Economic Opportunity and Social Mobility
Years ago, I worked at the Pew Charitable Trusts on something called the Economic Mobility Project. In 2009, we commissioned a survey covering opportunity, mobility, and the American Dream. One revealing question we asked was the following:
The term American Dream means different things to different people. Here are some ways some people have described what the American dream means to them. On a scale of one to ten, please tell me how accurately each statement describes what you consider the American dream to be.
Based on the responses we received in focus groups before developing the survey, we included 12 possible descriptions of the American Dream. We expected that the most popular ones would relate to economic outcomes, particularly since in early 2009, it wasn't clear that the nation had escaped the financial crisis that had begun just months earlier. The unemployment rate back then was at about 8% — twice what it is today.
We were wrong. When looking at the share of people who scored a description between 8 and 10 (indicating that it strongly accorded with their view of the American Dream), five definitions fell short of a majority. These included "being middle class," "becoming rich," "owning your own business," "having enough income to afford a few of life's luxuries, like vacations and eating out," and "getting married and having children."
Five definitions garnered more support, but with less than two-thirds of respondents giving them a score of 8 to 10. They included "getting a college degree or advanced education," "being able to succeed regardless of the economic circumstances in which you were born," "owning a house," "being financially secure," and "your children being better off financially than you."
To our surprise, the two most popular definitions invoked not economic outcomes, but freedom and initiative. The second-most-popular definition was "being free to say or do what you want"; the top description was "being free to accomplish almost anything you want with hard work." That winning description involved a view of opportunity that values work ethic and individual responsibility while remaining agnostic about the outcomes people should desire.
Another survey — this one by AEI in mid-2018 — asked how important different descriptions were "to your own view of the American Dream." The winner was "to have freedom of choice in how to live one's life," which beat out "to become wealthy," "to have a better quality of life than your parents," "to have a successful career," "to own a home," "to retire comfortably," and others by a wide margin.
From these results, it appears that those who simply equate flourishing in America with economic success are mistaken: When it comes to achieving the American Dream, such outcomes are not necessarily Americans' primary goal.
But Americans do want to live in a society where rising by their own effort is possible, and where opportunity is widely available. The complexity of public views on that subject should lead us to dig deeper into the ideal of opportunity, its connection to mobility, and the ways in which both include economic outcomes but also extend beyond them.
ECONOMIC MOBILITY
Although economic outcomes did not fully describe the American Dream to a majority of the people we surveyed, economic opportunity offers a good place to start our analysis. Even when restricting ourselves to economics, we can think about opportunity in any number of ways.
Intuitively, one might define opportunity as a measure of how people do relative to their parents. Of course, asking "how people do" begs the question of which outcomes matter. We could look at an individual's hourly wages, annual earnings, family income, overall wealth, occupational prestige, educational attainment, and more. For our purposes, we can likely glean the most information by focusing on family income, which includes pre-tax earnings from employment as well as pensions, investment income, and government benefits that take the form of cash (as opposed to, say, public housing or food stamps).
Economists generally compare people's income relative to that of their parents in two ways. The first measures an individual's and his parents' standard of living. This kind of mobility is known as "absolute mobility."
In a study conducted for the Archbridge Institute a few years ago, I found that after adjusting incomes for the increase in the cost of living, perhaps 70-75% of 40-year-olds had a higher family income than their parents did at the same age. Those estimates addressed circumstances before the impressive income gains we've seen since the Great Recession, so it would probably be accurate to put the current absolute mobility rate at 75% or higher.
Is that rate high or low? Without some kind of reference point, it's hard to say. If we compare today's absolute-mobility rate to that of the recent past, it looks low. Harvard economist Raj Chetty and other researchers, for instance, have found that over 90% of Americans born in 1940 out-earned their parents. Indeed, according to economist Yonatan Berman, absolute mobility appears to have peaked for people born in the depths of the Great Depression and declined steadily through at least the mid-1960s.
