Economic Mobility and The American Dream

In a comment on my interview with Adam Shepard, Liberal Arts Dude pointed to the Economic Mobility Project, a nonpartisan collaboration between several leading think-tanks. According to the project's web site:

While as individuals [these groups] may not necessarily agree on the solutions or policy prescriptions for action, each believes that economic mobility plays a central role in defining the American experience and that more attention must be paid to understanding the status and health of the American Dream.

The Economic Mobility Project's purpose is:

To provoke a more rigorous discussion about economic mobility in America by presenting new findings and research, and analyzing the effects of social, economic and human capital factors that may impact one's ability to move up the economic ladder over a generation.

Re-stated in plain English: several groups that don't normally agree on political issues have banded together to explore economic mobility, the ability of any one person to improve her economic status within her lifetime. Can a child born into poverty achieve wealth? How? What factors influence his success or failure? The group isn't after political answers — it's seeking actual data.

Yesterday the Economic Mobility Project released a study about the trends and issues that influence economic opportunity for Americans. Getting Ahead or Losing Ground: Economic Mobility in America, is a volume of research into the viability of the American Dream. According to the press release:

  • “Across every income group, Americans are more likely to surpass their parents' income in absolute terms if they earn a college degree, reinforcing the conventional wisdom that higher education provides a means for opportunity.” You are four times more likely to move from poverty to wealth if you earn a college degree than if you do not.
  • “Family background plays an equally, if not more important, role than education.” If you are born into wealth, you have a 23% chance of remaining wealthy if you don't obtain an education. Yet if you're born into poverty, you only have an 19% chance of moving to the top, and that's if you earn a college degree. (There's only a 5% chance if you don't get an education.)
  • “Data show that…there is ‘stickiness' at the ends of the wealth distribution.” About one-third of those born into poverty remain in poverty. About one-third of those born into wealth remain wealthy. (There's a lot of movement up and down among the middle-class, however.)

Other interesting findings  include the fact that “family incomes of both sons and daughters resemble their parents' to a similar degree”. But “only 31 percent of black children born to middle-income parents make more than their parents' family income, compared to 68 percent of white children”.

The mission of Get Rich Slowly is very much about economic mobility. I was born into a poor family, as was my father, as was his father before him. I'm pursuing the American Dream. I'm hoping to help others achieve it as well.

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Liberal Arts Dude
Liberal Arts Dude

Hello there Many thanks for posting this information on the Economic Mobility Project. Despite my initial contentious post in my blog in reaction to Adam Shephard’s book, it did lead to a very vigorous and illuminating discussion in the blogosphere and in this blog about socio-economic mobility and the American Dream. Something that I think is very good to have in these uncertain economic times. So perhaps despite whatever political or ideological disagreements I may have with Mr. Shephard he deserves credit for sparking such a wide-ranging discussion with his book. There’s a lot of good data in the Economic… Read more »

Underemployed Liberal Arts Dude
Underemployed Liberal Arts Dude

How many poor families own a box factory?

I think times are going to get mighty tough for unskilled American workers. Dothe Mobility people have anything to say on that topic?

Jesse
Jesse

At the risk of sounding cliché, if you believe in the American Dream, then you can certainly live it. The trick is to get people to believe!

I have a feeling (and hope) that economic mobility issues (and many other social issues) will be addressed at a grassroots level. This blog being a great example of just that.

Ultimately, liberty is the foundation for economic mobility.

c
c

only a 4% difference between people who are born wealthy staying wealthy and those starting in poverty becoming wealthy – i would so that stat leads to a couple of possible (and very interesting) hypotheses. huh.

Jerry
Jerry

Great post and very interesting topic. I came from a upper middle class family but both of my parents weren’t educated. My father came from a very poor family and built his life into a success by many standards. He is an inspiration to me and especially seeing that he is in the 5% category shows me how unique he was. I’m now in insurance now and have changed careers many times. On my road to prosperity, I don’t know where the road will lead to.

Jerry
http://www.leads4insurance.com

Inquisitor
Inquisitor

Great read. I’m a strong believer in economic mobility – I had a poor family (though not quite “poverty”) and was able to work my way through school and do better for myself than either of my parents did. A lot of it comes down to psychology. If you believe you can rise up, you can. If you believe you can make money blogging, you can. If you don’t believe you can make money online, you can’t… same for weight loss, dating, anything really. That sounds cliche, but as I’ve moved more into the world of non-traditional work, that is… Read more »

Tom S
Tom S

Thanks for sharing this information. Economic mobility has always been something that intrigues me. I had no idea that this Project even existed.

I consider myself lucky to be living my version of the American Dream.

J.D.
J.D.

Rant alert. I don’t usually respond to trolls, but… Minimum Wage (under an alias) wrote: How many poor families own a box factory? Dammit, Minimum Wage, you’ve gone too far this time. Usually I ignore your crap, but not today. That box factory was not given to my father. It did not spring fully formed from his head. That box factory is the product of years of blood, sweat, and tears. It’s the product of hard work and desperation. Dad didn’t sit around making snide comments about how difficult life was — he tried (repeatedly) to improve his situation and… Read more »

Menial Work
Menial Work

Hey, that’s a great story, and well worth a post of its own. I love entrepreneurial success stories and hope to see more of them.

