Photo: Pew Charitable Trusts
Although the vast majority of today’s adults earn more than their parents did at their age, only 4 per cent of adults from homes at the bottom rung of the economic ladder were able to reach the top, according to a new report released by Pew Charitable Trusts.
“The ‘rags-to riches’ story is more often found in Hollywood than in reality,” Pew says. “40-three per cent of those who start in the bottom are stuck there as adults, and 70 per cent remain below the middle quintile.”
On the flipside, it’s just as unlikely for the rich to fall from grace over time as it is for a poor person to strike it rich. Just 8 per cent of wealthy adults dropped from the top quintile to the bottom, Pew found, part of a phenomenon it calls “stickiness at ends.”
Most of the regular factors that determine wealth are at play here as well, with race and education still impacting income levels more than any other.
A four-year college degree, for example, proves to be the best chance at financial security for those at the top income level as Pew found it “prevents downward mobility from the middle and the top” for consumers. It’s also the best shot bottom-rung consumers have at clawing their way to the top.
On the bright side, there are nearly twice as many “upwardly mobile” households in the U.S. as there are downward.
“30-five per cent of Americans have higher income and move up at least one rung on the ladder relative to their parents,” compared to 16 per cent of those falling in wealth, the report says.
Pew also confirms what we’ve long known about the swiftly growing divide between America’s rich and poor:
“Wealth has decreased at the bottom and middle and has increased at the top two rungs of the ladder. The wealth compression is especially notable at the bottom: Median wealth for those in the lowest wealth quintile decreased from just under $7,500 in the parents’ generation to less than $2,800 in the children’s generation. Conversely, at the top of the wealth distribution, median wealth increased from just under $500,000 in the parents’ generation to almost $630,000 in the children’s generation.”
The report is based on data from Pew’s Panel Study of Income Dynamics, which has analysed household wealth between 1968 and 2009.