Slower economic growth has dampened upward mobility, but the news is better than you might think

Economic inequality and upward mobility are concepts that frequently intersect. We’ve written that our policy focus should be on enhancing mobility. Expanding educational opportunities and improving outcomes can be effective strategies, particularly in our state in which 740,000 new job opportunities will become available over the next five years, most of them to be filled by workers with a postsecondary credential or some college.

Some recent studies (mentioned in the first two links in the previous paragraph) have questioned whether America continues to provide opportunities for increased mobility. At E21, Charles Hughes discusses some of the research

Stanford University professor Raj Chetty and colleagues released a blockbuster study at the end of 2016 concluding that the share of children earning more than their parents had declined from 90 percent to 50 percent over the latter half of the 20th century. This sparked a discussion about the fading of the American Dream and whether the next generation has more opportunity and brighter prospects than this one.

Fortunately a new paper from Joint Economic Committee scholar Scott Winship, formerly of the Manhattan Institute, provides more reason for optimism. He analyzes a range of mobility measures and finds that “contrary to some claims, the American dream abides.” However, he concludes that the American Dream it is not as robust as it should be, and on some measures, the level of mobility could be improved.

From Winship’s paper (footnotes omitted):

Contrary to some claims, the American Dream abides. The United States remains among the richest countries in the world, which are collectively the richest societies in world history. Poverty is much lower than it was in the “Golden Age” of the mid- twentieth century, to which so many people seem to want to return. The pace of middle-class income growth has slowed, but beyond cyclical downturns, it has not reversed. The productivity growth of the 1940s, 1950s, and 1960s was unusually strong, so its slowdown beginning in the 1970s was bound to produce disappointing income growth.

…one consequence of slower growth is that upward absolute mobility has declined. Yet it remains the case that roughly three in four adults today are better off than their parents were at the same age. That share is higher among Americans who grew up poor, and it is lower among those who grew up in affluence…

However, while the ability of the American economy to li incomes remains strong, our ineffectiveness in helping people to transcend their family origins continues to disappoint. 

Hughes writes of Winship’s research,

Increasing the degree of school choice and accountability could allow more children to develop the skills and obtain the education they will need when they enter the workplace. Reforming welfare programs that reduce the instances of poverty traps, when families lose almost all of each additional dollar earned through higher taxes or increased benefits, could make it easier for them to rise from the bottom end of the income spectrum and join the middle class. Regulations such as occupational licensing and restrictions that slow progress in new industries also reduce opportunity.

One other reason for the disappointing recent trends in mobility is slower economic growth. Policies that lead to more job creation and more robust growth would bolster mobility.

Our goal is to extend Washington’s culture of opportunity to all parts of the state to promote shared prosperity. In other words, we want to help create the conditions for enhanced upward mobility. We encourage you to read the pieces by Winship and Hughes. They’re both encouraging and cautionary, with solid suggestions for expanding opportunities.