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Moving up the economic ladder is even harder than we thought

Oct 14, 2016

“Pulling yourself up by your bootstraps” is a phrase that used to describe trying to do something that was nearly impossible. (Imagine, for a moment, trying to stand up by pulling on your own shoes. You’d look pretty silly.)

But somewhere along the way, it’s become short-hand for the kind of crowd-pleasing rags to riches stories found everywhere from movie screens to the evening news.

Americans are particularly enchanted with the idea that in this country, with enough hard work and grit, anyone can be successful.

A survey by the Pew Research Center found that 71% of Americans thought that hard work and a drive to succeed were more important to a person’s economic success than how much money their parents made or the state of the economy.

And this was in 2009, right after the American economy had the rug yanked out from underneath it.

But a new report from the National Bureau of Economic Research suggests that climbing the social and economic ladder in America is even harder than we thought. And it’s nowhere near as common as Americans think it is.

The NBER researchers found that studies of American social and economic mobility are probably underestimating the influence of family resources on children’s success. That’s because most of that research has focused on the difference between parents and their children. What it hasn't measured is the influence of the wealth and resources of previous generations, like grandparents and great-grandparents.

For example, Washington Post reporter Ana Swanson writes, imagine that the son of a banker decides he’d rather become a poet than follow in his parent's footsteps. But then, a couple of decades later, his daughter returns to the family business.


“If you just looked at the poet and his daughter, you might think that economic mobility is alive and well in America -- she probably makes a lot more money than her father does. But actually, the daughter might be drawing on much older, preexisting family resources – such as financial resources, personal connections, or knowledge about how Wall Street works from her grandfather – that make it easier for her to become a banker than it is for the average kid.”  

The researchers, who used educational attainment as a proxy for social and economic status, found that only looking at two-generation data sets underestimates the impact of family educational achievement by about 20%. And to be clear, we already knew that social mobility in the U.S. isn’t nearly as rosy as most Americans perceive it to be.

According to Ana Swanson in the Washington Post:


“Research by economists from Harvard and Berkeley found that fewer than 10 percent of people in the bottom fifth of the wealth distribution will make it into the top fifth. Things weren't much better for the middle class: Only about 20 percent of people in the middle fifth would rise into the top fifth over the course of their lives.”

Lead researcher Joseph Ferrie of Northwestern University told the Washington Post that the authors don't yet know why grandparents matter to mobility. But the report says previous research points to several ways grandparents could impact their grandchildren's social and economic outcomes including "inheritance of financial assets, inheritance of social networks, and the direct effects that personal contact between grandparents and their grandchildren could have."

Whatever the reason, it's pretty clear that the American Dream looks very different in real life than it does in the movies.