Are you better off than your parents?

[StarOfAfrica2]

We Americans have always held the opinion that our country is special, that anyone can be anything, regardless of birth or class or social status.

According to an article in todays Wall Street Journal by columnist David Wessel, that's not the case anymore.  

...... the reality of mobility in America is more complicated than the myth. As the gap between rich and poor has widened since 1970, the odds that a child born in poverty will climb to wealth -- or a rich child will fall into the middle class -- remain stuck. Despite the spread of affirmative action, the expansion of community colleges and the other social change designed to give people of all classes a shot at success, Americans are no more or less likely to rise above, or fall below, their parents' economic class than they were 35 years ago.

Although Americans still think of their land as a place of exceptional opportunity -- in contrast to class-bound Europe -- the evidence suggests otherwise. And scholars have, over the past decade, come to see America as a less mobile society than they once believed.

As recently as the late 1980s, economists argued that not much advantage passed from parent to child, perhaps as little as 20%. By that measure, a rich man's grandchild would have barely any edge over a poor man's grandchild.

"Almost all the earnings advantages or disadvantages of ancestors are wiped out in three generations," wrote Gary Becker, the University of Chicago economist and Nobel laureate, in 1986. "Poverty would not seem to be a 'culture' that persists for several generations."

But over the last 10 years, better data and more number-crunching have led economists and sociologists to a new consensus: The escalators of mobility move much more slowly. A substantial body of research finds that at least 45% of parents' advantage in income is passed along to their children, and perhaps as much as 60%. With the higher estimate, it's not only how much money your parents have that matters -- even your great-great grandfather's wealth might give you a noticeable edge today.

Many Americans believe their country remains a land of unbounded opportunity. That perception explains why Americans, much more than Europeans, have tolerated the widening inequality in recent years. It is OK to have ever-greater differences between rich and poor, they seem to believe, as long as their children have a good chance of grasping the brass ring.

This continuing belief shapes American politics and economic policy. Technology, globalization and unfettered markets tend to erode wages at the bottom and lift wages at the top. But Americans have elected politicians who oppose using the muscle of government to restrain the forces of widening inequality. These politicians argue that lifting the minimum wage or requiring employers to offer health insurance would do unacceptably large damage to economic growth.

Despite the widespread belief that the U.S. remains a more mobile society than Europe, economists and sociologists say that in recent decades the typical child starting out in poverty in continental Europe (or in Canada) has had a better chance at prosperity. Miles Corak, an economist for Canada's national statistical agency who edited a recent Cambridge University Press book on mobility in Europe and North America, tweaked dozens of studies of the U.S., Canada and European countries to make them comparable. "The U.S. and Britain appear to stand out as the least mobile societies among the rich countries studied," he finds. France and Germany are somewhat more mobile than the U.S.; Canada and the Nordic countries are much more so.

Even the University of Chicago's Prof. Becker is changing his mind, reluctantly. "I do believe that it's still true if you come from a modest background it's easier to move ahead in the U.S. than elsewhere," he says, "but the more data we get that doesn't show that, the more we have to accept the conclusions."

Still, the escalators of social mobility continue to move. Nearly a third of the freshmen at four-year colleges last fall said their parents hadn't gone beyond high school. And thanks to a growing economy that lifts everyone's living standards, the typical American is living with more than his or her parents did. People today enjoy services -- cellphones, cancer treatment, the Internet -- that their parents and grandparents never had.

Measuring precisely how much the prosperity of Americans depends on advantages conferred by their parents is difficult, since it requires linking income data across many decades. U.S. research relies almost entirely on a couple of long-running surveys. One began in 1968 at the University of Michigan and now tracks more than 7,000 families with more than 65,000 individuals; the other was started by the Labor Department in 1966.

One drawback of the surveys is that they don't capture the experiences of recent immigrants or their children, many of whom have seen extraordinary upward mobility. The University of California at Berkeley, for instance, says 52% of last year's undergraduates had two parents who weren't born in the U.S., and that's not counting the relatively few students whose families live abroad.

Nonetheless, those two surveys offer the best way to measure the degree to which Americans' economic success or failure depends on their parents. University of Michigan economist Gary Solon, an authority in the field, says one conclusion is clear: "Intergenerational mobility in the U.S. has not changed dramatically over the last two decades."

