Category Archives: income

Upward Mobility Gap

Flickr photo by Herve Demers

Doyle McManus (of the L.A. Times) has a nice piece citing Robert Putnam on some of our unpublished research evincing “canaries in the coalmine” that are likely to block upward mobility in the US in the decades ahead if unremedied.

Opportunity in America isn’t what it used to be either. Among children born into low-income households, more than two-thirds grow up to earn a below-average income, and only 6 percent make it all the way up the ladder into the affluent top one-fifth of income earners, according to a study by economists at Washington’s Brookings Institution…. Children born into poverty in Canada, Britain, Germany or France have a statistically better chance of reaching the top than poor kids do in the United States….

[In addition to the decline of public schools,] Harvard sociologist Robert Putnam argues that thanks partly to the rise of two-income households, intermarriage between rich and poor has declined, choking off another historical upward path for the underprivileged….”We’re becoming two societies, two Americas,” Putnam told me recently. “There’s a deepening class divide that shows up in many places. It’s not just a matter of income. Education is becoming the key discriminant in American life. Family structure is part of it too.”…

“Success in life increasingly depends on how smart you were in choosing your parents,” Putnam said. “And that flies in the face of the fundamental American bargain — that every kid ought to have access to the same opportunities.”…Most Americans accept inequality in the economy as long as the ladder of opportunity is accessible to anyone who wants to work hard. The best way for America to reclaim its self-image as a land of opportunity is to ensure that every kid has access to a decent education — now more than ever the first step onto the ladder. That’s why bipartisan education reform isn’t just about fixing schools; it’s about repairing the fabric of American society.

Read “The Upward Mobility Gap” (Doyle McManus, L.A. Times, 1/2/11)

See also some interesting recent articles in NY Times on how pay of superstars stifles everybody else, and another article that attempts to reconcile Americans’ dislike of equalizing income with declining mobility by showing how in America being middle class is more driven by aspirations than income.  And finally, research conducted at Harvard Business School that ironically shows that most Americans would prefer an income distribution more similar to Sweden’s (far more egalitarian than in the US) over the current American income distribution.

Paul Krugman in “A Tale of Two Moralities” (NY Times Op-Ed, January 15, 2011) writes: “…I’ll also have a lot to say about how far we really are from being a society of equal opportunity, in which success depends solely on one’s own efforts.”

Michael Gerson (Washington Post columnist) also had a very thoughtful column on this issue, indicating that this issue (upward mobility) should be the issue that Republicans should be discussing.  See “The economic debate that we should be having” (Dec. 14, 2010)  Gerson writes:

“…the main reasons for inequality are failing schools, depressed and dysfunctional communities and fragmented families. For the most part, inequality does not result from a lack of consumption by the poor but from a lack of social capital and opportunity.

This does not release conservatives from responsibility because the distribution of social capital and opportunity is dramatically unequal. Economic inequality can be justified as the reward for greater effort – so long as there is also social mobility. In the absence of mobility, capitalism becomes a caste system. And this is what America, in violation of its self-image, threatens to become. The United States has less upward economic mobility among lower-income families than Canada, Finland or Sweden. Americans who are born into the middle class have a roughly equal chance of ascending or descending the economic ladder. But Americans born poor are likely to stay on its lowest rungs.

Addressing the actual causes of inequality should be common ground for the center-left and center-right – and politically appealing to American voters, who are generally more concerned about opportunity than income equality. A mobility agenda might include measures to discourage teen pregnancy; increase the rewards for work; encourage wealth-building and entrepreneurship; reform preschool programs; improve infant and child health; increase teacher quality; and increase high school graduation rates and college attendance among the poor. Children of low-income parents who gain a college degree triple their chance of earning $85,000 a year or more. If America had the same fraction of single-parent families as it had in 1970, the child poverty rate would be about 30 percent lower.”


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Money can’t buy you love, but can buy you happiness (II)

Betsey Stevenson and Justin Wolfers in a data rich paper conclude three things:

a) the rich are happier;

(b) rich countries are happier;

(c) economic growth is associated with greater happiness for their citizens; and

(d) they find little evidence for the “relative income hypothesis” (that happiness depends more on one’s income relative to others in one’s country or community than it does on absolute levels of income).

Justin Wolfers is blogging about the paper at Freakonomics blog. There are to be several posts, but this is the first post. The paper is also summarized in today’s New York Times, featuring a nice graphic, The authors also discussed the research on CNBC (4/16/08).

The paper by Betsey Stevenson and Justin Wolfers (both at Penn’s Wharton School) has the rather academic title of “Economic Growth and Subjective Well-being: Regressing the Easterlin Paradox

Earlier post on this subject available here discussing paper by Angus Deaton on this topic; Deaton’s conclusions were partially the same but he found a cut-off point beyond which economic growth did not lead to increases in happiness, perhaps because of the destabilizing impact of the growth.

Achievement Trap: the fate of high-achieving students from poor backgrounds

The Achievement Trap report (of the Jack Kent Cooke Foundation) “chronicles the experiences of high achieving lower-income students during elementary school, high school, college, and graduate school.”

They note: “In some respects, our findings are quite hopeful. There are [3.4 million]… high-achieving lower-income students in urban, suburban, and rural communities all across America; they reflect the racial, ethnic, and gender composition of our nation’s schools; they drop out of high school at remarkably low rates; and more than 90 percent of them enter college.

