[Paleopsych] WSJ: Escalator Ride

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Escalator Ride
http://online.wsj.com/article/0,,SB111595026421432611,00.html?mod=home%5Fpage%5Fone%5Fus

As Rich-Poor Gap Widens in the U.S., Class Mobility Stalls
Those in Bottom Rung Enjoy Better Odds in Europe; How Parents Confer an Edge
Immigrants See Fast Advance

By DAVID WESSEL
Staff Reporter of THE WALL STREET JOURNAL
May 13, 2005; Page A1

The notion that the U.S is a special place where any child can grow up to be 
president, a meritocracy where smarts and ambition matter more than parenthood 
and class, dates to Benjamin Franklin. The 15th child of a candle-and-soap 
maker, Franklin started out as a penniless printer's apprentice and rose to 
wealth so great that he retired to a life of politics and diplomacy at age 42.

The promise that a child born in poverty isn't trapped there remains a staple 
of America's self-portrait. President Bush, though a riches-to-riches story 
himself, revels in the humble origins of some in his cabinet. He says his 
attorney general "grew up in a two-bedroom house," the son of "migrant workers 
who never finished elementary school." He notes that his Cuban-born commerce 
secretary's first job for Kellogg Corp. was driving a truck; his last was chief 
executive.

But the reality of mobility in America is more complicated than the myth. As 
the gap between rich and poor has widened since 1970, the odds that a child 
born in poverty will climb to wealth -- or a rich child will fall into the 
middle class -- remain stuck. Despite the spread of affirmative action, the 
expansion of community colleges and the other social change designed to give 
people of all classes a shot at success, Americans are no more or less likely 
to rise above, or fall below, their parents' economic class than they were 35 
years ago.

Although Americans still think of their land as a place of exceptional 
opportunity -- in contrast to class-bound Europe -- the evidence suggests 
otherwise. And scholars have, over the past decade, come to see America as a 
less mobile society than they once believed.

As recently as the late 1980s, economists argued that not much advantage passed 
from parent to child, perhaps as little as 20%. By that measure, a rich man's 
grandchild would have barely any edge over a poor man's grandchild.

"Almost all the earnings advantages or disadvantages of ancestors are wiped out 
in three generations," wrote Gary Becker, the University of Chicago economist 
and Nobel laureate, in 1986. "Poverty would not seem to be a 'culture' that 
persists for several generations."

But over the last 10 years, better data and more number-crunching have led 
economists and sociologists to a new consensus: The escalators of mobility move 
much more slowly. A substantial body of research finds that at least 45% of 
parents' advantage in income is passed along to their children, and perhaps as 
much as 60%. With the higher estimate, it's not only how much money your 
parents have that matters -- even your great-great grandfather's wealth might 
give you a noticeable edge today.

Many Americans believe their country remains a land of unbounded opportunity. 
That perception explains why Americans, much more than Europeans, have 
tolerated the widening inequality in recent years. It is OK to have 
ever-greater differences between rich and poor, they seem to believe, as long 
as their children have a good chance of grasping the brass ring.

This continuing belief shapes American politics and economic policy. 
Technology, globalization and unfettered markets tend to erode wages at the 
bottom and lift wages at the top. But Americans have elected politicians who 
oppose using the muscle of government to restrain the forces of widening 
inequality. These politicians argue that lifting the minimum wage or requiring 
employers to offer health insurance would do unacceptably large damage to 
economic growth.

Despite the widespread belief that the U.S. remains a more mobile society than 
Europe, economists and sociologists say that in recent decades the typical 
child starting out in poverty in continental Europe (or in Canada) has had a 
better chance at prosperity. Miles Corak, an economist for Canada's national 
statistical agency who edited a recent Cambridge University Press book on 
mobility in Europe and North America, tweaked dozens of studies of the U.S., 
Canada and European countries to make them comparable. "The U.S. and Britain 
appear to stand out as the least mobile societies among the rich countries 
studied," he finds. France and Germany are somewhat more mobile than the U.S.; 
Canada and the Nordic countries are much more so. Even the University of 
Chicago's Prof. Becker is changing his mind, reluctantly. "I do believe that 
it's still true if you come from a modest background it's easier to move ahead 
in the U.S. than elsewhere," he says, "but the more data we get that doesn't 
show that, the more we have to accept the conclusions."