Bhashkar Mazumder, a Federal Reserve Bank of Chicago economist, recently combined the government survey with Social Security records for thousands of men born between 1963 and 1968 to see what they were earning when they reached their late 20s or 30s. Only 14% of the men born to fathers on the bottom 10% of the wage ladder made it to the top 30%. Only 17% of the men born to fathers on the top 10% fell to the bottom 30%.

[BTAirsol]

I think my parents could afford more than I can today. My dad worked, mom stayed home & raised us kids. They bought there house in Calif., had a new car and 1 used car. Today I own a house but it takes two incomes, own 1 new car 1 used. I live in Calif, LA area. No way will my kids be able to buy a home here. Auto insurance, medical is all going up due to law suites. Our kids have to work harder and longer hours to afford what I can. The trend in jobs are changing, my dad was a butcher, I am engineer in plastics. Butchers are a dying trade. My job in manufacturing is dying to over seas, China, India. Future for kids will be ever changing as it has for me.

[Octavius]

$$$

[Seagoon]

No Star,

My parents are wealthier than my wife and I are.

Had my wife and I continued on the career track we were on in the mid-90s that would not be the case. Had my wife remained at Sun Microsystems and had I continued on in Information Systems management by now we would have been bringing in probably 3 to 4 times as much as they are.

But, with my decision to go into the pastorate, we first wiped out our savings on seminary education and then committed ourselves to a vocation where I don't even earn half of our combined salaries in the 90s.

I mention this only because we are not the only residents of America who chose calling, service, and contentment over cash. Another prime example of this are the guys in the U.S. military. I have members of my congregation who are Lawyers and Dentists for the military who could be earning easily 3x as much in private practice. I'm sure there are probably other guys on this board who are doing stuff they enjoy or which serves others rather than simply going the route that would have garnered the largest income.

The problem with economic indexes is that it doesn't take this factor into account, they generally assume that everyone's goal is to earn more and more both personally and generationally, and that when they aren't doing this, it means they and the economy are failing.

- SEAGOON

[StarOfAfrica2]

I didnt get from the article that anyone necessarily believes our economy is failing, only that our perception that each generation has an "escalator" they can choose to ride to the top is no longer as valid as it once was.  The reasons for it are as varied as the cultures that make up our society, but I dont see it as a failing.  A plateau perhaps.  I was and still am interested in hearing what others think of the idea, and if it holds true for them.  Just curiousity.  

[midnight Target]

My dad bought a 4 bedroom house in So. Calif. the year I was born. Paid 14k for it. He said that there were times when it was hard to come up with the $150 house paymment.

That same house just sold for 500k. I couldn't afford it.... my kids are really SOL.

[Habu]

Yes.

[StarOfAfrica2]

A couple here built themselves a home in the early 70s.  They spent 130k+ on it then.  It was just appraised at over 4 million, mostly due to location.  Of myself and two brothers, none of us makes half what my father does, although the youngest of us may eventually surpass his income.  Not that I have a bad life, and the choices I made were my own.  Still, I cannot see many paths my life could have taken where I would equal my father's income.

[bunch]

I am better off than my dad because my wife has a bigger rack than my mom

[Pongo]

Ya way better off.

[Sandman]

Am I better off? I doubt it.

[Lizking]

I am much better off than they were at my age.

[Maverick]

I definately am better off. My Dad died when I was 7. We lived on SS and some VA benefits.

I retired the first time at 40, again at 44 and finally at 50. I guess the 3rd times the charm. I was really worried about flunking retirement.

Now the wife and I are touring the country in a Rv fulltime. It's a tough life but someone has to do it.

[storch]

my dad worked as a middle manager for a large corp.  he kept mom at home to raise the kids.  in the 80's after early retirement he got tired of fishing and watching TV so he started a cigar import business prior to the cigar craze.  he was able to have our home and also built a second weekend home in the Florida keys along with everything necessary to pursue and catch lots of fish.

My dad did way better than what I have done or can hope to do.

[Ghosth]

Depends on how you look at it.

When my mom & dad got married they moved into a tiny house, 2 bedrooms, no garage, and got by on a shoestring.

All 4 of us kids have better houses, and my oldest brother just built a frickin mansion on a lake.

financially, I'd say its 2 & 2.  Which actually is not bad odds. Statisticly I'd of guessed that 1 should be better off, 1 worse off, and 2 about the same.

Part of it is that people seem to expect so much more than they did 50 years ago.
Part of it is an amazing # of people fall into the credit trap, and spend their lives working to fill someone else's pockets.