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January 30, 1997 A CERTAIN degree of economic inequality, combined with a belief in upward mobility, is part of the American spirit. Horatio Alger became perhaps the best-selling American writer of all time - his books sold between 100 and 500 million copies - by telling stories of how alliterative heroes like Ben Bruce, Ned Newton and Dean Dunham rose from humble beginnings to secure middle-class status. As literature, Horatio Alger stories aren't much. The characters are stick figures. He turned two basic plots into almost 100 books. His heroes are forever tempted by bad companions, threatened by bullies, and unfairly accused, before winning the attention of a benefactor by saving a drowning child, returning a lost gem, or stopping a runaway horse. The message, pounded home with sledgehammer subtlety, is that through frugality, honesty, abstaining from smoking and drinking, standing up to bullies, and answering the door when fortune knocks, anyone can reach middle-class respectability. Horatio Alger died in 1899. But his books were best-sellers into the 1920s, and one shouldn't underestimate how they continue to capture a powerful element of popular imagination. Modern-day popular culture still celebrates when a high school graduate, an immigrant, or garage entrepreneur rises to fame and fortune. However, the 20th century has made us cynical about Horatio Alger's prescription for success - or maybe just realistic. The thrust of recent economic research is that there is less economic mobility than one might like to see. Starting in 1967, researchers at the University of Michigan set up a nationally representative data set of 5,000 households. When a marriage breaks up, or children move away from home, they add those households to the data set. After three decades, this data set provides a rich source of information on the extent of economic mobility. Using the Michigan data, one study found that of those who start in the bottom fifth of the income distribution, half are there 10 years later. Further, of those in the bottom fifth who move up, about half of them rise only to the second fifth. Another calculation found that almost two-thirds of men aged 20-59 who started in the bottom fifth of the income distribution in 1974 remained in either the bottom or second fifth by 1991, 17 years later. In other words, while upward mobility surely acts to reduce the degree of economic inequality over time, it is also true that poor (and rich, too) are rather likely to have similar economic status a decade or two later. Of course, wage inequality has been rising substantially. Over the last two decades, an average family at the 10th percentile of the income distribution has seen its real income fall on average by about 1 percent per year, while a family at the 90th percentile has seen its income rise at about the same rate. Although the gap between rich and poor has widened, mobility across the income distribution seems to have changed little since the late 1960s, which is as far back as the Michigan data goes. Interestingly, international comparisons of the extent of economic mobility find that the amount of mobility across the income distribution is about the same in the United States and in Europe. This mobility comparison is slightly biased against the United States. Since America has a more unequal distribution of income than most European nations, movement between different fifths of the U.S. distribution represents larger jumps than in Europe. Nonetheless, it is striking that America seems to have no more shuffling of its income distribution than France, Sweden, or Italy. Not everyone can be rich, and some degree of poverty will always be with us. But surely, with public programs where necessary for a solid start in early childhood, completion of high school, better links to the labor market, and support of additional education, we could move some degree toward fulfilling our belief that America is a land of special opportunity. << Back to 1997 menu |
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© 2010 Timothy Taylor |