From Rags To…Uh…Slightly Nicer Looking Rags
By Justin Gardner | Related entries in Economy, Money, The WorldAhh, the “American Dreamâ„¢.” You know, that story we’re told as youngsters that we can be whatever we want when we grow up. It’s also the story immigrants are told when they come into this country. That’s right, with enough hard work and determination, anybody can make it.
Well, it’s true. But if you’re poor, only if you’re damn lucky.
The likelihood that a child born into a poor family will make it into the top five percent is just one percent, according to “Understanding Mobility in America”, a study by economist Tom Hertz from American University.By contrast, a child born rich had a 22 percent chance of being rich as an adult, he said.
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He also found the United States had one of the lowest levels of inter-generational mobility in the wealthy world, on a par with Britain but way behind most of Europe.
But it looks like the PR spinmeisters are driving the perception the other way…
A survey for the New York Times last year found that 80 percent of those polled believed that it was possible to start out poor, work hard and become rich, compared with less than 60 percent back in 1983.
And yes, race is a factor…
On average, 47 percent of poor families remain poor. But within this, 32 percent of whites stay poor while the figure for blacks is 63 percent.It works the other way as well, with only 3 percent of blacks making it from the bottom quarter of the income ladder to the top quarter, versus 14 percent of whites.
Do I begrudge the rich their position in society? Absolutely not. In fact, I know quite a few entrepreneurs who came from nothing to become well respected in their fields and fairly wealthy. My last two bosses exemplify this, as well as the investors for the startup I currently work at. They’re all self made men, people who dreamed big and won.
And actually, I have to correct that last statement. They’re not all men. But they’re all white and the majority of them are men. In fact, by a ratio of nearly 10 to 1. So if my experience is representative of this trend, I think it’s fairly safe to say that this country already has an unofficial caste system. You know, where it’s hard to break into the club unless you have a certain “look and feel.”
True, it’ll never get as bad as India. We have laws against such things. But to think that we’re catching up with England when it comes to the dearth of upward mobility is kind of sad. And anybody who’s seen the fantastic “UP” documentary series by Michael Apted, that followed a bunch of children from age 7 on up every 7 years (14, 21, 28, so on…), can attest to the fact that people don’t usually move much beyond their station as children. It’s pretty well set in the UK, and it’s a shame that the same is proving true in the US.
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May 2nd, 2006 at 9:51 am
That study sounds like a total crock.
I know of no other definition of “rich” which means “top five percent.”
Consider this as a counterexample, from the urban institute. It’s well acknowledged that the richest and poorest have the least mobility (duh), but 60% of people in one of the middle three quintiles were in a different one a decade later. That is wholly unlike Europe or anywhere else in the world.
It is entirely possible to go from dirt broke to middle or even upper-middle class: I know personally a whole bunch of folks who did. It is VERY hard for anyone to get to the top five percent - you’re including the Gates, Jobs, Buffet, Dell, types there, right?
Race may be a factor somewhere, but I’ll tell you that it’s never been a consideration in anything I’ve ever seen. Other factors are so much more important - education, experience, connections, etc. Race may be a barrier to some of those other things (i.e. people tend to hang out with others of their race, and thus benefit gained from personal connections may vary), but it in and of itself isn’t the issue.
May 2nd, 2006 at 9:58 am
No, they represent the top 1% of the top 1%. If you’re in the top 5%, you’re making six figures. Technically, that’s “rich.”
Be careful before calling something a crock so quickly…
May 2nd, 2006 at 10:09 am
“Race may be a factor somewhere, but I’ll tell you that it’s never been a consideration in anything I’ve ever seen.”
You’ve got to be joking.
“Other factors are so much more important - education, experience, connections, etc.”
You’re right, and all of those things are correlated with race. There are members of every race who are poor, who have less education, experience, connections, etc. However, I’m pretty sure that in this country, white men make up the smallest number of those people.
May 2nd, 2006 at 11:18 am
When compared, as a percentage, to the rest of the categories? Yes, probably so. But sheer numbers…it might be a tie.
May 2nd, 2006 at 1:15 pm
But why is this so? Is it that the system is rigged against the poor? Or is that our rich and poor have very different cultures.
I think it’s a little of both. In America, there are pockets of entrenched poverty both in urban areas and in rural ones. In many of areas, there exists a culture that devalues education while lacking any significant skill-sets or serious work ethic to pass down to their children. Absentee fathers, crime and drug use are also more prevelant in these cultures than among the middle and upper classes.
