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Straight Story: Moving up?

Economics editor Chris Farrell

TESS VIGELAND: It's time once again for our economics editor, Chris Farrell, to help you sort out what's smart, what's stupid, and what's the Straight Story. And Chris, you know, it used to be you can ask any given American, are you better off than your parents? And the answer was always yes.

CHRIS FARRELL:
And that's how it should be, right?

VIGELAND:
But there's this new study out that says the response these days is often, no, I'm not better off than my parents, and that's a pretty serious change.

FARRELL:
Yeah, this comes from a collaboration between the Pew Charitable Trust and members of four think tanks. And Tess, here's one striking thing they found, American men in their 30s today are worse off than their fathers were at the same age. Here's another. Okay, there is greater upward mobility in Canada, Denmark, Norway, Sweden, Germany, and get this, France, than in the U,S.

VIGELAND:
Wow.

FARRELL:
In other words, the odds are better here. If you're born rich, you'll stay rich, and if you're born poor, you'll die poor. Well, here's the straight story. This is an ominous trend. To reverse it, we need to create genuine ladders of opportunity for the disenfranchised and the disadvantaged.

VIGELAND:
I've always been under the impression that we had those ladders. What happened to them?

FARRELL:
Part of it is, back to the '50s and '60s when there was greater mobility, you know, we had limited competition, and our economy, we had a social compact, we had strong unions, the GI Bill, Social Security, Medicare...

VIGELAND:
Those haven't got away, though.

FARRELL:
No, but we have now moved toward a society of hyper competition, both domestically and internationally, this thing that we talk about a lot, we've also had deregulation, which is, you know, again, I'm not saying these things are all negative. What I'm saying is how the environment has changed. Yes, Social Security is a great program, but things like the Earned Income Tax Credit, best anti-poverty program that we've had, you know, the past couple of years, the movement has been, you know, well, how do we sort of cut into it?

VIGELAND:
You know, we hear a lot about income inequality. You know, the President has even come out and said that it's, it's gotten worse over the last quarter century or so.

FARRELL:
Exactly.

VIGELAND:
How does economic mobility play into that issue?

FARRELL:
Okay, here's how I look at the relationship between income inequality and economic mobility. Now, imagine a world, or let's just take the world we have, wide income inequality. But in this world, everyone believes that they had the same chance to get ahead, that there's equality of opportunity. There's not equality of outcome, but there is of opportunity. So parents work hard, they believe that their children will do better. A rising tide lifts all boats. All right. Now, imagine a world same income inequalities we have now, but a rising tide only lifts a few yachts.

FARRELL:
In that world parents don't work as hard, their kids don't have hope of doing better, and, you know, more than income inequality, it's the lack of a belief in equality of opportunity to get economic mobility that leads to a stagnant, broken economy.

VIGELAND:
How do we fight against it? What's the biggest thing that society can do?

FARRELL:
Two things. One is education. From birth through high school, particularly addressing the prongs by people drop out of high school or don't get a good high school education, and by the way, we did it. The latter part of the 19th century, only 10 percent of Americans went to high school. It was in a period of a few decades. Most Americans went to high school. It's phenomenal. We built this economic engine on that one movement, so serious education reform and the second universal health care. Those two things alone will have a big impact.

VIGELAND:
Chris, we talk about this as an ominous trend, but this is really just one study, isn't it?

FARRELL:
There's a growing interest in this area, there's a lot of studies, and I'm gonna shock you, Tess, there's some contradictory results. Let me just also draw one other cautionary note. Let's not get too nostalgic about the '50s and '60s because economic mobility is much better for women these days. It's much better for African American these days. But I'm distressed that we're living in a society where we have rising income inequality. And you know what? In the international competition between nations, I want us to have better upward economic mobility than a number of the other ones that I mentioned, like France.

VIGELAND:
The straight story from our man, Chris Farrell. Thanks so much, Chris.

FARRELL:
You're welcome.

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