Many news stories and opinion pieces on the latest report from the Pew Center’s Economic Mobility Project — as well there might be.
Because “pursuing the American dream,” as the report is entitled, could be as rewarding as chasing a will o’ the wisp — especially for those born to low-income parents and most especially of all if they’re black.
At the very least, the report gives the lie to our “rags to riches” story. It’s “more of a Hollywood fairytale than an actual reality,” says Ethan Gelling at the Corporation for Economic Development, echoing the Pew project manager.
I think we need to parse the data into two separate issues, as the Pew analysts also do.
One is economic mobility as measured by movement up or down the quintiles into which income is commonly divided.
As the Pew analysts say, economic growth — especially at the top — puts the major rungs on the income ladder further apart. Obviously harder then to climb from one to another.
That’s how we can have what, at first blush, seem two contradictory findings. On the one hand, 93% of adults in the bottom fifth have family incomes higher than their parents did. On the other hand, only 57% move up into a higher fifth — and only 13% into one of the top two fifths.
Some argue that the root cause, i.e., the grossly disproportionate distribution of the wealth our economy generates, is bad in and of itself.
Rakim Brooks at Demos, for example, warns that the public as a whole loses trust in institutions “when it begins to associate the rich with the fortunes of the country.”
Others have said that income inequality is partly responsible for the credit crunch so many households now find themselves in.
People, they say, often define their wants upward, based on what they see richer folks have. They buy — or rather, make down payments on — houses they can’t afford. They put all sorts of “status-defining” goods on credits cards — enormous flat-screened TVs, designer accessories, etc.
I’m rather more preoccupied with the second issue. Do people in the bottom fifth have enough to live on, plus a modicum of what the Pew analysts call wealth and some others refer to as assets?
Do they, in other words, have a reserve for costly emergencies? A cushion against plain old hard times? Some resources to give their children a good start in life?
The answer from the Pew project is a resounding No.
The median income of families in the bottom fifth was a paltry $19,202 in 2009 — nearly $2,850 below the federal poverty line for a family of four.
And their median wealth, i.e., assets like home equity, money in the bank, a car, was just $2,748 — about $4,690 less than the bottom fifth had a generation ago.
The two figures are, I assume, closely related. If you’re, at best, making barely enough for basic needs, you’re not squirreling away money for a rainy day — let alone investing in mutual funds and the like that will, in the long run, make your nest egg grow.
Why families in the bottom fifth are in such bad straits is a much more complex question. Panelists at a recent all-day conference co-hosted by Demos and partners went at it from many angles.
I’ll mention here only what seemed one broad consensus. A college education — at the very least, enough to earn an associate’s degree or certificate — is a big part of the solution.
Yet, as we know, college is getting very expensive. Pell grants, which the lowest fifth could qualify for, rarelyt cover the costs — and now have new restrictions that tend to rule out self-supporting work during enrollment.
I don’t suppose I need to say anything about loan burdens — except perhaps to note that they surely seem especially formidable for potential students in the bottom fifth, whose prospects for moving up the income scale are iffy, at best.
Yet the Pew figures indicate that their families can’t help them.
Nor, indeed, will the parents all have the resources to provide what their infants and toddlers need to do well when they start school, e.g., a healthful diet, high-quality child care, time to read to them, take them to the zoo, etc.
Fewer than half of poor children are “school ready” when they start kindergarten, according to a study from the Brookings Institution. Three-quarters of children in families with moderate and high incomes are.
And when you start behind, you tend to stay behind, as some Pew figures on reading skills show.
Not surprising then that the dropout rate for low-income students is five times the rate for students from high-income families.
This is one way that income inequality passes from generation to generation. Not just inequality, but poverty too.