http://www.washingtonpost.com/blogs/post-partisan/wp/2014/01/24/the-mobility-muddle/

The mobility muddle

• BY ROBERT J. SAMUELSON

• January 24 at 11:14 am

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Traders work on the floor of the New York Stock Exchange on Jan. 13. (Scott Eells/Bloomberg)

Americans care about mobility — and are baffled by it. The rags-to-riches story is part of national folklore. And yet, mobility is said to be declining. Is the United States still a “land of opportunity” where hard work, talent and good ideas are rewarded? No, say many experts. People stay stuck in their class of birth. Well, here’s some good news: The conventional wisdom is wrong, concludes a new study from the National Bureau of Economic Research (NBER).

First, some background. Mobility is a muddled concept, because it comes in two varieties and popular discussions mix the two.

One sort — “relative mobility” — concerns your place on the economic ladder. Can people born at the bottom rise to the top? Do upper-middle-class children drop down the economic ladder? If these changes don’t occur, then birth is fate: You end up where your parents started.

Next is “absolute mobility.” It signifies whether each generation lives better than the preceding generation, reflecting new technologies and economic efficiencies. Everyone’s living standards can improve, even if all people remain in their parents’ place on the economic ladder. Poor people today live better than poor people did 50 years ago; so do the rich.

In practice, both sorts of mobility are important. If people are predictably frozen in their parents’ economic class, there’s little reason for them to work hard in school and on the job — or to take risks by investing in new businesses and technologies. On the other hand, everyone can’t be in the top 10 percent. If there’s no general rise in living standards, many people will feel frustrated. The only way to “get ahead” will be to move up the economic ladder. But for every person who moves up, someone else moves down.

By the conventional wisdom, U.S. society is becoming more rigid. People’s place on the economic ladder (“relative mobility”) is increasingly fixed.

Untrue, concludes the NBER study.

“We find that children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s,” write the economists. Comparing their results with earlier studies covering 1950 to 1970, they also find little difference. Social mobility “remained remarkably stable over the second half of the 20th century in the United States,” the study says.

Moreover, there’s significant shifting among classes. About a third of the children born into the wealthiest fifth of Americans stay in the richest fifth as adults — but two-thirds move down. Among children born to parents in the middle 20 percent by income, about a fifth end up in the richest fifth, as do about 9 percent of children born to the poorest fifth of Americans.

There’s no ideal amount of mobility. Parents matter, but they’re not everything. They pass along strengths and weaknesses to their children; but children can both overcome their parents’ vices and squander their parents’ virtues. It ought to be reassuring that theories of growing American rigidity are — at least for now — exaggerated.