falling to the bottom of the income scale over a generation, compared with 16 percent of white children -- meaning that even solidly middle-class African American families lead fragile economic lives.

Surprised? I'm not. When an African American gets half as many interviews with the exact same resume as a white, it'd be odd to find anything else. And the destruction of good manufacturing and labor jobs has naturally hit men hard.

Which is why women went into the workforce. Everyone goes on about woman's lib, but to me it's always looked more like ideology matching economic reality. Women have to work:

Over the decades, families have gradually adapted to these economic trends. They often have added a second income -- the proportion of married women who are in the workforce has gone from 23 percent in 1950 to 70 percent today. And families have become smaller, spreading their resources among fewer children in need of food, clothing and cellphones....

... A four-year college degree is now necessary just to tread economic water, and only a professional or graduate degree reliably ensures wage growth. But while college enrollment for men is up, graduation rates have recently declined.

They've declined, I strongly suspect, because college graduation rates track economic class very well. As college tuition has risen much faster than inflation, the lower middle class and working class have found it very hard to make it through and graduate.

And then we have some nonsense:

There are large reasons for these economic trends that have little to do with the economic policies of any single administration. Global competition has deprived America of many lower-skill, higher-paying manufacturing jobs. Rising powers such as China and India are preparing industriously to compete with Americans for higher-skill, high-tech jobs as well. No matter who is elected the next president, American workers will need to be highly educated, willing to change jobs often and prepared to move where new jobs emerge.

Free trade policies, and more relevantly, free capital flow policies and the financialization of the economy in the post Bretton Woods environment were deliberate policy choices. Wages for ordinary workers peaked in the mid seventies and have been stagnant or in slow decline ever since then. This is a question of policy. That's not to say it's only policy, America was never going to hold onto its World War II supremacy, but it's mostly a policy question. The idea that nothing can be done is something it's very convenient for the winners (which includes the class of people Senators and Members mostly come from) to claim, but it's simply not the case.

An interview with consumer debt expert Elizabeth Warren of Harvard Law makes this point:

Elizabeth Warren: No, it's not sustainable. We've built this latest economic boom on borrowed money. Consumers, to the extent that they've stayed afloat, have managed to stay afloat by using their credit cards and by taking out home-equity lines of credit.

Krizner: And they've used that credit for what? For lattes and microwaves and expensive vacations? Have Americans been over-consuming?

Warren: I wish that were the case, but the data say otherwise. Americans are in a lot of debt not because they're overconsuming, but because of big fixed expenses that they really can't wiggle out of.

Krizner: When you say "fixed expenses," what are you talking about?

Warren: Where American families are getting ruined financially is in the areas of mortgages and health insurance. The fact that they've got to have two cars, the fact that they've got to put their children in child care, their taxes -- the things over which they have little or no control.

Krizner: But can that really be the whole story? I mean, in gross numbers, consumption has tripled, apparently, in about 20 years. Surely a good chunk of that is discretionary spending.

Warren: Let's look at the basics. What families are spending on clothing in the last 30 years, it's down 33 percent in inflation-adjusted dollars. What they spend on food is down about 20 percent. What they spend on appliances, down about 52 percent. It's not stuff that's driving families to the poorhouse.

Krizner: You're describing a really tough squeeze. So how is this gonna play out in people's behavior -- what do you think?

Warren: I worry that there are gonna be some people that are going to delay marrying, there are going to be some who are not gonna have children, that the family life that sustains America, that makes us who we are, will become so expensive that many Americans will just opt out. And if that happens, everything that we understood about America starts to fade away.

chart(Chart from unmarried America)

Why do families need two cars? Because both the husband and the wife are working. Why do they need daycare? The same. Why is health insurance so expensive? Because of a deliberate government decision to keep it private and pay 50% more of GDP than most other OECD nations.

And Warren's behind the times. People are already delaying marriage. Actual marriage is down, with cohabitation up significantly. The American family as it was understood by a previous generation is already under siege.

If you don't spread the wealth, if you don't have a broad middle class society, this is what happens. And it's not a question of "forces beyond anyone's control", it's a matter of deliberate government policy. Want a middle class society? Great. In exchange you have to give up having tons of obscenely rich people. You can't have both.


Ian Welsh November 14, 2007 - 12:06pm
( categories: Economics )

What's killing Americans in so many ways is not having single payer health care. Every other industrial nation has it, we don't. And it is killing businesses, families, and all of us, one at a time.

