How Much Does Your Income Depend on Your Parents?
NEW YORK ( MainStreet) How much does your income depend on your parents? Quite a lot, according to a recent study by Harvard and Berkeley. And that hasn't changed in a very long time.
We like to believe in America as the land of opportunity for anyone willing to work hard. Economic mobility is the study of just how often that dream comes true; all things equal, how likely is a child to do better than his or her parents? Conventional wisdom says that, although it's fallen in the wake of the Great Recession, the dream remains fundamentally sound.
According to the Equality of Opportunity Project and head researcher Professor Raj Chetty, conventional wisdom is wrong. Economic mobility, the organization reports, hasn't fallen recently. It has remained low and flat in the United States for over 50 years.
This trend has remained stable despite generational shifts and massive changes to the economy, including the current transition from manufacturing to the information and service sectors. It has resisted deregulation, de-unionization and all tax incentives. A child growing up poor in 2014 has as much chance of climbing the ladder as he did in 1967, and the odds for both have always been low.
In fact, economic mobility in the United States is far lower than in most developed nations overall. Children born to poor families have a much harder time working their way into the middle class than in comparable nations like France, Canada or Denmark. Contrary to the common view of Europe as a society with heavy class structure, a child in Denmark is twice as likely to surpass his parents as one growing up in America.
Treating this as a nationwide problem only captures part of the picture, according to the team's results. Although the United States does comparatively poorly as a whole when held up against peer nations, within America the single most important factor seems to be location.
"Our team set out to answer the question 'is America the land of opportunity,'" said project senior researcher Sarah Abraham. "We found that there was not one answer to the starting question, but rather many... Children born to parents at the 25th percentile of income will on average make $31,100 at age 30 if they grow up in Salt Lake City, while those born to families of the same income in Charlotte will only be making $22,900; meanwhile the children born to the top one percent in either place will make roughly the same amount."
According to the study, opportunity fluctuates most depending on where in the United States a child grows up. In low mobility regions like Montgomery, Ala., children have no more than a 4% chance of working their way from the bottom fifth of income to the top. High mobility regions such as Salt Lake City, Seattle or New York can improve those odds to 10, 15 or even 30%.