We can also compare absolute mobility in the United States to that of other rich nations. Though we encounter some incongruities in the data, the best we can tell is that absolute mobility in the United States looks similar to that of Canada, Japan, and France, and worse than that of Australia, Germany, the Netherlands, Norway, Sweden, and Finland. The evidence is ambiguous as to whether America's absolute mobility looks worse than or the same as that of Denmark and the United Kingdom. Regardless, it's clear that these reference points do not paint America's contemporary absolute-mobility rate in a favorable light.
However, high absolute mobility may compete with another important economic outcome: high living standards. Consider the fact that the typical parent's income in the United States today is three times what it was in 1940. Would you rather have been born in 1940 and experienced higher absolute mobility, or born later and earned more income? Likewise, today's adults in China, having witnessed remarkably fast economic growth rates in recent decades, have almost surely experienced much higher absolute mobility than Americans over the same period. Would you rather have been born in rural China or the United States? Additionally, around 80% of today's American adults who grew up poor now exceed their parents' income, while that is true of only 10% of adults who had the richest parents. Where would you rather have started?
A second way of comparing people to their parents is to consider the extent to which growing up with relatively rich or poor parents translates into being relatively rich or poor oneself. To be sure, we all hope for a world in which people end up better off than their parents in absolute terms. But even if everyone were to improve on their parents' standard of living, their economic fates might remain inextricably tied to childhood advantage or disadvantage. The son of a security guard might end up becoming a better-paid security guard, but if the odds were always against him becoming a scientist, then most of us would say his opportunities were constrained despite his increased purchasing power.
Researchers measure "relative mobility" by ranking adults and their parents from poorest to richest and then assessing how one's rank during childhood affects one's rank as an adult. My Archbridge Institute research focused on children who were raised by parents with family incomes that ranked among the lowest fifth in the country. These children had a 46% chance of remaining in that bottom fifth as adults. Their probability of making it to the top fifth was just 3%. If parental income were unrelated to income in adulthood, every child would have a 20% chance of ending up in the bottom fifth and a 20% chance of ending up in the top fifth. This means there is quite a bit less upward mobility out of poverty in America than we might hope for.
Still, we need benchmarks to assess whether our current rate of upward relative mobility is unusually low. When we look at trends in American family-income mobility over time, we typically find little change in relative mobility, or even a small decline. If we compare America's relative mobility rates to those of other wealthy industrialized nations, it appears that the United States has lower relative mobility than Canada, Norway, Sweden, Denmark, and Finland (and perhaps lower relative mobility than Australia, Great Britain, Germany, and Italy). While relative mobility in the United States may be no worse than that of other countries if one looks at individual earnings rather than family income, that's about the best that can be said: Relative mobility in the United States is no better than it is elsewhere in the rich world and no better than it was three decades ago.
There is a caveat, however: Knowing the relative mobility rates of two countries or two points in time does not tell us which is more fair or just. It is difficult to name the "right" level of relative mobility. For starters, even if we could give all children the same educational opportunities and equalize their test scores and college readiness, they would each make different choices. Some would choose to be surgeons, investing years of their life in training to make high salaries later on. Some would choose to be entrepreneurs, rolling the dice and hoping to hit on the next big idea that will make them extraordinarily rich. Some would choose to stay close to home and sacrifice the opportunity to make more money by moving away. Some would choose to run their own independent bookstore even though they could have attended law school. It isn't too difficult to imagine that even if true equality of opportunity existed, children raised in families at the bottom fifth of the income spectrum might have different preferences than children raised in families at the top fifth.
Second, the reason that childhood family income and adult income are tied matters. Hardworking parents tending to raise hardworking children is very different from (and preferable to) rich parents using their status and money to give their children an unfair advantage over others.
Third, the method we choose to achieve greater relative mobility also matters. We could, in an attempt to address unequal economic opportunities among children, even out adult incomes through government-run redistribution programs. However, it seems preferable to break the link between income in childhood and adulthood by giving children more equal opportunities.
