January 30, 1997
"The Myth of Horatio Alger"
San Jose Mercury News
By Timothy Taylor
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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.
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