Upward mobility hasn’t declined over the past 20 years, study suggests

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Posted: Sunday, January 26, 2014 12:00 am | Updated: 11:04 am, Tue Mar 25, 2014.

The odds of moving up — or down — the income ladder in the United States have not changed appreciably in the past 20 years, according to a large new academic study that contradicts politicians in both parties who have said that income mobility is falling.

President Barack Obama as well as leading Republicans such as Rep. Paul Ryan of Wisconsin have argued recently that the odds of climbing the income ladder are lower today than in previous decades. The new study, based on tens of millions of anonymous tax records, finds that the mobility rate has held largely steady in recent decades, although it remains lower than in Canada and in much of Western Europe, where the odds of escaping poverty are higher.

Raj Chetty, a professor of economics at Harvard University and one of the authors, said in an interview that he and his colleagues still believed that a lack of mobility was a significant problem in the United States.

Despite less discrimination of various kinds and a larger safety net than in previous decades, the odds of escaping the station of one’s birth are no higher today than they were decades ago.

The results suggested that other forces — including sharply rising incomes at the top of the ladder, which allow well-off families to invest far more in their children — were holding back talented people, the authors said.

“The level of opportunity is alarming, even though it’s stable over time,” said Emmanuel Saez, another author and a professor at the University of California, Berkeley. Saez and Chetty are both recent winners of an award for the top academic economist under 40.

“The facts themselves are pretty unassailable,” said David Autor, an economist at the Massachusetts Institute of Technology who has read the paper, which the authors will soon submit to an academic journal. “How you want to interpret them is the question.”

The study found, for instance, that about 8 percent of children born in the early 1980s who grew up in families in the bottom fifth of the income distribution managed to reach the top fifth for their age group today. The rate was nearly identical for children born a decade earlier.

Among children born into the middle fifth of the income distribution, about 20 percent climbed into the top fifth as adults, also largely unchanged over the past decade.

Today, the odds of escaping poverty appear to be only about half as high in the United States as in the most mobile countries, such as Denmark, Saez said.

The new study is based on a much larger data set than previous work. The earlier papers had to rely on surveys, while the latest paper examines the tax records — stripped of identifying details — of nearly every American born in a given year.

The subject of mobility has become politically popular, as Democrats make the case that the affluent are choking off opportunity from others; Republicans say that a large, intrusive government is the culprit.

In a December speech at the Center for American Progress, the president said: “The problem is that alongside increased inequality we’ve seen diminished levels of upward mobility in recent years.”

Ryan, the chairman of the House Budget Committee and the Republican vice presidential nominee in 2012, argued in a speech at the Brookings Institution last week that a smarter, smaller government would allow the country to “get back to those days of upward mobility.”

The new study focused on a measure known as relative mobility, which tracks where people end up in a national ranking of incomes compared with where they started. If a child ends up in roughly the same place in the income distribution as his or her parents, even if the country as a whole becomes richer, he is not considered to be especially mobile.

As part of the same project, some of the same researchers made public a study last summer showing that the odds of escaping poverty in some parts of the United States were much higher than in others.

In the most mobile metropolitan areas, such as Salt Lake City and San Francisco, mobility rates are similar to those in western Europe. In the least-mobile areas, including Atlanta, Charlotte, N.C., and much of the industrial Midwest, the odds are much lower. Iowa had the greatest number of counties — 36 — showing upward mobility.

The variation, Saez said, offers hope that researchers will be able to learn more about the factors that contribute to upward mobility.

For all the continuity over recent decades, the authors emphasized that parents appeared to cast a longer shadow over their children’s lives, in some ways, than before. As inequality has risen, the average economic penalty for being born poor has grown over time.

“It matters more who your parents are today than it did in the past,” Chetty said.

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