U.S. strongEconomicstrong Mobility The Dream and the Data.pdfVIP

FRBSF ECONOMIC LETTER 2013-06 March 4, 2013   U.S. Economic Mobility: The Dream and the Data BY LEILA BENGALI AND MARY DALY Economic mobility is a core principle of the American narrative and the basis for the American Dream. However, research suggests that the United States may not be as mobile as Americans believe. The United States has high absolute mobility in the sense that children readily become richer than their parents. But the nation appears to fall short on relative mobility, which is the ability of children to change their rank in the income distribution relative to their parents. This Economic Letter is based on a presentation given by Mary Daly in April 2012. For a video of the lecture please visit: /education/teachers/economics-in-person/economic-mobility- in-the-united-states.html. Economic mobility, or the ability of individuals to move up or down the income distribution, is a fundamental value in the United States, one that defines the American Dream. According to a recent study by the Pew Charitable Trusts, over 40% of Americans consider hard work, ambition, and drive to be among the most important factors for economic advancement (Pew 2011). In contrast, just over 10% believe that coming from a wealthy family is one of the most important determinants of success. International surveys suggest that Americans stand out in their belief that individual effort is the key determinant of success (International Social Survey Programme 2009). This Economic Letter examines whether the reality of mobility in the United States matches the dream. U.S. mobility data suggest that the answer is mixed, depending importantly on exactly how mobility is measured. The United States scores well on the percentage of individuals who are able to surpass the absolute level of income of their parents. But when the metric is relative economic mobility, the picture is less clear. The data show that when the population is divided