Rising Income, Falling Mobility
An essential element of the American Dream is ensuring that each generation has greater opportunities than the last. What, then, do we make of a generation that can earn more than their parents, but still can't seem to climb the economic ladder?
A new report released by the Pew Center's Economic Mobility Project demonstrates that the incomes earned by this generation are indeed greater than that of their parents: 84 percent of workers earn more than their parents did at a similar age. But this generation still fails to transition into higher income classes. This is especially true among people in the lower quintile. While 93 percent earn more than their parents, only half manage to escape to a higher income bracket. Compare this with individuals in the middle quintile, 88 percent of whom earn more than their parents and two-thirds of which move up into higher income quintiles. The present economy does indeed appear stacked against lower income families.
Pew's analysis of wealth underscores the difficulty: 41 percent of lower quintile families remain unable to build enough wealth to chart a way into a higher wealth bracket. This is relevant primarily because it coincides with another trend: the decrease in overall wealth among the bottom three quintiles and the growth among the upper two.
Median wealth for those in the lowest wealth quintile decreased from just under $7,500 in the parents’ generation to less than $2,800 in the children’s generation. Conversely, at the top of the wealth distribution, median wealth increased from just under $500,000 in the parents’ generation to almost $630,000 in the children’s generation. Put in simpler terms, workers in this generation are likely to have 63 percent less wealth if they grew up in the lowest quintile, 20 percent less if they grew up in the second lowest, and 5 percent less if they grew up in the middle quintile.
It may be cliché but the truth is that only the rich are getting richer. The upper class is monopolizing a greater proportion of income and wealth than in past generations. This has been reported for over a decade now, and yet there still has been no national consensus on addressing the problem. Perhaps that is because people fail to anticipate the real costs: economic and political instability.
Political economists have long noted that wealth inequality has a deleterious impact on the social fabric of a nation. As the wealthy become a more identifiable and entrenched class, the rest of society begins to associate the rich with the fortunes of the country. This balkanization reaches a critical juncture when the country takes a turn for the worse, as ours did in 2008. Trust in government falls (only 19 percent of Americans say government can be trusted), and anger (26 percent) and frustration (60 percent) increase. Other institutions also suffer a loss in public confidence -- just 38 percent say they feel favorably toward business corporations; 41 percent say the same about labor unions. All in all, the very institutions that build a better tomorrow become objects of reproach.
One can't help but feel like America is lurching more strongly in the wrong direction. Demos' recent conference on poverty serves to highlight that the crisis is real (25 percent of Americans near or in poverty, almost a third of those in deep poverty) and a disproportionate and unjust share of the burden rests with minorities (65 percent of black Americans are raised in the lowest income quintile, compared with 11 percent of whites). We need solutions now if the American Dream is going to persist as more than a mockery.