J.D.
J.D.

I think that’s Minimum Wage’s way of trying to apologize.

Andrea >> Become a consultant
Andrea >> Become a consultant

Is there some sort of back story I’m missing here? That question didn’t seem all that snarky to me. (Although the alias does make one wonder….)

Someone I know always talks about how poor her family was. But I recently found out that her family’s income was way higher than my family’s income. So sometimes “poor” is hard to nail down, I guess.

BohRev
BohRev

I think a family’s values have a lot to do with this, too – not just the economics. For example: if you’re poor, but your parents want you to have better than they did, they’ll help in whatever ways they can. Maybe they can’t pay a dime toward college, but they’ll make sure you get time to do your homework uninterrupted so you can win scholarships. But then there are families who think “It was good enough for me” and actually (perhaps unconsciously) try to hold back their kids. I suspect they’re afraid if the kids do better in the… Read more »

Adfecto
Adfecto

I looked at these same figures recently on my own blog. I found them from a special feature in the New York Times on Class in America. I think that the data is mostly in the eye of the beholder. When I see that only 1/3 of those who start with wealth keep it and only 1/3 of those who start in poverty stay in poverty, I see evidence of GREAT economic mobility. Frankly, there are reasons other than opportunity that not 100% change their status. At the bottom we have mental illness, addiction, and poor mental or physical fitness… Read more »

J.D.
J.D.

Maybe I’m over-reacting. Minimum Wage regularly leaves snarky comments at personal finance blogs. He’s smart and sometimes contributes materially to the conversation, but mostly he plays the role of gadfly. In this case, I felt his “how many poor families own a box factory?” was meant to minimize my family’s background, to negate it as a valid data point. That made me cranky. I truly believe that my father is an example of somebody employing economic mobility, moving from “the bottom quintile” (as the article puts it) to a middle quintile. I resent the implication that this was somehow handed… Read more »

HollyP
HollyP

JD, kudos to your family for building a successfull business. (I’m assuming on some level your mom helped your dad with his plan.) I agree wholeheartedly that family background has a huge amount of influence over a person’s chances of career/financial success. I’ve observed this first-hand, with several foster children who lived with my family in the 70s as well as with my husband. All the tough talk about bootstraps is great, but when you are being abused by your stepdad, when you worry about being shot on your way to school, or hunger pangs distract you from class, it… Read more »

plonkee
plonkee

The other thing, JD, is that even where people try, they might not succeed.

For example, I’m sure your dad worked hard at all his businesses, not just the ones that succeeded. What if none of them had done well? He probably would have remained in the bottom quintile, but not through the want of trying. Other people who try and fail once or twice might not be resilient enough to try again.

I think there are two questions, why don’t more poor families start box factories? and why don’t more poor families succeed with their box factories?

Stephen Martile
Stephen Martile

Hi JD,

There seems to be a trend in the data presented in your article. People who achieve the American Dream seem to have the following,

– Parents as financial role models
– Teachers and peers as financial role models (for those who go to College)

…. or at least these factors seem to increase the probability of success. In my own opinion, the people in your environment will greatly affect your financial success. Or as T Harv Eker says (or something close to this),

‘90% of your friends will earn within 10% of your income.’

Anonymous
Anonymous

Plonkee, Your question is a breath of fresh air. Too many times when the discussion is about success I hear people talking like they’re quoting a passage from the book The Secret. In reality, it doesn’t matter what arena you’re talking about — be it sports, music, or business, whatever — success is never automatic, no matter how good your attitude is, or how hard you try. Luck is always involved. First, you need some level of talent at what you’re doing — the degree of talent necessary varying quite a bit depending what you’re trying to do. And just… Read more »

J.D.
J.D.

BRILLIANT comment, Anonymous.. Thank you. You’ve done a fantastic job expressing my own feelings on this subject, and in a much better way than I’ve been able to do.

Many people don’t want to believe that luck is an element of the equation, but it is. I think that most successful people recognize this. Success isn’t crafted purely from brawn and brains — there’s an element of chance involved, too.

Seth
Seth

Excellent post J.D., and despite it’s ranty qualities, your comment was great too! Of course I tend to like a little rantiness every now and again. 🙂

I don’t know if anyone would find it relevant, but the New York Times spent a year researching a series on class and social mobility in America. They looked at matters of education, immigration, religion, etc. and found some interesting results. While it is becoming a little harder to get ahead, the US remains one of the most readily socially mobile cultures in the world.

