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November 21, 2007 |  5 comments |  Print  Your Opinion  

The (Euro)Land of Opportunity

Casey S Butterfield: Income mobility in the United States is not as high as people think. If the US economy is so excitingly dynamic, why do children in Canada and Europe have a better chance of surpassing their parents’ incomes?

The US holiday of Thanksgiving is almost upon us, a day when Americans of all races, classes and ancestries gather with family and consider what they should be grateful for this year. In this season of subprime mortgage crashes, looming foreclosures, and a dollar that has hit a 40-year nadir, some cheering news has come from the US Treasury. Income mobility in the United States between 1996 and 2005 was “considerable,” so let’s give thanks for being part of a country where anyone can make it.

Or should we?

Pundits on both the left and the right have jumped on the Treasury findings, which indicate that more taxpayers in the lowest quintile moved up the ranks, and more wealthy taxpayers in the highest quintile moved down. Aha, says the Wall Street Journal, this proves that income inequality is so much populist hokum “opportunity and merit continue to drive American success, not accidents of birth.” Oho, says the New Republic blogger, “Is it really that much of an achievement that during a decade of rapid economic growth, one-third of workers saw their real incomes fall?”

A seemingly high level of income mobility supports the argument that America is still the land of opportunity, to the exclusion of all others: that there is something unique about this country that rewards entrepreneurship and risk-taking. But is that mythical America still around, if it ever was? Does a child who grows up in poverty have the same chance as anyone of obscene success? Can a new immigrant to the US who starts with nothing see her children join the middle class? And would they do any better on the other side of the Atlantic?

There are several comparative studies of income mobility in North American (United States and Canada) and European countries that use the same end date (late 1990s, early 2000s) as the recent US Treasury results. In every survey, the United States ends up at or near the bottom of the list. This study from the London School of Economics shows Canada and Northern Europe to have much greater intergenerational income mobility, from father to son, and makes particular mention that “the idea of the US as the ‘land of opportunity’ persists; [sic] and clearly seems misplaced.” In their report entitled “Is the U.S. a Good Model for Reducing Social Exclusion in Europe?”, John Schmitt and Ben Zipperer of the Center for Economic Policy Research review OECD data over a three-year period to show that with only 29.5%, the United States had “the lowest share of low-income workers that exit their low-income status from one year to the next.”

The OECD results from the mid-1990s match this year’s findings from the Treasury, which demonstrate that those in the bottom income group (roughly half) remained there over time, just as 54% of the top 5% of US taxpayers in 1996 were still in the top 5% in 2005. The Pew Economic Mobility Study, which issued three reports on the same day that the Treasury results came out, found that “Forty-two percent of children born to parents at the bottom of the income distribution remain at the bottom, while 39 percent born to parents at the top, stay at the top.” Compare this to OECD member Denmark, where 69.4% of low-income workers exited to a higher income bracket. Or even Portugal, where 37% did.

The economic dynamism of the United States is often used as an excuse for the high rates of child poverty and inequality encountered here, and the numbers on the US Treasury press release encourage such an interpretation. But this latest news is the same old song. The last US Treasury study of income mobility in 1992 showed an improvement in income mobility during the 1980s, which in turn were better for income mobility than the stagflationary 1970s. If the US economy is so excitingly dynamic, why do children in Canada and Europe have a better chance of surpassing their parents’ incomes?

It’s good to know that income mobility in the US is improving. But our rising tide still lifts some boats more than others.


Casey Butterfield is the editor-in-chief of the Atlantic Community. Ms. Butterfield studied comparative literature at the University of California, Berkeley, and holds a master’s degree in international relations from the University of Cambridge. She is a former Fulbright scholar and has worked as an editor, writer and translator in Spain, Great Britain and the United States. She grew up in Los Angeles.


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Annie  Glimmerglass

November 21, 2007

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Interesting article, written with flair and understanding of the US. Ms. Butterfield also evidences some compassion for those who are not born into the middle class. As a psychotherapist, I see another aspect to being born into poverty. Access to therapeutic intervention to help cope with the many issues inherent in being poor is often not available. Shame, anger and depression can contribute toward an inability to rise from one status to another.
Tags: | poverty | therapy | Middle Class |
 
Jan-Friedrich  Kallmorgen

November 24, 2007

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Thanks for this very insightful article, which is particularly valuable as it comes from an American.