Systematically, it is very much true that we simply do not provide enough opportunity for the poor to pull themselves up. But it would be wrong for us to only adress the problems with our systems when the problems with culture is just as much (and often more) of a factor.
May 2nd, 2006 at 1:24 pm
So certainly you’re answer to social mobility wouldn’t be income redistribution, would it?
May 2nd, 2006 at 1:38 pm
Well, Dos, I did recently come out of the Socialist closet . . . .
May 2nd, 2006 at 7:10 pm
Justin and Meredith, look at these charts and tell me how much farther we can go. The government is distributing more income amongst the poor over time, not less.
Also, the richest 1% in America contribute a greater percentage of total tax revenue than in any other industrialized nation in the world.
What will satisfy you guys? is it this? =P
May 2nd, 2006 at 7:31 pm
Justin -
This isn’t my experience at all.
My uncle came from a very poor background, put himself thru medical school, invented a dialysis machine, and is very wealthy.
I’m a woman who makes close to what’s considered “rich” in your post above and I come from an poor inner city dysfunctional single mother home. I put myself thru college (using the program the government has in place to help people such as myself make it in life), got a good job - worked really really hard - now I’m going to grad school.
Please note that in the two situations above - the common thread is hard work.
You sound a little disheartened? Sometimes I’m like that too. There was actually a moment in time that I realized I wasn’t going to be rich (or what I consider rich) unless I won the lottery. It was a little depressing, but I pick up, move forward, and figure out what to do next - not complain about the flaws in the system.
May 2nd, 2006 at 8:34 pm
“But if you’re poor, only if you’re damn lucky.”
I guess it depends on how you define luck, and how you define rich. If you work hard, it isn’t hard to pull yourself out of poverty. The fact that so many people stay poor doesn’t contradict this. Many poor people grow up in a culture that doesn’t encourage them to work hard, or doesn’t help them to make responsible decisions. But if they do work hard, and do make responsible decisions, getting out of poverty isn’t difficult at all.
Making $100k+ is tough, but I don’t think that’s the goal. $50k isn’t that tough, and it’s hardly poverty.
May 2nd, 2006 at 8:42 pm
Jimmi - I don’t buy your site’s characterization of “wealth redistribution”. It appears they’re including the total spending on SS and Medicare. If one pays into these programs, and then takes out from this program, most people wouldn’t consider that to be wealth redistribution. While some people pay a lot more in than they can expect to take out, counting the entire amount seems a bit of a stretch.
May 2nd, 2006 at 9:16 pm
Yeah, the more I look at that first chart, I see that you are right Tom. Although, Medicaid is more of a redistribution program and the authors claim “welfare” is included. I would imagine that the trends would still show the increase in government mediated weath redistribution even if Social Security was excluded, albeit at a much lower overall percentage of Budget, GDP ect.
What it does show, is that if social security is not partially privatized soon, it might have to become a redistribution program via means-testing, unless we dramatically cut benefits. (a whole other thread =P)
May 3rd, 2006 at 1:01 am
Justin,
I stand by calling it a crock. 6 figures is certainly “rich.”
However, 2005 HHS guidelines define the poverty line as $9570/year for a single person. Now, 6 figures is MORE THAN 10 TIMES THAT. I think that there’s got to be another definition of “rich” which is a little bit less “engineered.”
How about “top quintile”?
May 3rd, 2006 at 9:15 am
Does anyone think that if companies were doing a better job paying their employees that there would be no need for income redistribution. If you look at the discrepancies that exist in the increases of pay, the people at the top are making much more now than they were twenty or thirty years ago, and the people from the middle down are making less, real dollar value of course. So perhaps its not that government and sissy liberals want forced income redistribution, but they have to demand it, because corporations are not being socially responsible to their employees by doing it their self.
income redistribution… Please?
May 3rd, 2006 at 1:17 pm
I don’t think that so-called “income redistribution” is an extreme idea. There is nothing magical about how income is currently distributed. The current distribution is just a result of the tax laws, the extent of public benefits programs, minimum wage laws, etc. This is just the result of the policy choices made by our representatives. The current distribution is not sent down from Above.
The setup also happens to result in inequality. The particular identities of rich and poor may change, but the distribution will remain the same.
Changing laws so that income is distributed more evenly is not radical since there is nothing inherently natural about the current distribution. It would, however, be more fair and just.
May 3rd, 2006 at 9:20 pm
Prof. Gary Becker writes this on the Posner-Becker Blog (a blog several IQ points above most I might plug):
There is a culture of poverty out there that works for itself and against education which is showing a high rate of return.