OPPORTUNITY DISPARITIES
Rather than comparing people to their own parents, there is a third way of thinking about economic opportunity: We can ask whether, in general, poor and middle-class Americans are better off over time than their predecessors were, or better off than poor and middle-class individuals in other countries. Relative mobility might be stagnant and absolute-mobility rates falling, but if Americans are getting richer over time, that could still be consistent with rising opportunity. Similarly, Americans could have lower relative- and absolute-mobility rates than residents of other countries but be so much richer that we would consider opportunity to be greater in America.
Economic opportunity in the United States looks stronger if we take this perspective. Despite perennial claims that the current generation of young adults will be the first to end up worse off than the one before it, that doesn't seem to be the case. As they approach and pass age 40, Millennial men and women have higher median hourly wages than any previous generation did at the same age. Millennial women also have higher median annual earnings than their predecessors, and Millennial men have annual earnings as high as ever. Millennial families have higher family income than did previous generations. Meanwhile, Gen Z is earning more than Millennials were at the same age.
These figures all look at medians — the person or family in the middle of all the data — to indicate how the middle class has changed over time. But lower-income Americans have seen gains at least as impressive as these. We have conflicting evidence about what happened in 2021 and 2022, but today, poverty rates — including child-poverty rates — are more or less at all-time lows. Even as relative mobility in the poorest fifth of the population has flattened or declined, the Congressional Budget Office estimates that between 1979 and 2019, the average income of the bottom fifth of families with children rose by 45% before — and by as much as 94% after — accounting for taxes and transfers.
Moreover, according to the LIS Cross-National Data Center, median income in the United States is higher than it is in Israel, South Korea, and Japan, as well as its peer nations in northern and western Europe and the former British Empire. Americans' median income is even higher than that of Norway (which sits alongside huge offshore oil reserves) and Switzerland (a banking center and tax haven for the global rich). Our middle class is about 30% richer than Germany's, nearly 40% richer than Sweden's, over 40% richer than France's, and about 50% richer than the United Kingdom's.
The child-poverty rate is somewhat higher in the United States than in its peer countries, but it's much lower than it is in eastern and southern Europe. After accounting for the greater prevalence of single parents in the United States as well as our smaller welfare state, we have a child-poverty rate similar to those of other nations of western Europe and the former British Empire.
That is the big picture of economic opportunity in the United States: We are richer than ever before, and we are the richest people the world has ever known. But, as in most other developed nations, the rate at which we become richer with each passing year has slowed, causing absolute mobility to fall. All our economic growth has done nothing to increase upward relative mobility, and our safety net's perverse incentives may slow improvement even as the safety net itself reduces poverty at any given time.
American progress has also been unevenly shared, and some populations suffer from a greater lack of economic mobility than others. Take the markedly different relative-mobility rates of black and white Americans. In research I carried out with American Institute for Boys and Men president Richard Reeves, we discovered that black children are much more likely than white children to have grown up in the poorest fifth of the population (44% for blacks versus around 13% for whites) and are much more likely to remain in the poorest fifth if they started out there (54% of black men versus 22% of white men in terms of earnings mobility, and 62% of black women versus 33% of white women in terms of family-income mobility). They are also much more likely to be in their third straight generation in the poorest fifth of the population (one in five black adults versus one in 100 white adults). These racial gaps are a shameful tarnish on the golden promise of the American Dream.
Worrisome regional disparities in mobility also appear. The Southeast and the Rust Belt have low rates of relative and absolute mobility, while the Upper Midwest, the Plains, and parts of the Mountain West have high rates.
Finally, gains for men have been much less impressive than gains for women. In fact, over a period of roughly 20 years, from 1973 until the early 1990s, men's earnings remained stagnant or declined. This period likely represented a recalibration of men's pay as the era of what I call "breadwinner bonuses" receded. During the heyday of organized labor in the mid-20th century, many less-skilled men were paid in excess of their economic value because of the widely shared norm that a man should be able to support a family on one income. As wives' employment and full-time work rates rose in the 1970s and '80s, this norm eroded. With the transition from that era behind us, the worst is over for post-Baby Boomer men; men's earnings have increased by nearly 30% since 1992.
