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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