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Downward Social Mobility is Crushing the American Dream

Politics / Social Issues Jan 19, 2012 - 06:33 AM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleDavid Zeiler writes: Forget about getting ahead. For many in the middle class these days it's more about not sliding backwards.

It's called downward mobility and it's crushing the American Dream.

According to a study conducted by the Pew Charitable Trusts, nearly one out of three U.S. citizens born into middle class households in the 1960s have lost their economic status.


And because the study used data from 2004 to 2006 - before the Great Recession - the numbers today could be even worse.

"Being raised in the middle class is not a guarantee that you'll have that same status as an adult," Erin Currier, project manager at Pew's Economic Mobility Project, told CNNMoney. "With all the economic turmoil in the past four years, there's good reason to think that downward mobility is more severe."

Pew used three different criteria to assess the economic status of the study subjects. According to two criteria, 28% dropped out of the middle class; a third measure showed downward mobility for 19%.

Pew defines the middle class as those falling between the 30th and 70th percentiles of income.

It compared the households of the target group in 1979, when middle class meant incomes between $32,900 and $64,000, to their income in 2004-2006, when middle class meant making between $53,900 and $110,000.

Any middle class workers hit by the current recession will have a long road back.

In another Pew study, half of people who lost 25% or more of their income during better times in 1994 were still making less money four years later. One third of the group had not recovered even after 10 years.

With the unemployment rate still at 8.5% and so many people working at jobs making less than they once did, it will take years for the middle class to recover - if it ever does.

No Longer the Land of Opportunity
Once envied as the land of opportunity, the United States is no longer the best place to climb the economic ladder - far from it.

These days, workers in Europe have a better chance of moving up in economic status than those in the United States. A study by Swedish economist Markus Jantti found that 42% of American men raised in the bottom fifth of incomes remained there as adults, compared to only 25% in Denmark and 30% in Great Britain.

Even Canada offers better economic mobility.

According to Canadian economist Miles Corak at the University of Ottawa, just 16% of men raised in the bottom tenth of incomes could not move up as adults, compared to 26% of men in the United States.

"It's becoming conventional wisdom that the U.S. does not have as much mobility as most other advanced countries," Isabel V. Sawhill, an economist at the Brookings Institution told The New York Times. "I don't think you'll find too many people who will argue with that."

It seems there's evidence of downward mobility everywhere you look.

A study of downward mobility using housing data conducted by Stanford University last year revealed a middle class downsized over the past four decades. While 65% of families lived in middle-class neighborhoods in 1970, only 44% did in 2007.

The United States also ranks in the bottom third of nations on the Gini Index, a measure of income inequality that uses a 100-point scale. The U.S. score of 45 puts it well below most European nations, many of which score in the mid- to high 20s.

And then there's the widening income gap.

According to the Economic Policy Institute, the top 1% of wage earners has collected nearly 35% of all income growth over the past 30 years. Meanwhile, the bottom 90% has had to make do with just 15.9% of total income growth.

The Causes of Downward Mobility
So how did we end up in this predicament?

One big culprit is globalization. Foreign competition for labor has helped depress wages as many former U.S. middle-class jobs have migrated overseas.

That has helped make education become the defining element in how far one can advance economically. People that once could get decent-paying middle class jobs with a high school diploma are now left fighting for low-income work.

Without a college degree, getting into, or remaining in, the middle class is almost impossible.

"We're becoming two societies, two Americas," Harvard sociologist Robert Putnam told the Los Angeles Times. "There's a deepening class divide that shows up in many places. It's not just a matter of income. Education is becoming the key discriminant in American life. Family structure is part of it too."

Although certain social factors, such as divorce, can also hold people back economically, the economic destiny of most Americans is determined at birth by the wealth of their parents.

It's an increasingly rigid class structure reminiscent of 19th century Europe - but with the added curse of downward mobility.

"Success in life increasingly depends on how smart you were in choosing your parents," Putnam said. "And that flies in the face of the fundamental American bargain - that every kid ought to have access to the same opportunities."

Source http://moneymorning.com/2012/01/19/downward-mobility-is-crushing-american-dream/

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