I also recommend the work done at the Brookings Institution's Hamilton Project, which produces research and policy proposals on how to create a growing economy that benefits more Americans. See http://www.brookings.edu/projects/hamiltonproject.aspx. In Germany, the Altana Quandt runs a three year project on the issue: http://www.herbert-quandt-stiftung.de/root/index.php?lang=de&page_i...

Do you know what positions the current presedential candidates take on income mobility?
Tags: | income mobility | Middle Class |
 
Casey S Butterfield

November 25, 2007

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Thanks for your comment, Jan. I'm glad you like the article.

Income mobility has not been a big issue on the presidential campaign trail, and for good reason: if you look at the Treasury studies that have been done since the 1970s, you can see that income mobility increases regardless of who is in the White House. It's a wonky issue that doesn't change much and is difficult to turn into a memorable sound bite.

Income inequality is another matter, however. This was a huge element of John Edwards' "two Americas" campaign in 2004, and he continues to run on a platform to address poverty in the United States. Indeed, most of the Democratic presidential candidates have to make a fair amount of noise about income inequality to placate the more progressive elements in the party.

I deliberately steered clear of income inequality in this article, as the income mobility issue across the Atlantic was a lot more interesting of an issue to explore in this forum. For the record, however, income inequality does not decline as income mobility rises, regardless of what the WSJ editorial board has argued during the Clinton administration and the present one. Paul Krugman refutes their arguments neatly here and here.

And that's why, while I don't see income mobility as a big issue in next year's campaign, we can expect to hear a lot more about income inequality in the coming months.

I will have a look at the links you provided.

p.s. I find it very interesting that both you and Ms. Glimmerglass have used the "Middle Class" tag in your comments!
 
Nikolas Kirrill Gvosdev

November 27, 2007

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What is interesting to consider is what this trend means in the long-term for the viability of the "American Dream" as part of the glue that cements together the American body politic. It is also relevant to point out that Bill Clinton had been strongly influenced as a undergraduate by Caroll Quigley and his notion of "future preference"--that current generations are willing to make sacrifices and invest for the future on the grounds that their children and grandchildren will be better off.

The data may also be one of the reasons--perhaps obscured by greater attention paid to much more restrictive immigration and travel policies post 9/11--why the U.S. has been declining in global surveys as the country "of choice" one would want to immigrate to. If I recall, the UK and Germany now pass the U.S. (with the exception of the survey done in India).

This data also raises questions related to both immigration and the question of the U.S. underclass--and whether or not most Americans are in fact going to be in the "middle class"--and I think it is interesting that all the posts have talked about the "middle class" because it is still the definition that most Americans use to define themselves even when their income puts them either into a higher or lower bracket. Somehow "middle class" is still defined as the default position for Americans--and Casey, this is why Democrats have difficulty winning on poverty platforms and why the DLC prefers to stress questions of opportunity.
 
Casey S Butterfield

November 29, 2007

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Nick, your last point reminded me of a joke I read recently--I'm sure in DC you've heard it already--that the Democrats can't win, and the Republicans can't govern.

Seriously though, it's a sagacious point you make, connecting this self-defining as middle class with an inability to connect to poverty. Such a broadly defined middle class is an essential part of the American dream, because for at least 3 quintiles of the taxpayer population studied by the IRS, the upper middle class (earning $120,000/year) is actually the aspiration: see this poll. Is it really the root of why Democrats have difficulty winning, though? I think a large part of it is that they can't just keep their heads down and run with the pack toward the goal--it seems to me that they get in each other's way politically a lot more than the Republicans do. But that's off-topic.

Another interesting fact gleaned from Gallup:
Also, people with lesser economic means are actually less sympathetic to the plight of the poor than those with greater means. Twenty-three percent of lower-income respondents say that poor people deserve to be poor, a much higher percentage than found among middle- (12%) or upper-income (5%) respondents.


That's from this one, "Most Americans Do Not Have a Strong Desire to Be Rich". Perhaps what we need is to come to a consensus on what, exactly, constitutes the American Dream: is it meteoric success, or is it comfort?

Perhaps it depends on one's class.
 

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