If my mom hadn't been covered by medicare, her last hospital bill would have wiped out all her savings. As it is, her inheritance left enough for my disabled sister and nephew to live on.

We need to fix this issue and we can't because the Republicans and the health care industry don't want us to. It is ridiculous that we all have to keep suffering so some can profit. And that is true of so much of the Republican mindset - the war, the repression of women and minorities, the economic problems - it is all of a piece.

β€œIt is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

Charles Darwin

darwin November 14, 2007 - 1:02pm

I don't think this trend is a uniquely American one. You see this same trend all around the world. It may be more striking in the US but I suspect Health Care is only one reason for that.

bobbob November 14, 2007 - 3:58pm

that are our age (~25 yrs old) are putting off marriage. We're just now getting into the "first wave" of weddings (including our own). But the majority of our friends still have no plans to marry, so I suspect we'll see the "second wave" sometime around ages 28-30.

Of all the people that I knew in high school--friends and acquaintances--only 4 got married within a year or two of graduating. I currently have about 24 friends on my MySpace page from high school, and only maybe 2 of them are married right now (remember, ~25 yrs old). The rest have no plans for marriage that I'm aware of.

I don't have much regular contact with high school friends, so I don't know their personal financial situations and can't comment. Our college friends are all doing ok, but well-to-do Ivy league graduates are not exactly a typical sample of the general population.

On a larger note:

I came across a study the other day talking about the Mobility Myth. It was focused on Britain but compared it to the US, West Germany, Norway, Sweden, Finland, and (I believe) Canada. There was some justification for being able to do this--the previous studies they used for data were conducted in the same manner by the same group and they were confident that the comparisons were valid.

Anyhow, Britain's social mobility was found to have decreased significantly and was now "as low as America's." Yes, America had the lowest social mobility of all the above-mentioned countries. The scale they were using was from 0 (fully mobile) to 1 (no mobility). Canada, Finland, etc. all came in around 0.12 - 0.16. America and Britain were both around 0.22. Perhaps the most remarkable thing noted in the study (imo) was that America's social mobility has always been pretty low and that this current number was not considered to be a departure from the norm.

Bolo November 14, 2007 - 2:27pm

Interesting. Studies from the post war period found a fair bit of mobility in the US if I recall correctly from my time reading up on it university. Could be misremembering, but that's my recollection.

Ian Welsh November 14, 2007 - 2:44pm

study was looking when they mentioned low mobility in America. It could be that they were referring to the mid-60s/70s and later and didn't examine the late 40s and 50s.

Bolo November 14, 2007 - 5:54pm

Click here (.pdf)

Let me know what you think. I didn't have time to do more than skim over it, so perhaps it's flawed.

Edit: And it appears that numbers for American and Britain are worse than I remember--0.28.

Bolo November 14, 2007 - 6:07pm

I don't think the primary reason for putting off marriage and having children is significantly due to financial reasons,. Rather I think its a shift in priorities and attitudes.

Since its quite normal to co-habitate nowadays as opposed to the previous generation, there's no reason to get married to do that. People also want to do more with their life before they settle down and raise a family (travel, drive a fancy car, pursue a risky business venture, etc)

bobbob November 14, 2007 - 3:57pm

It's the parent's attitudes that matter, not the cohabitating kids.

GordonMcMillan November 14, 2007 - 4:20pm

have done any of those things or anything like that. Most of the ones from high school are working steadily in one place and aren't really doing anything fancy. The ones from college are more ambitious and there has been some travel, etc. there--but once again, they're almost unanimously from well-off families and are Ivy League educated.

I don't think your typical twenty-something is putting off marriage just to have a vacation, start a business, or buy a car. And there's an increasing number that are living at home with their parents for a few years after college/high school because they can't find a job that pays enough to get their own place.

Bolo November 14, 2007 - 5:52pm

And it really starts to settle down.

Why are African Americans so much worse off?? The highschool graduation rate of black teenage boys hovers around 50% around most of the country, well below the graduation rate of the 60's and 70's. Why are men 30 and younger falling behind? Because men under 30 are less likely to go to college than forty years ago, and less likely to finish. Why aren't women in these statistics, because their educational attainment levels among both blacks and the young have trended much higher over the same period.

The colleges in my community right now are nearly 2 to 1 female to male ratios. Young men are not finishing high school, not going to college and not finishing if they get there. Now that is a question.

