Pursuing the American Dream: Economic Mobility Across
Generations
Leonard Lopoo and Thomas DeLeire
Pew Center on the States - Economic Mobility Project
July 2012
http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pursuing_American_Dream.pdf

[moderator: the full report is found at the above link.]

"During the past generation, the amount of
wealth held by people at each rung of the ladder
has diverged: Wealth has decreased at the bottom
and middle and has increased at the top two
rungs of the ladder. The wealth compression is
especially notable at the bottom: Median wealth
for those in the lowest wealth quintile
decreased from just under $7,500 in the parents'
generation to less than $2,800 in the children's
generation. Conversely, at the top of the wealth
distribution, median wealth increased from just
under $500,000 in the parents' generation to
almost $630,000 in the children's generation."

Introduction and Key Findings.

The ideal that all Americans have equality of
opportunity regardless of their economic status at birth
is the crux of the American Dream and a defining element
of our national psyche. This study investigates the
health and status of that dream by analyzing economic
mobility-Americans' movement up and down the economic
ladder-during the past generation. Pursuing the American
Dream: Economic Mobility Across Generations is an update
to the Economic Mobility Project's (EMP) foundational
work, Getting Ahead or Losing Ground: Economic Mobility
in America, originally released in 2008.

This chart book moves the project's work forward in two
ways. First, the income mobility estimates have been
adjusted for family size to account for shifts in family
demographics across generations. Second, the analyses
now include mobility estimates of personal earnings and
family wealth in addition to family income. Using Panel
Study of Income Dynamics (PSID) data through 2009, the
study provides the most current estimates of mobility
and the first estimates that overlap with the recession.

Pursuing the American Dream looks closely at the
mobility experiences of Americans on different rungs of
the economic ladder, divided into five equal parts or
quintiles. The study measures mobility in two ways.
Absolute mobility measures whether a person has more or
less income, earnings, or wealth than his or her parents
did at the same age.3 Relative mobility measures a
person's rank on the income, earnings, or wealth ladder
compared to his or her parents' rank at the same age.

Descriptive information on how the distribution of
income and wealth has changed between the parents' and
children's generations also is included. While
information about aggregate changes across generations
does not capture the unique experience of any one
parent-child pair, it does provide important context
about how the economic environment in which people
strive to climb the ladder has changed over the past
generation.

Considering both absolute and relative mobility together
and in the context of changing distributions is
essential to understanding the full picture of
opportunity in America.

Family Income

The vast majority of Americans have higher family
incomes than their parents did.

* Eighty-four percent of Americans have higher family
incomes than their parents had at the same age, and
across all levels of the income distribution, this
generation is doing better than the one that came before
it.

* Ninety-three percent of Americans whose parents were
in the bottom fifth of the income ladder and 88 percent
of those whose parents were in the middle quintile
exceed their parents' family income as adults. Americans
raised at the bottom and top of the family income ladder
are likely to remain there as adults, a phenomenon known
as "stickiness at the ends."

* While a majority of Americans exceed their parents'
family incomes, the extent of that increase is not
always enough to move them to a different rung of the
family income ladder.

* Forty-three percent of Americans raised in the bottom
quintile remain stuck in the bottom as adults, and 70
percent remain below the middle. Forty percent raised in
the top quintile remain at the top as adults, and 63
percent remain above the middle.

* Only 4 percent of those raised in the bottom quintile
make it all the way to the top as adults, confirming
that the "rags-to-riches" story is more often found in
Hollywood than in reality. Similarly, just 8 percent of
those raised in the top quintile fall all the way to the
bottom.

Family Wealth

Half of Americans surpass their parents in terms of
family wealth.

* Fifty percent of Americans have greater wealth than
their parents did at the same age.

* Seventy-two percent of Americans whose parents were in
the bottom fifth of the wealth ladder and 55 percent of
those whose parents were in the middle quintile exceed
their parents' family wealth as adults.

There is stickiness at the ends of the wealth ladder.

* Sixty-six percent of those raised in the bottom of the
wealth ladder remain on the bottom two rungs themselves,
and 66 percent of those raised in the top of the wealth
ladder remain on the top two rungs.

Mobility by Race

Blacks have a harder time exceeding the family income
and wealth of their parents than do whites.

* Sixty-six percent of blacks raised in the second
quintile surpass their parents' family income compared
with 89 percent of whites.

* Only 23 percent of blacks raised in the middle surpass
their parents' family wealth compared with over half (56
percent) of whites. Blacks are more likely to be stuck
in the bottom and fall from the middle than are whites.

* Over half of blacks (53 percent) raised in the bottom
of the family income ladder remain stuck in the bottom
as adults, compared with only a third (33 percent) of
whites. Half of blacks (56 percent) raised in the middle
of the family income ladder fall to the bottom two rungs
as adults compared with just under a third of whites (32
percent).

* Half of blacks (50 percent) raised in the bottom of
the family wealth ladder remain stuck in the bottom as
adults, compared with only a third (33 percent) of
whites. More than two-thirds of blacks (68 percent)
raised in the middle fall to the bottom two rungs of the
ladder as adults compared with just under a third of
whites (30 percent).

Mobility by Education

A four-year college degree promotes upward mobility from
the bottom and prevents downward mobility from the
middle and top.

* Almost one-half (47 percent) of those raised in the
bottom quintile of the family income ladder who do not
earn a college degree are stuck there as adults,
compared with 10 percent who do earn a college degree.
Similarly, 45 percent without a college degree are stuck
in the bottom of the family wealth ladder compared with
20 percent with a degree.

* Having a college degree makes a person more than three
times more likely to rise from the bottom of the family
income ladder all the way to the top, and makes a person
more than four times more likely to rise from the bottom
of the family wealth ladder to the top.

* Thirty-nine percent raised in the middle of the family
income ladder who do not get a college degree fall from
the middle, compared with less than a quarter (22
percent) of those with a degree. Similarly, 39 percent
raised in the middle of the family wealth ladder who do
not earn a degree fall down the wealth ladder, compared
with 19 percent with a degree.

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