The American Myth of Social Mobility

The American Myth of Social Mobility

by Howard Steven Friedman

We Americans cherish our national legends about the “American dream” and have always perceived that our country, the land of opportunity, allows for greater mobility than the countries of Europe and Asia, with their feudal histories and perceived rigid class structures. This belief in the “American dream” is evidenced by surveys showing that Americans have a greater faith in their country being a meritocracy than citizens of nearly every other country on earth.

Regardless of political philosophy, few would argue that a society with little social mobility is a good thing. Societies in which there is little opportunity for social mobility will lack incentives for people to strive. Those born in lower socioeconomic classes will be resigned to their station in life, a self-destructive pattern that all countries seek to avoid. Countries that generate opportunities for all of their citizens to succeed will maximize the talent pool of their population, while countries that fail to do so will fall behind, relying on the talents of only the privileged few.

Measuring social mobility usually involves examining the relationship between the income of one generation and that of the following generation. We expect there to be some correlation between the incomes of the two generations; after all, it is reasonable to assume that wealthier parents provide not only material assets to the next generation but also attributes that may aid their wealth generation. Wealthier parents are typically more educated, are able to invest in their children’s development, and tend to entertain higher expectations that their children will gain success.

The quantitative expression of this mobility measures how much the variability of a son’s income can be explained by the father’s. If the father’s income can be used effectively to predict the son’s income, then that would suggest that there is little mobility: Richer fathers would have richer sons, and poorer fathers would have poorer sons. Alternatively, if there is no relationship between the father’s income and the son’s income, this would suggest perfect mobility — i.e., the chances of a son having a high income would be independent of the father’s income.

Cross country comparisons have been performed for a number of years using different measures where the countries included Australia, Canada, Denmark, Finland, France, Germany, Italy, Norway, Sweden and United States. The studies have examined income mobility elasticity (the percentage of increase in a son’s income associated with a 1 percent increase in the father’s income), correlations between income of two generations as well as examining the probability of someone born in one income level moving to another. All of these studies have drawn the same conclusion, that the United States has lower, not higher, mobility than other wealthy countries. For example, in the studies on income mobility elasticity, it was seen that an American man’s income is nearly twice as reliant on his father’s background as a Canadian man’s.

One interesting study examined the probability that a son will remain in his father’s income quintile, where a quintile represents one-fifth of the population ranked from lowest to highest income. In that study of six countries (Denmark, Sweden, Finland, Norway, the United Kingdom, and the United States), the data demonstrate that 42 percent of the American sons of fathers born in the poorest quintile landed in the poorest quintile themselves. This rate of the persistence of poverty was far higher than the 30 percent found in the United Kingdom and well above the 25 percent to 28 percent range found in Denmark, Sweden, Finland, and Norway.

This same study on income quintiles examined what might be called the rags-to-riches version of mobility, looking at the percentage of sons born to fathers in the poorest quintile who ended up in the wealthiest quintile. The U.S. rate was 7.9 percent, far lower than that of the other countries, where rates ranged from 10.9 percent to 14.4 percent. Some of this measured immobility may derive from America’s striking income inequality; that is, an American born into the poorest quintile has farther to travel to reach the highest quintile than those in countries with greater income equality.

Overall, these statistics are very depressing for those who subscribe to the notion that America is a meritocracy and a “land of opportunity.” We see that there is far less social mobility in the United States than in other countries and other studies have shown clearly that this mobility is declining.

Many cite education as the key to socioeconomic mobility, and here the inequalities in the American educational system clearly play a role. For example, the United States Department of Education has shown that the highest performing eighth graders from low socioeconomic backgrounds have about the same chance of completing a bachelors degree as the lowest performing eighth graders from high socioeconomic backgrounds. Translation: When it comes to higher education, the amount of money your parents have is much more critical than academic potential, and higher education is a key to socioeconomic mobility. But the inequalities of opportunity start far earlier than the eighth grade. Children from lower income families are about 20 percent less likely to attend pre-primary school than those from middle income families.

Education makes a difference, as the facts make clear. Of the adults who grew up in low-income families but earned college degrees, only 16 percent stayed in the lowest income quintile. Of the adults who started in the lowest income quintile and failed to earn a college degree, 46 percent stayed there. End inequality in education, and we strike a blow for social mobility — although persistent disparities in income by race and gender still need to be addressed.

Clearly, these data fly in the face of the American dream — the idea that you can be anything you want to be if you just work at it. Rather, they point to a rigid and entrenched structure of wealth at odds with our American sense of this being the land of opportunity.

Note: Many of the studies on income mobility examine the relationship between a son’s income to that of his father, rather than looking at female incomes so as to avoid combining gender bias issues into the analysis.

This article is based on excerpts from the recently released book The Measure of a Nation: How to Regain America’s Competitive Edge and Boost Our Global Standing

A key goal in ‘Measure of a Nation’ is to compare the United States to other wealthy countries, with the idea being to identify which countries are performing the best in each area of interest: health, safety, democracy, education and equality. In each of those areas, the countries that are performing the best are examined to determine which best practices might be applied here in America. Leading countries were labeled Stars and lagging countries were labeled Dogs.

