Alain Sherter of bnet.com put this better than I could, so I'll let him have the first word:
In America today, how likely is it that a son will eventually attain higher earnings than his father? If dad’s wages rank in the top 20 percent, pretty good — the boy has a roughly 57 percent chance of surpassing his father, according to the Economic Policy Institute. But if dad is among the bottom 20 percent, his son only has a 4.5 percent chance of one day having higher earnings. Statistically, in other words, he’s probably doomed.
The idea that people have an equal opportunity to climb the economic ladder remains central to this country. It doesn’t matter where you start, according to this doctrine, because what matters is where you’re going.
But a new study out of the Federal Reserve Bank of Boston suggests the American Dream may require revision. It shows that income mobility for U.S. families has been falling for nearly 40 years. Income inequality accelerated in the 1990s, compared with the ’70s. Notably, the poorest families fare the worst in improving their economic circumstances.
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Sherter's article has pretty charts, which I've decided not to filch. So, I'm sticking with text, and if you want to see the pictures, click the link above.
Sherter calls attention to the Federal Reserve Bank of Boston study -- WARNING, 39-PAGE PDF! -- by Katharine Bradbury (senior economist and policy advisor) and Jane Katz, director of education programs at the New York Fed currently visiting in Boston. The Boston study intends to augment and extend the "fairly limited existing literature tracking changes in U.S. earnings or income mobility over time" -- something that you would think would have been more widely studied, given the prevalence of the "American Dream" mythos in popular culture.
But despite all of the different ways that remain for people to climb the socio-economic ladder in this country -- why, you can win big on a game show, marry someone rich, become a successful athlete, receive a large court judgment for the wrongful death of one of your children, score big with your viral rap video, and I'm sure that there are at least three or four other "hometowner makes good" stories that don't as frequently make the news -- it turns out that Americans tend to be stuck pretty much where their parents subsisted.
The Boston report is hardly a wild-eyed liberal screed. The authors are willing to ask questions, for example, that many of us think should have obvious answers:
Is more mobility always better from a social welfare point of view? What is the appropriate policy response to declining mobility, and to what extent does it depend on whether the cause of the decrease is increased barriers and labor market impediments or changes in talent, effort, and preferences?
Their analysis on the point is thoughtful. Here's a key paragraph:
What are the implications for policy? Because we find no evidence to suggest that the typical poor family is more likely to move up and out of poverty within several years than it was 40 years ago, policy remedies for those at the bottom should aim beyond short‐term help, as the poor at any point in time are likely to have low long‐term incomes. Beyond short‐term relief, the choice of policy presumably hinges, at least in part, on the reasons for the decline in mobility, for example, whether it reflects rising barriers to opportunity or rising returns to highstakes labor market promotion practices, including tournament‐style regimes common in the professions.
The two major political parties compete to be the "Party of the American Dream." The Republicans, by and large, advise using snake-oil, craven deference to wealth and authority, and a poverty draft as their means to social mobility. Democrats favor education, a social safety net, and at least one other thing: making sure that people have the security that a health care crisis or disaster doesn't wipe out all of an economically ascendant family's economic gains.
In other words, when we talk about health care, let's recall that we are also talking about one other thing: Allowing the American Dream to come true. Because, in 40 years of mostly Republican rule, that hasn't been happening.
Update: philipmerrill reminds us below that the AFL-CIO has recently produced its own report on these issues that is worth reading!