Posted on 04/26/2006 3:47:22 PM PDT by nicollo
America may still think of itself as the land of opportunity, but the chances of living a rags-to-riches life are a lot lower than elsewhere in the world, according to a new study published on Wednesday.
The likelihood that a child born into a poor family will make it into the top five percent is just one percent, according to "Understanding Mobility in America," a study by economist Tom Hertz from American University.
By contrast, a child born rich had a 22 percent chance of being rich as an adult, he said.
"In other words, the chances of getting rich are about 20 times higher if you are born rich than if you are born in a low-income family," he told an audience at the Center for American Progress, a liberal think-tank sponsoring the work.
He also found the United States had one of the lowest levels of inter-generational mobility in the wealthy world, on a par with Britain but way behind most of Europe.
"Consider a rich and poor family in the United States and a similar pair of families in Denmark, and ask how much of the difference in the parents' incomes would be transmitted, on average, to their grandchildren," Hertz said.
"In the United States this would be 22 percent; in Denmark it would be two percent," he said.
The research was based on a panel of over 4,000 children, whose parents' income were observed in 1968, and whose income as adults was reviewed again in 1995, 1996, 1997 and 1999.
The survey did not include immigrants, who were not captured in the original data pool. Millions of immigrants work in the U.S, many illegally, earnings much higher salaries than they could get back home.
Several other experts invited to review his work endorsed the general findings, although they were reticent about accompanying policy recommendations.
"This debunks the myth of America as the land of opportunity, but it doesn't tell us what to do to fix it," said Bhashkar Mazumder, a senior economist at the Federal Reserve Bank of Cleveland who has researched this field.
Recent studies have highlighted growing income inequality in the United States, but Americans remain highly optimistic about the odds for economic improvement in their own lifetime.
A survey for the New York Times last year found that 80 percent of those polled believed that it was possible to start out poor, work hard and become rich, compared with less than 60 percent back in 1983.
This contradiction, implying that while people think they are going to make it, the reality is very different, has been seized by critics of President Bush to pound the White House over tax cuts they say favor the rich.
Hertz examined channels transmitting income across generations and identified education as the single largest factor, explaining 30 percent of the income-correlation, in an argument to boost public access to universities.
Breaking the survey down by race spotlighted this as the next most powerful force to explain why the poor stay poor.
On average, 47 percent of poor families remain poor. But within this, 32 percent of whites stay poor while the figure for blacks is 63 percent.
It works the other way as well, with only 3 percent of blacks making it from the bottom quarter of the income ladder to the top quarter, versus 14 percent of whites.
"Part of the reason mobility is so low in America is that race still makes a difference in economic life," he said.
And this, childre explains why 80% of the rest of the world would move here to this greatest failure on the globe, in a heartbeat!
You are not allowed to make up your own definition of things.
Says who?
There's an old thread I posted in '03 in which we discussed this issue in response to Warren Buffet's complaints about the dividend tax reduction. Buffy went ballistic. Meanwhile, Buffy takes only some couple hundred K in salary in order to reduce his own tax load. Thread here: Dividend Voodoo
rich
1. Possessing great material wealth:
http://dictionary.reference.com/search?q=rich
"...we don't know how to fix it" but we would like to, otherwise, why study the problem? In this way, the policy solution is implied in the conduct of the research itself, i.e., the Fed desires policy solutions to meet their goals of what they think the economy should or should not be.
Much of the economic research from the Fed may be useful, but that research could be produced by others (outside the Fed). The people in charge of regulating banks and monetary policy should not be engaged in research directed toward social engineering.
The Fed should be providing research related to its function in bank regulation and monetary policy. Even then, the research should be limited. A better system would have greater transparency of the Fed operations and having outside research conducted to monitor the effectiveness and presence of unintended consequences arising from Fed policy. Better yet, they should dissolve the Federal Reserve system.
I like your use of the word "transparency," as that's core to the problem of the Fed. In the least, the research papers it produces are "transparent" -- unless they're hiding some, and who knows.
Unfortunately, "transparency" was not part of the original mission of the organization, thus its quazi-public/ quazi-private nature. The idea was to remove monetary policy from politics. That necessitates removing policy-formation from the public. Sometimes there's a good balance there, sometimes there's not.
1. The socioeconomic class between the working class and the upper class.
I'm find that modern historians of 19th century America enjoy mocking Horatio Alger and his "rags-to-riches" stories, dismissing them as cover for the robber barons.
My prof told me that it is a "consensus" that the 1874 and 1893 panics/depressions are bookends of a larger economic downturn. I'm having a heluva time believing that. Are you familiar with this thought? Whatever basis they're using for comparison cannot, simply cannot, account for the enormous growth in wealth and business during that same period.
My understanding of the 1893 panic is that it was monetary. If so, it cannot possibly have anything to do with 1874.
This is how statistics can be distorted to fit anything you want them to say. The income of the top 5% of the United States is a heck of a lot more than the income of the top 5% of Danmark (a socialist country). Therefore to compare the chance of someone who grew up poor to reach the almost millionnaire status of the top 5% of the US, to that of the top 5% of Denmark is totally like comparing apples and oranges.
Exactly right. The key distortion is 5% which very few make it to by definition. If there was zero correlation beteen where you started and where you end up then a poor person would only have a 5% chance of making it to the top 5%. That a poor person has a 1% chance is actually quite good.
(To be more precise, a poor person who really tries hard could have a 99% chance of making it to the top 5% for all we know, since most do not even try to do what it takes to make it to that level.)
Also, top 5% for USA is a lot higher bar than making it to the top 5% in other countries. Using percentages is the second distortion. The only fair way to compare countries would be to set the bar at a fixed dollar amount and then covert to using foreign exchange rates.
The best questions to ask are: How many poor children in USA ended up making $75,000+ per year in middle age? How many poor children in Sweeden ended up making $75,000 or more in middle age?
Not sure I follow your point here. I thought you were claiming "rich", "middle class", and "poor" have nothing to do with wealth and only to do with income. The definition you quoted for "middle class" does not mention income.
Can you fix me up with Selma?
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This is what I'm missing every time I look at my pay stub. Hola!!! |
The point being that you have to have a fixed measure before you can measure anything.
Income is what we use to measure where someone falls on the economic scale of rich, middle class and poor.
Me too. The car would be nice also.
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What car? |
This is moronic, and the author knows it. America is NOT about becoming rich or super-rich, though there are ever-increasing numbers of people filling those categories. It is about , much more importantly, an ever-expanding middle class, and the opportunities for the proverbial "pursuit of happiness". Anyone can still get that here, with or without benefits, entitlements, and being legal or illegal. This utterly foolish piece will be forgotten immediately even by those who wish it were true.
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