In order to do this analysis, we selected the subset of countries that are both wealthy (nominal GDP per capita over $20,000) and have a population greater than 10 million (upper third of national populations, no city-state countries) as a comparison group. This comparison group consists of 14 countries: Australia, Belgium, Canada, France, Germany, Greece, Italy, Japan, Portugal, The Netherlands, South Korea, Spain, the United Kingdom, and the United States.


Kids Cheat Just Like Their Business Role Models Do

Kids Cheat Just Like Their Business Role Models Do

by Susan Antilla

A friend wrote me last week to say how troubled she was by this stunner from her 19-year-old: The freshman at a private liberal-arts college told her mom that cheating on exams was standard operating procedure at school, and that she fully expected that cheating would be an everyday thing once she got into the workplace, too.

“To really get ahead, and get what you want in the business world, it is absolutely necessary to cheat,” the student told her horrified mother. Forgo a chance to cheat and you’re foolishly transferring a perfectly good opportunity to some other cheater who will reap the benefits, she said.

Though she’s years from gainful employment, the young woman has something in common with lots of people already securing a paycheck in the job world.

In a survey of 500 financial professionals in the United States and the United Kingdom released Monday, one-quarter said they believed “that the rules may have to be broken in order to be successful.” Asked whether they thought their competitors would break the law to get ahead, nearly 40 percent in the survey sponsored by New York law firm Labaton Sucharow said yes.

Though it’s tempting to minimize these dysfunctional ethics as just a sleazy financial industry thing, the problem, of course, infects business on Wall Street and off. In January, the not-for-profit Ethics Research Center said that 13 percent of the 4,600 employees it surveyed across a range of industries last September perceived pressure to compromise standards at their jobs. That was a five percentage-point increase from 2010. Don’t expect any miraculous turnaround. Boding poorly for the future is that more employees are reporting retaliation after they speak up, and thus are increasingly afraid to expose unscrupulous practices.

So when you think about it, no mom or dad should be shocked that young people look upon dishonesty as a tool in a go-getter’s quest for success.

And parents themselves play a part in the messages they send about attaining goals at any cost. New York City officials said Monday that 70 students at Stuyvesant High School had been involved in a cheating scheme last month. During a foreign-language exam on June 18, the principal confiscated a cell-phone from a student who was texting messages to fellow students. Using data found on the student’s phone, a subsequent investigation uncovered additional cheating during previous tests, including three Regents exams.

In the ensuing press coverage, much was made of the stressful demands on Stuyvesant teenagers to meet expectations in a school that sends graduates to places like MIT and Brown. “Most of the students come from families where the goal is ‘Ivy League school or bust’; you either go to an Ivy League school or you haven’t lived up to your potential,” one Stuyvesant grad told the New York Times.

Feel sorry for the Stuyvesant kids if you want, but I don’t. At some point, people in charge have to come down hard on cheating, whether it happens in the classroom or in the corner office. Now wouldn’t be a bad time to start.

Sadly, the school hasn’t taken the opportunity to expel the student/cheaters, much the way many businesses let rogues stay in their jobs. Our executives-of-the-future must wonder what planet we’re on when we give those sermons about ethics.

On Long Island last fall, seven high school students — and young people who posed as those students — were arrested. Kids who were trying to get into college paid brainiacs to pose as them and take the SAT and ACT exams. The imposters pocketed between $1,500 and $2,500 apiece for their labors.

Schools try lots of things to keep students on the straight and narrow. Some insist that students sign a promise not to cheat before they begin an exam. Others, like Princeton University, require ethics training before freshmen begin their Fall classes.

Dan Ariely, a behavioral economist at Duke University who recently published The (Honest) Truth About Dishonesty, says both measures are useful, but that many people need constant prompting to do the right thing. In his experiments, which for the most part use college students, the professor learned that cheating can be so contagious that even subjects who think they are wearing fake designer sunglasses are more inclined to cheat than those who think they’re wearing the real thing. (In fact, in Ariely’s experiment, all were wearing the same glasses.)

He also found that, after he gave some subjects the chance to cheat on a test and exaggerate their results, they quickly persuaded themselves that they’d actually earned the score. It’s hard not to be reminded of the self-puffery we see from some of the more mediocre players in finance.

A policy that solves at least part of the cheating problem can be found on Wall Street, of all places. The brokerage industry has a self-regulatory organization, The Financial Industry Regulatory Authority Inc., that has often been too soft on its members over the years, but does get one thing right. When brokers cheat on a licensing test administered by Finra, they get kicked out of the industry.

Brokers try to challenge that, of course. One guy who impersonated his boss at a Finra exam — the impersonator presumably was the smarter of the two — got caught, and appealed to the regulator that his stressful life had included an abduction by terrorists and the looting of all his assets.

A Finra hearing panel said it was sympathetic to the man’s pressures. But the rules are the rules, Finra said, and the broker was history. CEOs and school principals would do well to be just as uncompromising. Our kids have caught on that anything less is an invitation to game the system.