What has changed since 1970? Well the high paying blue collar jobs are way way down, having been outsourced either overseas or to a newly smart machine via computer interface. The high school educated jobs are down, and the drop out job market nonexistent.

The system today is based on educational merit. Get educated you have opportunity. Don't and you will fall behind. I would add that any society needs to provide at least a perceived improvement of life conditions for all segments of society, and bringing some of the non educated 'blue collar' jobs back to the US would probably be a good thing.

The mystery to me has not been why some segments have declined in earning power, but why black men, and men in general drop out of the educational system, while during the exact same period women have flourished.

Scotjen61 November 14, 2007 - 3:48pm

The system today is based on educational merit. Get educated you have opportunity. Don't and you will fall behind.

I would probably change the word "merit" to "certification." Get a piece of paper and you have opportunity. It's literally all about the degree--colleges talk frequently about the prestige of their degrees, as if they're a standard product. In my experience, a degree is only loosely correlated with the abilities of its possessor.

Though there is definitely some correlation, there are also some very undeducated people coming out of our best educational institutions. They are then labelled "the elite" and use their pieces of paper to get good jobs that simply aren't accessible to those without such papers. I am technically one of them, but I like to think that I've educated myself reasonably well so far ;).

Bolo November 14, 2007 - 6:01pm

a college degree is now required just to stay even.

The majority of sociological evidence I'm aware of (I'm behind on the area but I really doubt it's changed) shows that performance in the vast majority of fields is not improved by having a degree. My personal observation is that degrees are used as an ass-covering mechanism by HR folks so they can't be easily blamed for hiring failures.

But then my observation on the job has been that performance, as long as it's not bad, matters in very few jobs. You just have to satisfice the position, not exel.

There are some exceptions, sales being the most notable.

Ian Welsh November 14, 2007 - 6:22pm

But then my observation on the job has been that performance, as long as it's not bad, matters in very few jobs. You just have to satisfice the position, not exel.

The slackers will not advance in the organization.


β€œI despise ideologues masquerading as objective journalists.” - Bill O'Reilly, March 30, 2007

Mark November 14, 2007 - 9:36pm

GordonMcMillan November 14, 2007 - 10:02pm

begin to phase out of the job market, the educational requirements will change and/or education will become more affordable.

adrena November 15, 2007 - 8:05am

to be willing to work. But you don't need to be competent in my experience in a major multinational. Apple polishing, burning down the house, backstabbing and empire building are all very good ways to get ahead.

Of course, I suppose that's competence. Of a sort.

Ian Welsh November 14, 2007 - 11:01pm

The broad fields of engineering, architecture, nursing, chemistry, basic science research, teaching, the legal fields, psychiatry, psychology, all the trades electrical, plumbing, gas, heating/cooling.

I find that college teaches one of the most valuable skills, the ability to work well with others, cooperate and communicate. I have repeatedly found that those who fail in the workplace walk around with grudges, lack verbal communication skills, quick to anger.

The ability to shrug off problems in high stress situations, equals success.

Scotjen61 November 14, 2007 - 10:14pm

I've never found that teachers who've had training were necessarily better than those without. And I'm pretty sure there's evidence backing that up. You'd also be surprised how incompetent doctors coming out of medical school are, and again, it's been measured.

Trades don't count, in my opinion. That's hands on training in an apprenticeship situation in most cases.

Engineering and science, agreed.

But most people don't work in such fields. General business jobs require basic literacy (admittedly, you can't be sure a high school graduate is literate, but that's another conversation), social skills and common sense. Nothing you should need to go to college to learn.

Overall the evidence on how much better people with degrees do jobs than those without shows almost no correlation. In highly technical fields that's not the case, but again, most people don't work in such fields.

Ian Welsh November 14, 2007 - 11:07pm

You'd also be surprised how incompetent doctors coming out of medical school are, and again, it's been measured.

Amen. You should meet my dermatologist. I'm getting referred to someone else soon.

Bolo November 14, 2007 - 11:17pm

I will insert here the obvious comment, which I believe will meet with general approbation, that science and math teachers need advanced training (and are much better at the job when they have it).

The others, well, it's very good when they are literate and like to read.

mmeo November 14, 2007 - 11:57pm

"I have repeatedly found that those who fail in the workplace walk around with grudges, lack verbal communication skills, quick to anger.

The ability to shrug off problems in high stress situations, equals success."

