Upward mobility falls sharply in US since 1940

New York, April 25: The probability for children to attain a higher income than their parents has dropped dramatically in the US -- from more than 90 per cent for children born in 1940 to 50 per cent for those born in the 1980s, say researchers including one of Indian origin.

The findings, published in the journal Science, revealed that restoring economic mobility would require, in part, more equal economic redistribution.

"Increasing GDP growth rates alone cannot restore absolute mobility to the rates experienced by children born in the 1940s," the researchers said.

"However, distributing current GDP growth more equally across income groups as in the 1940 birth cohort would reverse more than 70 per cent of the decline in mobility," the study added.

These results imply that reviving the "American dream" of high rates of absolute mobility would require economic growth that is shared more broadly across the income distribution.

The "American Dream" promises that hard work and opportunity will lead to a better life and that even those born to low-income families can "rise above the ranks" with sufficient effort.

Despite much interest in economic mobility, however, studying it over generations remains challenging, mainly because of the lack of large, high-quality datasets in the US linking children to their parents.

To overcome these gaps in data, Raj Chetty from Stanford University and his colleagues took a sophisticated approach that combines data from the US Census and Current Population Survey with tax records, adjusting for inflation and other confounding variables.

They found that the fraction of children earning more than their parents fell from 92 per cent in the 1940 birth cohort to 50 per cent in the 1984 birth cohort.

Economic mobility fell most sharply in the industrial Midwest (Indiana, Illinois) while the smallest declines occurred in states such as Massachusetts, New York and Montana.

Increasing GDP growth without changing the current distribution of growth would only have modest effects on rates of absolute mobility, the researchers said.