Still, the escalators of social mobility continue to move. Nearly a third of 
the freshmen at four-year colleges last fall said their parents hadn't gone 
beyond high school. And thanks to a growing economy that lifts everyone's 
living standards, the typical American is living with more than his or her 
parents did. People today enjoy services -- cellphones, cancer treatment, the 
Internet -- that their parents and grandparents never had.

Measuring precisely how much the prosperity of Americans depends on advantages 
conferred by their parents is difficult, since it requires linking income data 
across many decades. U.S. research relies almost entirely on a couple of 
long-running surveys. One began in 1968 at the University of Michigan and now 
tracks more than 7,000 families with more than 65,000 individuals; the other 
was started by the Labor Department in 1966.

One drawback of the surveys is that they don't capture the experiences of 
recent immigrants or their children, many of whom have seen extraordinary 
upward mobility. The University of California at Berkeley, for instance, says 
52% of last year's undergraduates had two parents who weren't born in the U.S., 
and that's not counting the relatively few students whose families live abroad.

Nonetheless, those two surveys offer the best way to measure the degree to 
which Americans' economic success or failure depends on their parents. 
University of Michigan economist Gary Solon, an authority in the field, says 
one conclusion is clear: "Intergenerational mobility in the U.S. has not 
changed dramatically over the last two decades."

Bhashkar Mazumder, a Federal Reserve Bank of Chicago economist, recently 
combined the government survey with Social Security records for thousands of 
men born between 1963 and 1968 to see what they were earning when they reached 
their late 20s or 30s. Only 14% of the men born to fathers on the bottom 10% of 
the wage ladder made it to the top 30%. Only 17% of the men born to fathers on 
the top 10% fell to the bottom 30%.

Land of the Self-Made Man

Benjamin Franklin best exemplified and first publicized America as the land of 
the mobile society. "He is the prototype of the self-made man, and his life is 
the classic American success story -- the story of a man rising from the most 
obscure of origins to wealth and international preeminence," one of his many 
biographers, Gordon S. Wood, wrote in 2004.

In 1828, a 14-year-old Irish immigrant named Thomas Mellon read Franklin's 
popular "Autobiography" and later described it as a turning point in his life. 
"Here was Franklin, poorer than myself, who by industry, thrift and frugality 
had become learned and wise, and elevated to wealth and fame," Mellon wrote in 
a memoir. The young Mellon left the family farm, became a successful lawyer and 
judge and later founded what became Pittsburgh's Mellon Bank. In front, he 
erected a statute of Franklin.

Even Karl Marx accepted the image of America as a land of boundless 
opportunity, citing this as an explanation for the lack of class consciousness 
in the U.S. "The position of wage laborer," he wrote in 1865, "is for a very 
large part of the American people but a probational state, which they are sure 
to leave within a longer or shorter term."

Self-made industrialist Andrew Carnegie, writing in the New York Tribune in 
1890, catalogued the "captains of industry" who started as clerks and 
apprentices and were "trained in that sternest but most efficient of all 
schools -- poverty."

The historical record suggests this widely shared belief about 19th-century 
America was more than myth. "You didn't need to be told. You lived it. And if 
you didn't, your neighbors did," says Joseph Ferrie, an economic historian at 
Northwestern University, who has combed through the U.S. and British census 
records that give the occupations of thousands of native-born father-and-son 
pairs who lived between 1850 and 1920. In all, more than 80% of the sons of 
unskilled men moved to higher-paying, higher-status occupations in the late 
1800s in the U.S., but less than 60% in Britain did so.

The biggest factor, Mr. Ferrie says, is that young Americans could do something 
most British couldn't: climb the economic ladder quickly by moving from farm 
towns to thriving metropolises. In 1850, for instance, James Roberts was a 
14-year-old son of a day laborer living in the western New York hamlet of 
Catharine. Handwritten census records reveal that 30 years later, Mr. Roberts 
was a bookkeeper -- a much higher rung -- and living in New York City at 2257 
Third Ave. with his wife and four children.

