Economic mobility hasn’t changed in a half-century in America, economists declare: Notes for a lecture, "E Pluribus Unum? What Keeps the United States United":

Economic mobility hasn’t changed in a half-century in America, economists declare

By Jim Tankersley, Washington PostPublished: January 22 | Updated: Thursday, January 23, 12:01 AM http://www.washingtonpost.com/business/economy/economic-mobility-hasnt-changed-in-a-half-century-in-america-economists-declare/2014/01/22/e845db4a-83a2-11e3-8099-9181471f7aaf_print.html

Children growing up in America today are just as likely — no more, no less — to climb the economic ladder as children born more than a half-century ago, a team of economists reported Thursday.

Even though social movements have delivered better career opportunities for women and minorities and government grants have made college more accessible, one thing has stayed constant: If you are growing up poor today, you appear to have the same odds of staying poor in adulthood that your grandparents did.

The landmark new study, from a group led by Harvard’s Raj Chetty, suggests that any advances in opportunity provided by expanded social programs have been offset by other changes in economic conditions. Increased trade and advanced technology, for instance, have closed off traditional sources of middle-income jobs.

The findings also suggest that who your parents are and how much they earn is more consequential for American youths today than ever before. That’s because the difference between the bottom and the top of the economic ladder has grown much more stark, but climbing the ladder hasn’t gotten any easier.

Those findings add up to a surprising take on the status of the iconic American Dream, and they cast Washington’s roiling debate about the consequences of economic inequality in a new light.

The paper suggests that “it is not true that mobility itself is getting lower,” said Lawrence F. Katz, a Harvard economist and mobility scholar who was not one of the paper’s authors but has reviewed the findings. “What’s really changed is the consequences of it. Because there’s so much inequality, people born near the bottom tend to stay near the bottom, and that’s much more consequential than it was 50 years ago.”

Americans have always placed great faith in economic mobility, the idea that any child born into poverty can grow up to be middle class, or that a middle-class kid can grow up to be rich.

As the country struggles through the slow recovery from recession and decades of middle-class stagnation, politicians including President Obama and Rep. Paul Ryan (R-Wis.) have lamented that mobility is getting worse; that it is getting harder to climb out of poverty or into wealth.

Previous research has suggested that that might be true, particularly work by Bhash Mazumder, a senior economist at the Federal Reserve Bank of Chicago who found mobility declined as inequality increased in the 1980s.

Chetty and his colleagues — Nathaniel Hendren of Harvard, Patrick Kline and Emmanuel Saez of the University of California at Berkeley and Nicholas Turner of the Treasury Department’s Office of Tax Analysis — examined millions of anonymous earnings records and found that mobility has not changed appreciably since the 1970s.

(The authors looked at records for parents at a set age and for their children once they reached adulthood. For the most recent generation of children, many of whom have not yet started working, they measured college attendance, which correlates with higher earnings).

Incorporating results from a previous study dating back to the 1950s, the authors concluded that “measures of social mobility have remained remarkably stable over the second half of the twentieth century in the United States.”

That finding implies mobility is stuck at a low rate, at least compared to other wealthy nations: It is much harder for a poor child born in America to climb into the rare air of the country’s highest earners than it is for a similar child in, for example, Canada or Denmark.

Several economists who study mobility and inequality expressed surprise at that stasis — starting with Chetty, the lead author. “I am really struck by how stable it seems to be,” he said in an interview. “I would not have expected that, because many things have changed over time.”

Heather Boushey, who heads the Center for Equitable Growth, a new inequality-focused think tank, said the findings were “making me rethink” her previous belief that mobility may be declining, particularly for men.

David Autor, an MIT economist who writes frequently about issues related to inequality, called the findings “a sort of Rorschach” test that will support many economists’ preconceived notions about the effectiveness of government programs in providing opportunity.

Some could view the results as a failure of programs such as Pell grants, Head Start and nutritional supplements for children that are intended to promote mobility. Or, he said, “you can view this as: Social policies have fought market forces to a draw.”

Another leading voice on mobility issues, Manhattan Institute economist Scott Winship, said in an interview that he has found a similar trend in mobility — no change for children born in the 1980s compared to those born in the 1940s — using a different data set.

The findings from Chetty and his co-authors are likely to set off a new round of debate over mobility and inequality, which Obama recently called “the defining challenge of our time.”

There’s something in the paper to challenge both political parties’ converging approaches to the issue. It suggests that both sides are wrong to talk about mobility declining. It explicitly calls into question the “Great Gatsby Curve” invoked by the Obama administration, the idea that widening inequality will depress mobility over time.

But the findings also suggest that Republicans are wrong to downplay inequality and focus solely on improving mobility.

Companion work by the Chetty team suggests that geography may be a critical factor in the pursuit of the American Dream. That research shows that some parts of the country, particularly the Southeast, have experienced persistently lower mobility over time than other parts, such as the Mountain West.