SOCIAL POVERTY
Beyond economic opportunity, there is what we might call "social opportunity." The American Dream, as the surveys testify, is not simply about what people can afford to buy. Happiness cannot be reduced to how much money one has. The trajectory of social opportunity is far more concerning than the economic trends discussed up to this point.
The term "social capital" refers to the value that inheres in our connection to other people and to the institutions that we've created to achieve goals together. Having social capital means having strong relationships with people who can provide various benefits — advice, emotional support, job leads, financial assistance, a source of identity and self-worth, and the rest.
Unfortunately, social capital has been declining in America for decades. Perhaps the most important factor driving this trend is the breakdown of the two-parent family. The share of American children living with married parents fell from 86% in 1967 to 66% in 2022. Today, nearly half of children will live without one or both biological parents at some point before reaching adulthood.
Families are weaker in other ways as well. Marriage rates have declined, causing the share of Americans living in families to drop. Divorce rates rose and then fell, but the decline was due to Baby Boomers moving out of life stages in which divorce is more likely. Holding age constant, the likelihood of divorce has continued to increase.
Moving outside the family, the trends are nearly as concerning. Americans spend less time with their neighbors than in the past and less time with co-workers while off the job. Richer and poorer Americans are less likely to live near each other. Trust between Americans has declined, as has trust in institutions as varied as federal and state governments, media organizations, banks, corporations, public schools, and the health-care system. Trust in organized religion is down, while religious adherence and church attendance have declined in tandem. Union membership is down. Engagement in politics and participation in voluntary associations have fallen as well.
That these trends are many decades in the making means we cannot simply blame them on smartphones and social media. Nevertheless, and even while it provides ways for us to maintain friendships and family connections over great distances, personal technology has undoubtedly led people to withdraw into solitude while exposing children to harmful influences that were less readily available in the past.
The consistency and magnitude of these social declines contrasts with the mixed picture of economic trends. The social breakdown in America — more so than financial matters — has fueled a rising sense of despair. Half of adults under the age of 30 report being depressed; a quarter say they have considered self-harm "several days in the last two weeks." The opioid crisis continues unabated. These are crises of connection, belonging, and purpose, not of economics.
REBUILDING OPPORTUNITY
Given this complex picture, what can we do to increase opportunity in America?
In the economy, we should pursue three priorities: stronger economic growth to improve living standards for everyone, targeted early-childhood and primary-education policies to increase upward relative mobility out of poverty, and place-based policies to revive poor and declining communities and help families move to high-opportunity areas.
There are many ways to increase economic growth rates. We can reduce the regulatory burden on businesses, encouraging new firms to form and increasing competition. We can loosen or eliminate occupational-licensing requirements, which shut too many people out of attractive jobs. We can reform zoning and land-use regulations, which make cities and suburbs unaffordable to lower-income Americans who would otherwise benefit by moving to high-growth areas. We can reduce corporate tax rates. We can have the Federal Reserve Board target a path for economic output rather than an inflation rate to keep the economy at full employment. We can reform entitlement programs to reduce budget deficits and interest rates for private borrowers. We can increase federal research-and-development spending on health care and science. We can adjust disability and other safety-net programs to encourage people to work. We can identify education reforms that produce a higher-skilled workforce. And we can reform immigration policy to attract high-skilled workers and entrepreneurs to our nation from around the world.
When it comes to early-childhood and primary education, we must devote far more attention and resources to identifying innovations that improve the outcomes of disadvantaged students. Unfortunately, it is far from clear how to achieve this goal.
One option for early-childhood education would be to create what I call an Opportunity, Evidence, and Innovation Office in the White House that would fund a plethora of locally administered programs to boost school readiness, subject them to rigorous evaluation, and promote models that are successful. These programs should look less like Head Start, whose long-term results have been underwhelming, and more like the ParentPowered initiative (formerly Ready4K), which sends parenting tips via text message and has been shown to improve school readiness and increase the time parents spend with their children. As for primary education, reforms should involve authorizing more charter schools to increase competition with slow-to-innovate public schools. The federal government could also build a small corps of instructors who have demonstrated excellence, and leverage Zoom and interactive apps to encourage schools across the country to rely on them for teaching.