Anyway here’s a link to the series:
http://www.nytimes.com/pages/national/class/index.html

JerichoHill
JerichoHill

In that NewYorkTimes piece, I have worked with the demographics expert that put that together. I grew up in a poor neighborhood. My father has an associate’s degree and was a 2nd generation immigrant (his father fled the Nazis). My mother never graduated from college. I am one of those 19% who grew up in a poor background, got an education, and moved up the ladder. To be economically mobile, one has to have desire, motivation, perspiration, reslience, and luck. A good role model helps too. Because my education allowed me to dramatically change my overall life, I fully believe… Read more »

amy
amy

First, I just want to say that as soon as read that first comment about a poor families owning box factories I knew it was Minimum Wage. J.D., I think you reacted appropriately.
Second, on the topic of luck, doesn’t it seem that people with better attitudes to some degree have better luck? I don’t beleive in that Secret nonsense, but I do beleive that attitude has a lot to do with success.

elisabeth
elisabeth

It is interesting to me to see the discussion about “luck” and, to see how there is an emphasis in the comments on individual anecdotes. That’s really a part of US culture — we think in terms of the individual, and don’t always give as much thought to how general conditions affect outcomes. American “exceptionalism” is an idea this culture encourages both at a national and an individual level. At the national level, there’s the idea that the US is #1 in every category — even those we aren’t! At the individual level, we put great demands on the individual… Read more »

Ashley
Ashley

Pertaining to the comments above, I have heard a quote that says something along the lines of you creating luck the harder you work. I will have to do some digging to find it, but the idea is that if you are working hard, you are more likely to have ‘luck’ on your side.

plonkee
plonkee

I’ll also add that the desire for economic mobility isn’t just restricted to the US, it’s also present in the class bound British social system. Although I’m solidly middle class and always have been, that’s as a result of the economic mobility of my dad, who managed to go from unskilled labouring immigrant parents, to the middle classes by the time I was born. This was due to a combination of intelligence, government education schemes, a huge amount of luck and societal changes (the tail end of a boom in the relative size of the middle classes). Of those four… Read more »

db
db

JD, for what it’s worth I had the exact same reaction to that post — on your behalf and also on my own personal experience. I have thought it before, and I’ll say it out loud — JD, if we were in close proximity I would love to be personal friends with you and your wife. I think you’re a great role model and you’re turning into your own success story. And THAT is what economic mobility is all about — taking your personal circumstances and turning them into a success story. No two people can do it the same… Read more »

hc
hc

I want to add that the people you surround yourself with have a big impact on your economic and social mobility. What I have witnessed is that you are more likely to be surrounded by people who tries to pull you down and have negative pessimistic attitudes, whiny but passive if you’re lower income. Adam Shepard is very lucky in that he is around people who shares his goals and dreams. Most lower income folks are not lucky like that. And even with education, your family background still have a big impact on economic mobility. I grew up poor, but… Read more »

Meg
Meg

While “luck” is almost certainly always a factor in acheiving wild financial success (i.e. a building a profitable company), it doesn’t necessarily take luck to pull yourself out of poverty (especially “poverty” by American standards). I think we’re too quick to say how hard those in poverty have to work and how lucky they have to be to acheive “wealth.” But obviously it’s hard for everyone, as 70% of those who are BORN into wealth don’t even end up wealthy. And no, not everyone has the ability or talent or time to start a company–in fact it may be a… Read more »

OiVey
OiVey

Grant me the serenity to accept the things I cannot change, the courage to change what I can, and the wisdom to know the difference. I do see that there are chance elements in life JD. So? We cannot predict or change that so isn’t it a little moot to talk about it as a factor? I will freely admit that my mother is a gambling addict and so I’m extremely hesitant to base anything on luck. I respect your POV and LOVE your blog. I wonder where mobility relates to perception? My sister makes more money than I do,… Read more »

Jeff
Jeff

Interesting post with interesting numbers. I also appreciate your final paragraph. You mentioned that 23% of those born into wealth stay wealthy. Later you mention that one-third stay wealthy. There is a discrepancy between the numbers, but either way it’s much, much lower than I thought. I would have guessed that maybe 80% of those born wealthy would remain wealthy. Not so. I read the press release to see if I could discover the source of the discrepancy. The press release says that 23% of those born wealthy THAT DON’T GET A COLLEGE DEGREE remain wealthy. Overall, one-third of the… Read more »

J.D.
J.D.

Good catch, Jeff. Thanks. I’ve made a correction.

Rob Madrid
Rob Madrid

two comments. Regarding working, a good boss can make all the difference in the world, a bad boss can very quickly dead end a carear. My Wife and a friend I knew both said having the right boss at the right time really helped matters. Secondly what is missing on any discussion about the working poor is how Corporate America exploits them. It may surprise you but for credit card companies people who have just filled for bankruptcy are the most profitable customers. As well payday loan companies backed by some of the biggest banks in America are busy separating… Read more »

CamKC
CamKC

As a foreigner, looking in here from littl’ol’ England, what worries me about the study and the comments is this: “what do you say to the people who find that the American Dream is just that – a dream?”

They work their butts off all their lives and still find themselves in poverty – were they just unlucky?

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