The “American Dream,” that you can succeed regardless of the circumstances of your birth, is a fundamental part of the United States’ national identity. But other countries are way better at it than we are.
A new paper from Miles Corak featured in The New York Times finds a disturbing trend in America: that increasing inequality plays an increasing role in determining where people end up, and that hard work means less. People at the bottom of the income ladder are more likely to stay there in the United States than in many other countries around the world, and those at the top often remain rich.
Here’s Corak’s chart, a version of the “Great Gatsby Curve,” which shows relative levels of inequality and intergenerational mobility in countries around the world. The U.S. has the highest level of inequality, and one of the lowest earnings elasticities (how much a father’s income affects their offspring’s):
We’re not just being beaten by countries with strong social safety nets, strong public education, and relatively little inequality. Even Canada has more equality of opportunity and mobility than the United States, despite having higher inequality than places like Denmark.
When there’s greater inequality, people at the top have more resources available to making sure their kids stay at the top, and have more incentive to make that investment given the potential gains.
A quarter of the sons born to fathers in the top 10% stay there in the United States. Significantly fewer do in Canada:
Far more sons born in the bottom decile end up clustered at the bottom in the United States:
There are lots of reasons for this trend. One in particular is education. The top colleges in America disproportionately serve the already wealthy, and non-graduates are disproportionately poor. Lower income students tend to end up at for-profit and lower-quality institutions. That tends to concentrate income at the top.
The higher the earnings premium (the difference in income between college graduates and those with just a high school diploma), Corak finds, the less earnings mobility. Higher education is supposed to be the great equaliser, but doesn’t work that way in the United States:
Wealthy families also have more to spend on “enrichment”: books, computers, good child care, summer camp, private school, tutoring, and so on. When the state provides less of that, when public options aren’t as good, inequality rises and mobility falls.
Hard work and talent still pay off. But for all of America’s lauded entrepreneurial spirit, the playing field is not particularly level, and is getting less so. We’re seeing the effects.
Read the full paper here.
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