Policies to help families move to areas with greater upward mobility might include efforts like the Creating Moves to Opportunity pilot in Seattle. That program encourages families eligible for housing vouchers to choose apartments in areas that have generated high upward relative mobility. It also works with landlords in those areas to support their participation in the housing voucher program. Reforming zoning and land-use regulations would not only increase economic growth, it would also increase relative mobility by reducing the cost of housing and allowing more lower-income families to live in high-growth cities. Unemployment-insurance reforms could incentivize people to move to high-employment areas by, for instance, giving them a lump sum to pay for moving expenses.
Many people prefer not to pick up and start over in a new place, however. For these individuals, federal policy can invest in poor and declining communities to expand opportunities for their residents. The Economic Innovation Group has proposed two interesting ideas along these lines. The first, the Opportunity Zones program, has become federal law and could be expanded. Opportunity zones provide large tax incentives to businesses that invest in low-income neighborhoods. The second, a Heartland Visas program, would direct high-skilled immigrants (and, hopefully, entrepreneurial activity) to declining communities that have opted into the program and require them to live and work in that community while participating in the program.
Finding solutions to social breakdown will be trickier. Social capital primarily involves local relationships, and the federal government's expanded reach has likely crowded out many roles historically occupied by families, civil society, and local government, leaving these institutions less capable of solving local problems. To expand the roles and responsibilities of these institutions, the federal government should reform a wide range of spending programs while taking a reduced role in funding and administering them. Federal officials can offer extra support during economic downturns and otherwise help out the lower-income communities that are least able to help themselves. However, as the Manhattan Institute's Andy Smarick has suggested in these pages, they should seek to keep these interventions targeted, limited in scope, rehabilitative, and temporary. In this way, local civil-society institutions and government actors can rebuild the social-capital muscles that have atrophied over the years, and people can become more involved in their communities once again.
Reversing the decay of the two-parent family should be another priority. We should throw several strategies at the problem. We can incentivize marriage through tax reforms (including making refundable tax credits more generous to married parents). We can run public-service campaigns promoting the benefits of marriage for children and adults. We can institute time limits and work requirements for more beneficiaries in more safety-net programs, which would help reverse some of the crowding out that the welfare state has inflicted on two-parent families by replacing the income a spouse would otherwise provide. We might experiment with local marriage-promotion efforts and fatherhood programs to find and publicize successful models.
Finally, we should promote charitable giving and volunteering to help build up our depleted stores of social capital. Making it easier for faith-based organizations to receive federal benefits and deliver social services could revive these institutions while more effectively serving the needy.
CONSERVING A CULTURE
The last decade of American politics has been marked by malaise about the American Dream, including intense economic discontent from parts of the right. Nevertheless, the populist turn in American politics stems much less from economic than from cultural grievance and anxiety.
Not all of these grievances are coherent, and certainly not all of them are defensible. But at its core, right-leaning populism is about resentment of elites and the cultural power they have to determine the "proper" way of thinking and behaving. Trump voters don't want to be held in contempt for their views on religion, gender, law and order, patriotism, or fairness. They don't want a novel vision of "the good life" imposed on them. They oppose policies and cultural expectations that upend their way of life. They don't want to be made part of a "global community." They view themselves as people who work hard and play by the rules, and they believe others should do the same. They don't want federal policy to carry people who subvert the value of hard work and the social contract.
In short, Trump voters see cultural change — driven by progressive elites in institutions like government, the media, and academia who routinely disrespect them — as infringing on their opportunities. Rallying around Trump is a way for them to assert their own vision of opportunity and identify with a cause in the midst of pervasive social breakdown. Young progressives at the leading edge of cultural change are also, in their own way, grasping for meaning and identity in a world of decrepit institutions. The fracturing of our sense of national fellowship is, in the end, another manifestation of social breakdown. Escaping this crisis will require thinking more broadly about what opportunity means and acting prudently to expand it.
