Will children be better off financially than their parents?
This is a question of economic mobility — the heart of the American Dream.
A new interactive feature at Pew's Economic Mobility Project looks at the "Faces of Economic Mobility." What emerges from the data is a picture of how race, marriage, education and having children impact the ability of Americans to not just surpass their parents' income and wealth, but climb higher on the income ladder relative to other Americans.
The project looks at intergenerational economic mobility — comparing adult children to their parents. The study analyzes income and wealth between the generations by asking whether children are making more than their parents did at the same age (absolute mobility) and whether the children are doing better than their parents relative to other people in the country (relative mobility).
Absolute mobility may mean that everybody is doing better compared to previous generations — like everybody riding on an escalator. Relative mobility is more about where they are on that escalator compared to other Americans. The comparisons are then adjusted for inflation and family size.
"Americans can experience a good deal of upward absolute mobility (when compared to their parents)," says Erin Currier, director of the Economic Mobility Project, "without experiencing upward relative mobility. In other words, someone could surpass their parents' income but still be in the same place on the income ladder."
Climbing the income ladder
Currier says the interactive feature on the website, www.pewstates.org, was created to show how multiple factors affect mobility and play out in the lives of American families.
"We know that education and race and family structure each individually matter for mobility," Currier says, "but this interactive allows the user to see how they matter collectively across different family types."
The interactive tool allows users to select the race, education level, family type (married or single male or female) and if there are children in the household. The interactive then shows the economic mobility between the selected household and the previous generation.
Because this study follows the results of actual parents and their children (starting in the 1960s), it is ongoing — and some data isn't yet available or is in too small a sample size. This means that, among other things, the only two races available to compare are black and white. It also means that there are data gaps in some categories, such as "white, non-college-educated, single fathers" or "black, college-educated, single mothers."
That last category, "black, college-educated, single mothers," however, is the most upwardly mobile of all the groups delineated in the data, according to Currier. "All had higher incomes than their parents," she says, "and 83 percent moved up the income ladder."
Black, college-educated couples with children are also upwardly mobile. Sixty-two percent moved up the income ladder compared to their parents and 55 percent moved up the wealth ladder as well.
On the other end of the scale, non-college educated single mothers were the least likely to have greater income and wealth than their parents. Sixty-eight percent of white mothers in this situation were likely to be in a worse situation economically than their parents. Likewise, 25 percent of black mothers were worse off than their parents while 62 percent were already stuck in the bottom fifth and so could not drop levels.
White, college-educated couples without children were the most likely to stay at the top of the income ladder (29 percent). Add children, and it changes to 17 percent staying at the top — still high compared to other categories such as white, non-college-educated single women (1 percent) or black, college-educated couples with children (0 percent).
Power of education
"Economic mobility research has long shown the power of a college degree," says Diana Elliott, who manages Pew's research on economic mobility. "For example, 83 percent of black, college-educated single-mothers were upwardly mobile, compared with only 9 percent of their non-college educated counterparts. That is just one finding that shows the power of a college degree."
Harry Holzer, professor of public policy at Georgetown University in Washington, D.C., says education has a large impact on how much money people make in America. "If a person comes from a lower-income family background it is harder to rise up ahead of your parents without an education level that is higher than theirs was."
"(This data) strengthens the policy argument that education is important," Holzer says. "But it especially says that we should do something not just about college attendance, but also about college completion."
Mark Edwards says a great predictor of the economic mobility of a particular region of the country is the number of youths who have dropped out of school and are unemployed. Edwards is the executive director of Opportunity Nation, a nonpartisan campaign to "rescue the American Dream."
"We know that in a free society, some inequality is unavoidable," he says. "People differ in skills and ambition. But inequality without the chance for mobility is economically inefficient and unjust. The circumstances of birth should not condemn anyone to an inescapable fate. When the American Dream is at risk for some, we all suffer."
A family enterprise
The study also found that marriage is a significant predictor of economic stability.
"The data in this tool really underscore that economic mobility is increasingly a family enterprise," Currier says. "We can see that at least half of white single men and women — regardless of education — fell down a rung on both the income and wealth ladders."
Without having a second earner in the household, single men and women were much less mobile, Currier says.
"Marriage is also pretty highly correlated with income in America," Holzer says. "But it is hard to know what is cause and what is effect. Young men, for example, start to get a lot more serious about earning money and having stable employment when they get married and especially when kids come along. On the other hand, it might be that the employment is causing the marriage — people with bad employment prospects make bad marriage partners. It is possible that the causation goes in both direction."
But either way, Holzer says the correlation between marriage and better income is not surprising.
"The people who are getting married today tend to be more educated," Holzer says. "Among less educated Americans, the marriage rates are declining, both because of increasing divorce rates and from people who were never married. It is a little frightening, but marriage is becoming an institution of the well-off."
To get a true picture of the ingredients that equal economic success or failure, Currier says you have to look at all factors and how they work together, from race to education to marriage.
"We often deal with these data in the aggregate — we look across the entire nation almost always," she says. "Sometimes it is a little bit more difficult for us to put a face behind what that mobility story means."