Colleges do not teach any of these things unless its a business school -- in which case four years of experience is worth more than four years of business school mock experience. Moreover, student stress and let's just say work stress or corporate stress is not at all the same. In fact, the idea that extroverted happy personalities are cultivited by colleges is ridiculous. They broaden the imaginative horizons of one's self-perception of personal opportunities which are subsequently contracted once the labour market is entered. In my experience with a major company, success equals the ability to leave behind personal principles, dignity and self-respect when going to work in order to act and think precisely how the immediate superior does. In essence, shallow people succeed in this society.

Polanyistudent November 15, 2007 - 2:39pm

I should have emphasized "best educational institutions." I meant to say that those who come from the best schools are given the keys to the system but often derive no value from going to college other than networking.

As for degrees from non-elite schools, they do only keep you even.

Bolo November 14, 2007 - 11:13pm

The current age of marriage is exactly the same as it was throughout Europe in the 18th and 19th century, another period of delayed marriage that was also paired with downward mobility among the upper and middle class, even as the pie expanded.

Scotjen61 November 14, 2007 - 3:50pm

point.

Ian Welsh November 14, 2007 - 5:48pm

... to share but from what I've read there seems to be generally a very good correlation about birth rate and economic well being in the industrialized countries i.e. the US, Russia and Europe are exhibiting the same kind of trends. It'll be interesting to see if there ever was a cooperative study done around this.

It seems to me the consequence that the Repubs are drawing from this is that the US just has to get more similar to developing countries i.e. more religious ignorance, no abortions and unavailability of contraceptives et voila the demographic trend will be fixed.

quax November 14, 2007 - 4:12pm

It seem clear to me that deficits transfer wealth from the poor to the rich, and taxes from the rich to the poor.

Those who advocate cutting taxes are also advocating increasing poverty.

Edwards seem to understd this.

Synoia November 14, 2007 - 7:38pm

Much of the higher intergenerational elasticity in the United States is due to greater income immobility at the top and bottom of the earnings distribution; the mobility of middle earners looks more similar to that in the other countries."

Beller, E. & Hout, M. 2006. Intergenerational Social Mobility: The United States in Comparative Perspective, The Future of Children. 16(2):19-36.

"A survey data set containing imputed values should not be analyzed uncritically as if all the data were real values." ~ Graham Kalton

JustPlainDave November 14, 2007 - 9:03pm

the middle earners are fighting a losing battle. They may be able to move up and stay there, but there's very little room at the top anyway--only a small % per generation will make it. But there's plenty of room at the bottom... and once you're there, it's very hard to get out. Stratification, here we come!

Bolo November 14, 2007 - 11:20pm

...United States, there is a greater tendency, inter-generationally, for those who came from the top of the distribution to stay at the top and those who came from the bottom to stay at the bottom - for those in the middle, no downwards bias (as compared to other societies mentioned) should be inferred from the statement.

To the extent that there is stratification, one should focus primarily on the extremes - and I would suspect that inter-generational wealth transfer (or lack of same) figures very, very prominently here, particularly if one makes the leap of drawing in educational factors [lots of folks in the lower income quartiles will be financing their education expenses out of wealth, rather than income]. With increased inequality, depending on what components are making the biggest contributions to the inequality, one could reasonably expect there to be a broadening of the churning middle region, but there's not a great deal to lead one to presume a priori that those differences are going to become more enduring and the middle region "boundaries" less permeable.

"A survey data set containing imputed values should not be analyzed uncritically as if all the data were real values." ~ Graham Kalton

JustPlainDave November 15, 2007 - 11:37am

as children get stuck for past parental debt or spend what was meant to be their inheritance paying for the medical bills generated by the last period of their parent's life.


"The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential."

- Dietrich Bonhoeffer

Escher Sketch November 15, 2007 - 11:51am

One can strip the estate to zero, but one doesn't get to pass the bill on to the offspring unless they have agreed to secure that debt.

"A survey data set containing imputed values should not be analyzed uncritically as if all the data were real values." ~ Graham Kalton

JustPlainDave November 15, 2007 - 12:08pm

But the stripping of the estate to zero by witholding care unless the children agree to entail it is what I'm talking about. It may not technically be transfer of debt, but the looting of a parent's long-husbanded bequest immediately before transfer as a precondition of medical care seems effectively the same thing.

