The Pew Charitable Trust’s Economic Mobility Project just released a new report with sobering findings. Just 4 percent of people who grew up in the bottom fifth of the household income ladder made it to the top fifth as adults, showing the new limits of American mobility. The recently released results analyzed household income across two generations and found that very few people born to poor parents ended up rich.
The report took a look at the idea of the American dream; the idea that all Americans have the opportunity to succeed regardless of their birth status. And while the study found that 84 percent of Americans have higher family incomes than their parents did, those born at the top and bottom of the income ladder are likely to stay there as adults.
Other key findings showed interesting results: 70 percent of Americans whose parents were in the bottom fifth of the income ladder stayed below the middle as adults while 63 percent of those born in the top fifth of the income ladder stayed above the middle when they became adults. In an alarming trend, African-Americans are more likely to be stuck at the bottom and fall from the middle of the economic ladder across a generation.
Overall, 35 percent of American households could be considered upwardly mobile, meaning they had a higher household income than their parents at the same age and were at a higher point in the income distribution ladder than their parents had been, but did not rise to the top of the mobility scale.
The report also acknowledged that people can make more money than their parents and still not rise up the income ladder because median income has increased at all levels. The study also noted that many households have more income than their parents did at the same age because more women are working than in the previous generation.
One of the key findings: Researchers found that a four-year degree triples a person’s chances of making it from the bottom to the top of the income ladder; a four-year degree promoted upward mobility from the bottom and prevented downward mobility from the middle and the top. College graduates also were more likely to be doing better than their parents were at the same age, in terms of both income and wealth.
So what does this all mean? The report provides a mixed view. While a majority of Americans exceed their parents’ family income and wealth, the impact of their mobility gains are not always enough to move them to a different rung of the economic ladder. So, while our kids will most likely make more than us as adults, that doesn’t mean they’ll necessarily be better off. And the key to our children’s economic mobility? An emphasis on assets and savings, and a 4-year degree.