Land of Opportunity?

Americans like to think of themselves as living in the land of opportunity.  Our language is full of phrases like the American Dream, the American Way of Life, the Free Enterprise System, all suggesting that if you live here, you can just reach out and grab the main chance.  But how true is all this?  How much opportunity do we have?

The answer is not very much, at least not now.

There are a number of ways to measure what we mean by economic mobility.  But all of them point to the same grim conclusion.  America is not the land of opportunity anymore.  Even worse, you would have a better chance of moving up the socio-economic scale had you been born in socialist Scandinavia, or in highly regulated Germany.

Here is one measure, lifetime income mobility.  This captures the movement of individuals up or down the economic scale over their working lives.  A mobile society would see a good number of people move from low paying to better paying jobs.  But in America, this form of income mobility has declined for men and women, and it has decline both for the college and non-college educated.  Where you start on the income distribution spectrum is likely to be where you end up.

In fact, the chance of moving upward over a lifetime of work was never very high. For those who began their working life (age 25) below median earning, the odds of making it into the top 20th percentile (the highly favored upper middle class) was a mere 6% in 1980.  But it has only fallen since.  Anyone starting below the top quintile has a very hard time making that team, while anyone on it has very little chance of being cut.

It’s hard to know how much lifetime income mobility is sufficient to claim we are an opportunity society.  But what about other measures?  What about mobility across generations?  Even if things are bad for me, an optimist in an opportunity society might reason, they can be better for my children.

For a long time, it was possible to imagine that your children would at least earn more than you.  In the post-World War II period of high growth and robust employment, 90% of children did.  But since 1980 that percent has been fallen nearly by half.  Now, where you are born is often where you end up.

Income advantages persist across generations.  To the extent your family is economically better off than another family, at least half, and for the very well off, more like 2/3rds of that advantage will be carried over into the next generation.  If you are born fortunate, you will likely inherit the skills, education, attitudes, social and indeed financial capital to stay that way.  This applies to the very rich but also the upper middle class.  While children in the middle of the spectrum may move up or down slightly, they will have a tough time breaking into the top 20%, let alone top 1%.  In short, rather than shirt sleeves to shirt sleeves in three generations, it’s more like shirtsleeves or white collar for the foreseeable future.

But surely America still does better than those class ridden old world societies?  In a word, no.  Not only is mobility low compared to elsewhere but it is driven by high levels of inequality—the so called Gatsby Curve.  Start well off, pass on these advantages to your children; this is something Americans seem to do much better than peer nations.

International Mobility Comparisons

In America lot depends on where you are born as well.  In some states and regions, economic mobility remains quite high, while in others it is as bad as an underdeveloped country. Here’s a more interactive way to look at it.   Some of the least mobile places, interestingly, are among the strongest Republican voting states.

Well, if location matters, then isn’t it fortunate America is a land of geographic mobility?  A continent sized nation continually on the move, even if at the expense of native people and their lands, America has long touted geographic mobility as one thing that separates it from more stagnate countries. If your hometown offered few opportunities, young man or woman, pick up and move elsewhere—usually west, but also to the sunbelt, or recently, even back to the old cities of the northeast.  Think about the Okies fleeing the dust bowl and ending up in Southern California.  Who would have guessed they had landed in paradise.  A booming wartime and post war economy, a growing city, rising land values, and a wonderful climate.  Anyone who had moved to Los Angeles before the traffic, smog, and unaffordable housing rolled in was set to do very well indeed.

Americans moved not just across the frontier, but they moved from farms to factories.  They moved even when they faced poverty and racism, escaping the sharecropping South for the hopes of a better life in northern cities.  White and black, they moved within the South, poured out of the countryside and into Atlanta, Houston, Birmingham, Dallas.

But Americans are not so much on the move anymore.  In fact, since 1970, geographic mobility has been cut in half.  There is more than a little evidence behind the anecdotes of people trapped in failing towns when factory doors shut or mired in rural despair when the mine closes.

So least we are great at starting our own firms and being entrepreneurs, right? Even if the incomes don’t match the aspirations we can still have our Jeffersonian yeoman dreams and be our own bosses.  Again, sorry to disappoint but that’s gone down and away as well.  In 2007 the US ranked 23rd on a list of 34 OECD countries in terms of newly registered companies per 1,000 working age population.  It sat below the United Kingdom, Denmark, France and Spain among others.  And if you think we are a nation of small businesses, the US ranked last in percentage of workers in firms with fewer than 50 employees.

Share of Employees

Americans do tend to be more optimistic about mobility than other nations.

Mobiltiy Perceptions

But that might the most depressing statistic of all.  We are a nation whose high hopes are being dashed off the cliff.  Expectations and frustrations, outworn beliefs sunk in long lost traditions and misplaced faith in a distinctive set of national values have yet to fully engage the grim new realities. These are the economic and also the cultural causes of the current state of American politics, as I see it.  You can say it’s all about racism, or you can call it blaming the victim, scapegoating, or any other number of examples of humanity at its worst.  And while economic frustrations are no excuse, at least we should recognize that there is plenty of evidence that they exist, even for the so called “better off” Trump voters.

At the same time, the people who might well still feel this is the land of opportunity are immigrants.  Most still come from economies that are far worse than our own.  Most still move because the option of staying means either crushing poverty or death.  What does it say that one of the main divisions in American society right now is over immigrants and immigration?  Could it be that nativism is just the unacknowledged anger of those who have lost the American Dream at those who still have it?

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