The case in point for me was when Oregonian friend's mother's lung cancer ate not only her own lungs but her daughter's inheritance - the previously unencumbered family house - in the year immediately before her death; seeing death up the road, the vultures weren't doing anything for Mom unless it was cash on the barrelhead, leaving her a Hobson's choice.

Morally, she made the only choice she could (I remember thinking "that's the kind of no-choice 'choice' one makes about pets - not parents") and entailed the family house. If I recall, there wasn't even enough of her "inheritance" left to fully pay for the funeral.

At the time of my own mother's death it was legal for seniors to choose to defer taxes (if I recall, in her case it was property taxes) against their estate until after their death.


"The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential."

- Dietrich Bonhoeffer

Escher Sketch November 15, 2007 - 1:14pm

So the middle region is more highly mobile *within its own boundaries.* I was assuming mobility in general, and since the bottom is larger than the top more of the middle would end up at the bottom over time.

(Edit: Reminds me of how a laser works ;) )

I guess the real question I'm interested in then is this: Given that those who go to the bottom or top tend to stay there, what is the net flux over the borders of bottom/middle and middle/top?

Bolo November 15, 2007 - 11:56am

Here is the GDP growth for the US 2004 to est. 2007

2004 3.6%
2005 3.1%
2006 2.9%
2007 1.9%
2008 ??

This is what global oil production has looked like over the same period. Rate of growth in oil supplies.

2004 4.1%
2005 1.3%
2006 .4%
2007 -1.0%
2008 ??

Can the pie expand, when the fuel that cooks the pie goes away??
What happens when the economic growth model deviates from the physical constraints of the planet, and what then happens to our standard of living??

AND there appears to be a skewing of GDP higher in most recent years by means of underreporting rates of inflation. Higher inflation means lower GDP.

Scotjen61 November 15, 2007 - 10:24am

Seriously.

I had a conversation with a bright young man today and found that he refused to accept the notion of taking joy in one's work as self-expression. I did until retirement and thought that there were few people who were as lucky as I. While there were some rotten times and problems and long hours (and occasional unemployment), I look back at my work life and marvel at what a wonderful adventure it was--and that someone actually paid me (well) for what I did.

Our educational system is mostly geared toward generating degreed citizens, without actually determining if there's a balance of aptitude and love. Some people seem to be born talented in their field and grasp of essentials is second-nature. Other people find they have to work at it a bit, but do not find it onerous, as they enjoy the challenge.

Instead, it's "Do the courseowrk; get good grades, and we'll give you your certificate. Never mind that you have neither the aptitude nor personality for what you're doing."

It's tragic, really. Not everyone should be a lawyer or a doctor.

Petronius November 16, 2007 - 1:43am

for downward mobility?

Unholy Alliance Fleeces Social Security Recipients
by Laura Rowley

Virginia grandmother Ruby Fauntleroy, 74, knew something was wrong when her rent payment bounced shortly after her Social Security check had been direct-deposited into her bank account.

Fauntleroy went to the bank, where a teller told her that the account was frozen following notice of a court judgment and garnishment order by Capital One. Fauntleroy had been trying to pay off this $4,000 credit card debt for years, but dropped her monthly payment to $100 after her husband died and her income declined. Capital One sued, and won a judgment.

"I was just numb, I couldn't believe this could happen," said Fauntleroy. "I told the bank, 'You know nobody is supposed to take a government check,' but they did. I couldn't sleep at night, I couldn't eat. I thought, why are they doing this to me when I was trying to pay [my debt]?"

Legal aid agencies across the country say they've been flooded with calls from seniors and disabled people whose accounts have been frozen by bill collectors. This is happening even though the federal government specifically prohibits the garnishment of exempt funds such as Social Security and veterans benefits.

In the worst cases, seniors go hungry or without medication because they have no access to funds -- in some cases, for months at a time. "People can really bumble around for months trying to get their accounts unfrozen because the procedures they have to follow are so Byzantine," says Claudia Wilner, attorney with the New York-based Neighborhood Economic Development Advocacy Project (NEDAP), which handles about 200 such cases a year.

In August, three senators asked the inspector general of the Social Security Administration to investigate the extent of the problem, querying the nation's largest banks on how often the practice occurs. The Senate Finance Committee held hearings on the issue in September.

http://finance.yahoo.com/expert/archive/moneyhappy/Laura-Rowley/1

http://mauberly.blogspot.com/

mauberly November 16, 2007 - 12:38pm

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