Economic mobility encyclopedia topics

Economic mobility in the United States

There are two main types of mobility, absolute and relative. Absolute upward mobility involves widespread economic growth which benefits everyone. Relative mobility is specific to individuals and occurs without relation to the economy as a whole. Both absolute and relative income mobility has been large and upward in the past ten years for those starting with below-average incomes; 80 percent of taxpayers had incomes in quintiles as high or higher in 2005 than they did in 1996, and 45 percent of taxpayers not in the highest income quintile moved up at least one quintile.

There has been a great disparity of income growth between 1979 and 2004 in the United States. The real, after-tax income of the top 1% earners has grown by 176% percent during that time, compared to a 69% rise for the top 20%, and an increase of 9% for the lowest 20%. Increasing income inequality, however, does not necessarily imply decreasing mobility. Median family income has risen 29% and mean family income has risen 43%, compared to the income of the previous generation for people that were children in 1968. Most of this growth in total family income can be attributed to the increasing number of women who work since male earnings have stayed relatively stable throughout this time. Two thirds of those who were children in 1968 reported more income than their parents, but only half of them exceeded their parents economic standing by moving up one or more quintiles. Although one third of the nation is moving up quintiles, another third is downwardly mobile — experiencing a decrease in income and economic standing compared to their parents.

While there is some economic mobility between generations in the United States, it is still difficult to move up one or more quintiles in regard to one’s income. 42% of children born in the bottom quintile are most likely to stay there, and another 42% move up to the second and middle quintile. On the opposite end of the spectrum, 39% of those who were born into the top quintile as children in 1968 are likely to stay there, and 23% end up in the fourth quintile. Children previously from lower-income families had only a 1% chance of having an income that ranks in the top 5%. On the other hand, the children of wealthy families have a 22% chance of reaching the top 5%.

Economic mobility worldwide

Using the ratio of an individual’s current income to that of their parent’s, the United States has much less relative mobility than other industrialized nations. The income of our parents is a great deal more predictive of our own incomes in the United States than other countries. France, Germany, Sweden, Canada, Finland, Norway, and Denmark all have more relative mobility than the US, while only the United Kingdom is shown to have less mobility. According to this study done by Miles Corak, The United States ratio of relative mobility is 1, whereas the other countries mentioned with more mobility have a range of 1.25 (France) to over 3 (Denmark).

Economic mobility of men compared to women

Women in their 30’s have substantially higher incomes today than their counterparts did in their parents’ generation. Between 1974 and 2004, average income for women in their 30’s has increased almost four-fold. This is a stark contrast to the growth in income of their male counterparts. The average income of men in their 30’s has increased from $31,000 in 1964 to $35,000 in 2004, an increase of only $4,000. However, much of this can be attributed to employment rates. The employment rate of women in their 30’s has increased from 39% in 1964 to 70% in 2004; whereas, the rate of employment for men in this same age group has decreased from 91% in 1964 to 86% in 2004. This sharp increase in income for working women, in addition to stable male salaries, is the reason upward economic mobility is attributed to women.

Economic mobility of black and white families

Average income for both White and Black families has increased since the 1970s. However, average income for White families in their 30s has increased from $50,000 to $60,000 from 1975 to 2005, compared to an increase from $32,000 to $35,000 for Black families of the same age over the same period. So in addition to receiving a lower average income, its’ growth is also less for Black families (10% growth) than their White counterparts (19% growth). One way this can be explained is that even though marriage rates have declined for both races, Blacks are 25% less likely to be in a married couple. However, Blacks also have less economic mobility and are less likely to surpass their parents’ income or economic standing than Whites. Two of three White children born into families in the middle quintile have achieved a higher family income than their parents. Conversely, only one of three Black children born into families in the middle quintile has achieved a higher family income than their parents. On average, Black children whose parents were in the bottom or second quintile do exceed their parents’ income, but those whose parents were in the middle or fourth quintile actually have a lower income than their parents. This is a very large difference compared to Whites, who experience intergenerational income growth in every quintile except the highest. This shows that in addition to lower wages with less growth over time, it is harder for Black families to experience upward economic mobility than it is for Whites.