 

“But there is also cause for alarm. There are far fewer lower-income students achieving at the highest levels than there should be, they disproportionately fall out of the high-achieving group during elementary and high school, they rarely rise into the ranks of high achievers during those periods, and, perhaps most disturbingly, far too few ever graduate from college or go on to graduate school.

 

“Unless something is done, many more of America’s brightest lower-income students will meet this same educational fate, robbing them of opportunity and our nation of a valuable resource.”

 

The findings come from three federal databases that have tracked students in elementary and high school, college, and graduate school over the past 20 years. And this population of 3.4 million children that are the top quartile academically on standardized tests, but come from households with incomes below the national median exceed the populations of 21 states. (Over one million of these children Kqualify for free or reduced-price lunch.)

Selected other findings:

  • They exhibit an Unequal Start: “Among first-grade students performing in the top academic quartile, only 28 percent are from lower-income families, while 72 percent are from higher-income families.”
  • In elementary and high school, these low-income, high-achieving students lose ground during K-12, becoming ever less frequent as the years progress. For example, “only 56 percent of lower-income students maintain their status as high achievers in reading by fifth grade, versus 69 percent of higher-income students….[And] [w]hile 25 percent of high-achieving lower-income students fall out of the top academic quartile in math in high school, only 16 percent of high-achieving upper-income students do so….Among those not in the top academic quartile in first grade, children from families in the upper income half are more than twice as likely as those from lower-income families to rise into the top academic quartile by fifth grade.”   So the ranks of low-income high-achievers start proportionately smaller, they have a harder time holding ground and low-income students are much less likely to break into this high-achieving group if they don’t start there.
  • High-achieving lower-income students drop out of high school or do not graduate on time twice as often “as their higher-income peers (8 percent vs. 4 percent) but still far below the national average (30 percent).”
  • “Unfulfilled Potential in College & Graduate School: Losses of high-achieving lower-income students and the disparities between them and their higher-income academic peers persist through the college years. While more than nine out of ten high-achieving high school students in both income halves attend college (98 percent of those in the top half and 93 percent of those in the bottom half), high-achieving lower-income students are:
    • Less likely to graduate from college than their higher-income peers (59 percent versus 77 percent);
    • Less likely to attend the most selective colleges (19 percent versus 29 percent);
    • More likely to attend the least selective colleges (21 percent versus 14 percent); and
    • Less likely to graduate when they attend the least selective colleges (56 percent versus 83 percent).”
  • “High-achieving lower-income students are much less likely to receive a graduate degree than high-achieving students from the top income half. Specifically, among college graduates, 29 percent of high achievers from lower-income families receive graduate degrees as compared to 47 percent of high achievers from higher-income families. This pattern of declining educational attainment mirrors the experiences of underachieving students from lower-income families — they start grade school behind their peers, fall back during high school, and complete college and graduate school at lower rates than those from higher-income families.”

“Our nation has understandably focused education policy on low-performing students from lower-income backgrounds. The laudable goals of improving basic skills and ensuring minimal proficiency in reading and math remain urgent, unmet, and deserving of unremitting focus. Indeed, our nation will not maintain its promise of equal opportunity at home or its economic position internationally unless we do a better job of educating students who currently fail to attain basic skills. But this highly visible national struggle to reverse poor achievement among low-income students must be accompanied by a concerted effort to promote high achievement within the same population. The conclusion to be drawn from our research findings is not that high-achieving students from lower-income backgrounds are suffering more than other lower-income students, but that their talents are similarly under-nurtured. Even though lower-income students succeed at one grade level, we cannot assume that they are subsequently exempt from the struggles facing other lower-income students or that we do not need to pay attention to their continued educational success. Holding on to those faulty assumptions will prevent us from reversing the trend made plain by our findings: we are failing these high-achieving students throughout the educational process.”

[above adapted from their Executive Summary.] 

The report is silent on what the mechanisms are that account for the unequal start of these groups in school and why the low-income, high-achieving groups lose ground over time in schools. It could be parental support, it could be school attention on this group, it could be peer groups, or other causes, but they indicate that this issue of mechanisms is definitely worthy of greater attention and study.

Full “Achievement Trap” report here.

Deja Vu All Over Again: The happiness equivalent of marriage

Nattavudh Powdthavee, a social economist at the U.K. university’s Institute of Education. publishing in the Journal of Socio-Economics, tries to quantify how much happiness health and marriage produce relative to what income increases would produce the same.  [Summary of the findings in this newspaper account.]

Freakonomics Blog reports this as though this is news.

Only problem is that Robert Putnam, in Bowling Alone, reported much the same 7 years ago (2000).  On page 333 he wrote: “Controlling for education, age, gender, marital status, income, and civic engagement, the  marginal ‘effect’ of marriage on life contentment is equivalent to moving roughly seventy percentiles up on the income hierarchy – say, from the fifteenth to the eighty-fifth percentile.  In round numbers, getting married is the ‘happiness equivalent’ of quadrupling your annual income.”

“What about education and contentment?  Education has important indirect links to happiness through increased earning power, but controlling for income (as well as age, gender, and the rest), what is the margainal correlation of education itself with life satisfaction?  In round numbers, the answer is that four additional years of education –a ttending college, for example – is the ‘happiness equivalent’ of roughly doubling your annual income.”  [Putnam goes on to analyze the happiness impact of socializing like volunteering, entertaining at home, attending church and attending club meetings.]

Powdthavee (2007): “Money buys happiness, but not a lot of it.”

Putnam (2000, Bowling Alone p. 333): “So money can buy happiness after all.  But not as much as marriage.”

Doesn’t sound so novel to me 7 years later coming from Powdthavee…