America prides itself on being a country where economic mobility is possible and everyone has an equal opportunity for success—what we define as the American Dream. But is it really true that anyone can attain the Dream?
According to research by Pew Charitable Trusts, 84% of people out-earn their parents (even after adjusting for inflation). That's great!
Get started with a free financial assessment.
Get started with a free financial assessment.
The poorest Americans are wealthier than they used to be, but it's increasingly difficult to transcend the economic class you were born into--43% of people born into the lowest economic class are stuck there, and 40% of those born into the very highest class hold onto their lofty positions.
Meanwhile, in a comparable country like Denmark, under 30% of those born into the lowest class end up stuck there as adults. It's not just Denmark; The New York Times notes there's less class mobility in the U.S. than in Canada or even Britain, a country with a reputation for class constraints.
So, although we're making more than our parents in absolute dollar amounts, a boost in income may not be enough to bump us to the next rung on the ladder because the gap between the richest and the poorest is wider than ever. Economists think the U.S. poverty rate will soon rise to 15.7%, the highest since 1965, and an earlier study by the Pew Research Center found that two-thirds of Americans think the class divide is the biggest concern in our country today, even bigger than racial strain or immigration.
As you can see in the chart from Pew's report, below, a true rags-to-riches experience is hard to come by. Each bar in the chart refers to one quintile, or a fifth of all people, born in each social class. So, the bar all the way to the left represents people born into the lowest fifth, and the colored divisions going upward represent the class they ended up in as adults. As you can see, only 4% of people born into the bottom quintile managed to make it all the way to the top as adults.
How to Improve Your Class Mobility
Despite the current lack of mobility in the U.S., one thing has been shown to help people across all economic classes raise themselves up: a college education. Though the nation's massive student loan debt has led people to debate whether a college education is actually worth it, education has been shown to significantly improve economic class at all levels.
For those who grew up low on the ladder: A college education makes a person over three times more likely to rise from the bottom of the family income ladder all the way to the top. 90% of people with a college degree move up from the bottom fifth of the ladder.
For those who grew up higher on the ladder: A degree makes people raised in a middle or higher economic group significantly less likely to lose ground. In other words, growing up in an upper middle class household helps your odds of staying relatively wealthy as an adult, and having a college degree cements that.
Is College a Cure-All?
Although a college education is, in some ways, a great equalizer, the road to that education is far from equal. Obviously, wealthier families will better be able to help their kids pay for college, and educated parents are more likely to pressure their kids to get a higher education. But the problem is that the achievement gap between rich kids and poor kids is growing ever wider.
In one study, the achievement gap--the difference in standardized testing scores--between rich and poor kids grew about 40% since the 1960s.
The New York Times article speculates that the recession may have intensified this gap, not least because, as one quoted University of Pennsylvania professor puts it, "The pattern of privileged families today is intensive cultivation." In other words, by the time they hit high school, high-income kids have spent about 400 more hours in "literacy activities," like extracurricular activities or enrichment camps, than poor children. Meanwhile, lower income families are likelier to be from single-income homes, in which parents simply don't have the time or means to keep their kids constantly stimulated.
Maybe that's why increasing numbers of high-income kids are going to college nowadays, whereas lower-income kids' college numbers have barely budged. One study found that high-income kids finishing college increased from about 33% to over 50% from the early '80s to the early '00s. Meanwhile, the number among low-income students only increased from 5% to 9%.
The bottom line? Income inequality:
- has been growing vastly in the U.S.
- is one of the biggest social issues today
- can be mitigated by going to college
- has bled into many parts of society, with social repercussions including the ability get an education and advance from one rung to the next.