As education became more important in the 20th century -- first high school, 
later college -- leaping up the ladder began to require something that only 
better-off parents could afford: allowing their children to stay in school 
instead of working. "Something quite fundamental changed in the U.S. economy in 
the years after 1910 and before the Great Depression," says Prof. Ferrie.

One reason that the once-sharp differences between social mobility in the U.S. 
and Britain narrowed in the 20th century, he argues, is that the regional 
economies of the U.S. grew more and more similar. It became much harder to leap 
several rungs of the economic ladder simply by moving.

The paucity of data makes it hard to say how mobility changed for much of the 
20th century. Individual census records -- the kind that Prof. Ferrie examines 
-- are still under seal for most of the 20th century. Data from the two 
national surveys didn't start rolling in until the 1970s.

Whatever the facts, the Franklin-inspired notion of America as an exceptionally 
mobile society persisted through most of the 20th century, as living standards 
improved after World War II and the children and grandchildren of immigrants 
prospered. Jeremiads in the 1960s and 1970s warned of an intractable culture of 
poverty that trapped people at the bottom for generations, and 
African-Americans didn't enjoy the same progress as whites. But among large 
numbers of Americans, there was little doubt that their children would ride the 
escalator.

Old Wisdom Shatters

In 1992, though, Mr. Solon, the Michigan economist, shattered the conventional 
academic wisdom, arguing in the American Economic Review that earlier studies 
relied on "error-ridden data, unrepresentative samples, or both" and 
misleadingly compared snapshots of a single year in the life of parent and 
child rather than looking over longer periods. There is "dramatically less 
mobility than suggested by earlier research," he said. Subsequent research work 
confirmed that.

As Mr. Mazumder, the Chicago Fed economist, put it in the title of a recent 
book chapter: "The apple falls even closer to the tree than we thought."

Why aren't the escalators working better? Figuring out how parents pass along 
economic status, apart from the obvious but limited factor of financial 
bequests, is tough. But education appears to play an important role. In 
contrast to the 1970s, a college diploma is increasingly valuable in today's 
job market. The tendency of college grads to marry other college grads and send 
their children to better elementary and high schools and on to college gives 
their children a lasting edge.

The notion that the offspring of smart, successful people are also smart and 
successful is appealing, and there is a link between parent and child IQ 
scores. But most research finds IQ isn't a very big factor in predicting 
economic success.

In the U.S., race appears to be a significant reason that children's economic 
success resembles their parents'. From 32 years of data on 6,273 families 
recorded by the University of Michigan's long-running survey, American 
University economist Tom Hertz calculates that 17% of whites born to the bottom 
10% of families ranked by income remained there as adults, but 42% of the 
blacks did. Perhaps as a consequence, public-opinion surveys find 
African-Americans more likely to favor government redistribution programs than 
whites.

The tendency of well-off parents to have healthier children, or children more 
likely to get treated for health problems, may also play a role. "There is very 
powerful evidence that low-income kids suffer from more health problems, and 
childhood health does predict adult health and adult health does predict 
performance," observes Christopher Jencks, a noted Harvard sociologist.

Passing along personality traits to one's children may be a factor, too. 
Economist Melissa Osborne Groves of Maryland's Towson University looked at 
results of a psychological test for 195 father-son pairs in the government's 
long-running National Longitudinal Survey. She found similarities in attitudes 
about life accounted for 11% of the link between the income of a father and his 
son.

Nonetheless, Americans continue to cherish their self-image as a unique land 
where past and parentage puts no limits on opportunity, as they have for 
centuries. In his "Autobiography," Franklin wrote simply that he had "emerged 
from the poverty and obscurity in which I was born and bred to a state of 
affluence." But in a version that became the standard 19th-century text, his 
grandson, Temple, altered the words to underscore the enduring message: "I have 
raised myself to a state of affluence..."

Write to David Wessel at david.wessel at wsj.com