NCPA - National Center for Policy Analysis

NEWS ALERT: THE AMERICAN DREAM IS ALIVE AND WELL

May 19, 2005

Major newspapers are in the throes of Mobility Mania: who "makes it" in America, and why; who doesn't, and why not. Yet, the scholarship commonly cited in support of such assertions say no such thing. In fact, the research suggests quite the opposite: that it has become substantially easier to move from one economic class to another, says Alan Reynolds (Cato Institute).

Although the mainstream media's judgment may be impaired, Reynolds says there are many reasons why some people earn more than others -- they work harder and have more experience and/or more schooling. Some observations:

  • The incomes of households with two full-time workers are five times as high as households in which nobody works; median incomes were $85,517 and $15,661, respectively.
  • In 2003, households with one year-round full-time worker earned $60,852 compared with $28,704 for those working part-time for 26 weeks or less.
  • Experienced supervisors earn twice as much as young trainees, but defining people as poor or rich at any moment in time often describes the same people at earlier and later stages of life.
  • Median income for households headed by someone age 45 to 54 was $60,242, compared with $27,053 for those younger than 24.
  • Those with four or more years of college earn three times as much as high school dropouts; median income for college grads was $68,728, compared with $22,718 for those without a high school diploma.

Reynolds emphasizes there is no evidence that it has become harder to get ahead through hard work at school and on the job. Efforts to claim otherwise attempt to make gaps between rich and poor unfair, determined by chance of birth rather than personal effort. Such efforts, he says, require both a denial that progress has been widespread and an exaggeration of income differences.

Source: Alan Reynolds, "For the Record: The American Dream Is Alive and Well," Wall Street Journal, May 18, 2005; Gary Solon, "A Model of Intergenerational Mobility Variation over Time and Place," in Miles Corak, ed., "Generational Income Mobility in North America and Europe," Cambridge University Press, November 25, 2004; and Bhashkar Mazumder and David I. Levine, "The Growing Importance of Family and Community: An Analysis of Changes in the Sibling Correlation in Men's Earnings," Federal Reserve Bank of Chicago and Haas School of Business, University of California, October 2004.

For WSJ text (subscription required):

http://online.wsj.com/article/0,,SB111637617221536429,00.html

For Solon text:

http://www-personal.umich.edu/~gsolon/workingpapers/ottawa.pdf

 

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