Archive for January 5th, 2012

The American Myth?

A lot of Americans believe that the US offers unique opportunities for people to rise to the top if they work hard and show innovation.  It’s the American dream – the idea anyone can grow up to be rich, anyone can be President.  After all, look where success stories like Barack Obama and Bill Clinton came from; neither were from the ranks of the rich and famous.

Yet as the New York Times reports, that dream is quickly becoming a myth.   If you’re poor in America, you’re likely stay poor.   It’s no longer the land of opportunity.   Canada and most of Europe offer a better chance for the poor to succeed.   The findings are sometimes stark.   In Demark about 25% of men in born in the bottom fifth end up there, in the US it’s well over 40%.    Even Great Britain’s level is 30%, much lower than that of the US.   Two thirds of those born in the bottom 20% stay in the bottom 40%.

The top fifth is also “sticky” as the article notes.  If you’re born in the top 20% of the population in terms of wealth, you’re very likely to stay there.   It’s hard for those on lower levels to move into the top fifth.

The good news is that in the middle things are more fluid.   About 36% born in the middle fifth move up, while 41% move down.     It’s the very rich and the very poor who appear stuck.

What do we make of this?   First, you can’t deny the role of economic and social structure in creating opportunities and constraints.   Being born into wealth assures you opportunities that others do not get — that’s why so many people stay there.     Being born into poverty means a lack of opportunity and a series of constraints:  poor health care, poor schooling, bad neighborhoods, etc.

This is not something that Republicans deny.   The article points out that Rick Santorum and other conservative voices are pointing out the lack of mobility from the bottom.

Second, the US does not fare any better than other advanced industrialized states in any measure of mobility.    The inability for the poorest to rise is stark, but at other levels countries fare similarly.   The American dream and the ability to achieve it for those outside the bottom 20% is about the same as the Canadian dream, Danish dream, etc.

Why, though, do our poor have more difficulty than those in other states?    The answer is obvious: social welfare programs.   For all their faults, social welfare programs assuring health care, basic housing and nutrition to all citizens make a difference.   That’s why a Dane born at the bottom finds more opportunity to rise up than an American born in similar circumstances.    It simply is not true that social welfare programs only create a sense of entitlement and dependency; they actually get people motivated to pursue opportunities and move forward.

This also suggests that it does the top fifth little or no harm to increase taxes to create social welfare programs to help the bottom fifth.   This isn’t unfair since the top fifth already has so many more opportunities and chances for success.   They don’t earn these opportunities through their own choices and work, they achieve it by dint of where they are in the social structure.   A major causal aspect of their success is from outside their individual efforts.

That doesn’t mean that individual choices don’t matter — people have to take the opportunity that they receive and not waste it.    Still, somewhat higher taxes won’t change that fundamental social structure.   Moreover, one could make a strong argument that it is a denial of liberty to those down the ladder by allowing so many individuals to be given such greater opportunity and fewer constraints because of position of birth.   It’s not much different than the old aristocracy.

However, how such money is spent still is debatable.   I don’t think a Danish social welfare system would necessarily work the same in the US because the social divisions, size of the country, and the impact of years of neglect will make it more difficult to get real opportunity to the poor.   Also, while it’s clear that social welfare programs can work – they help people move up the ladder, they don’t necessarily create dependency – not every program is equal.   Some programs do create dependencies, especially if like in the US the programs are meager transfers that don’t really create opportunity.  If you’re not going to be able to move up, why bother?   Just take what you can!

For the US to create opportunity we need to focus on helping people help themselves, providing education, health care, and the basics that children need to be in a position to let their effort and innovation actually determine what they achieve in life, not their position of birth.   Perhaps the kind of welfare programs we have is part of the problem

To be sure, 8% of Americans (still the lowest compared to other countries) born in the bottom fifth make it to the top fifth.   It’s not that there is no opportunity or that the constraints are insurmountable.    But Americans tend to over estimate how likely it is for one to be able to do that, and under estimate the impact of social structure on opportunity.

This also vindicates at least one message from Occupy Wall Street.   The 1% are almost certain to stay at the top, the game is structured in their favor.   The poorest have real constraints, and even the middle class have limited means.   That doesn’t mean that the radical solutions the protesters sometimes suggest are right — there is huge room for debate amongst conservatives, liberals, free marketeers and social democrats about the best ways to move forward.  What we have to do, though, is accept the fact the class mobility in the US is low, especially for the top and bottom 20%.

Finally, the article points out that some skeptics note that 81% of Americans earn more in absolute terms than their parents.   While that is a sign that as a society we’ve become more prosperous, the American dream is not simply about making more money, but real opportunity.   A trash collector today earns more than a trash collector did 20 years ago.  But the children of trash collectors should have the same opportunity to become doctors as the children of doctors.

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