Only about one-third of American families will surpass their parents in wealth and income and climb to a new rung on the economic ladder, a new study out today from The Pew Charitable Trusts concludes.
The study, titled “Pursuing the American Dream,” (PDF), looks at how familes are doing today compared to how their parents did. It turns out most Americans are making a bit more than their parents, but most are not moving into a higher income bracket – say from the poverty-level, or the bottom one-fifth of earners, into the lower-middle class.
Erin Currier manages the Pew Economic Mobility Project. “Americans who started in the top and the bottom of the economic ladder, tend to remain stuck there themselves as adults,” Currier said.
Now, there is more chance of upward mobility in the broad middle class. Still, more than 50 percent of people raised here stay at the same income level as their parents or fall back.
To demonstrate, here’s a tale of two PhDs. Sarah Bellows-Blakely is 25, from Topeka, Kansas. She’s a history grad student.
“I have had the sense since I graduated from college that I could make the exact same decisions my parents made, and still have a lower quality of life,” Bellows-Blakely said. “In the world that I live in now, there are many more obstacles for young people.”
Bellows-Blakely went to Stanford and graduated with more than $30,000 in debt. Her dad’s a doctor. He went to Stanford, too.
“It was much cheaper back then, he had a grandmother who helped pay for his college, but he didn’t have to take out loans,” she added.
Andrea Winkler’s got the career that Blakely’s hoping for. She teaches history at a state university in Georgia. Her dad was also a doctor.
“My parents were of the social set that begins with Junior League,” Winkler said. “I would have been a debutante.”
But in adulthood, Winkler’s fallen far below that. In her teaching job now, she’s on a three-year contract, no tenure, and makes $55,000. She doesn’t expect to do any better in coming years.
Measuring mobility: the methodology
PEW’s survey identifies the economic ladder in five income and wealth categories, or “quintiles.” Families fall into each quintile in two ways, based on their family income and family wealth.
Family income is a calculation of how much your family earns from taxable income like salary, interest, dividends, and Social Security. Family wealth leaves income out, and instead measures things like the value of your family’s home, farm or business, your checking and savings accounts, stocks, vehicles, and other assets.
And there are two measures of mobility, according to the study: absolute and relative. Absolute mobility measures whether a person has more or less income, earnings, or wealth than his or her parents did at the same age. Whereas relative mobility measures a person’s rank on the ladder compared to his or her parents’ rank at the same age.
Here are some of the most surprising figures from the report:
– You can still make more money than your parents and fall on the income ladder. Twenty percent of people are experiencing this right now.
– Thirty-five percent of people will achieve both absolute and relative mobility, both making more money than parents and climbing a ladder rung.
– Only 4 percent of people raised at the bottom quintile will ever make it to the top.
– Only 8 percent raised on the top rung will fall to the bottom.
– Sixteen percent of Americans are downwardly mobile, which means they earn less than their parents and have a lower wealth.
– Sixty-six percent of those raised in the bottom of the wealth ladder remain on the bottom two rungs. Sixty-six percent of those raised in the top of the wealth ladder remain on the top two rungs.
– Having a college degree makes a person more than three times more likely to rise from the bottom of the family income ladder all the way to the top, and makes a person more than four times more likely to rise from the bottom of the family wealth ladder to the top.
– When it comes to mobility there is a huge gap between blacks and whites. Sixty-five percent of blacks were raised on the bottom quintile. Only 11 percent of whites were.
– Two percent of blacks were raised at the top rung. Twenty-three percent of whites were. (Note: there are so few African Americans in top two quintiles that they did not provide a proper sample.)
– Downward economic mobility is much more likely for African Americans. Half of all blacks raised on the middle rung will fall to the bottom two rungs. Whereas 32 percent of whites will.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.