Economic mobility is the ability of an individual, family or some other group to improve (or lower) their economic status—usually measured in income. Economic mobility is often measured by movement between income quintiles. Economic mobility may be considered a type of social mobility, which is often measured in change in income.
Types of mobility
There are many different ideas in the literature as to what constitutes a good mathematical measure of mobility, each with their own advantages and drawbacks.
Mobility may be between generations ("inter-generational") or within a person's or group's lifetime ("intra-generational"). It may be "absolute" or "relative".
Inter-generational mobility compares a person's (or group's) income to that of their parents. Intra-generational mobility, in contrast, refers to movement up or down over the course of a working career. Absolute mobility involves widespread economic growth and shows to what extent families improve their incomes over a generation. Relative mobility is specific to individuals and groups and it occurs without relation to the economy as a whole. It shows how closely the economic prosperity of children are tied to that of their parents. Relative mobility is a zero-sum game, while absolute is not.
Exchange mobility is the mobility that results from a "reshuffling" of incomes among the economic agents, with no change in the income amounts. For example, in the case of two agents, a change in income distribution might be {1,2}->{2,1}. This is a case of pure exchange mobility, since they have simply exchanged incomes. More generally, for a set of incomes xi, any permutation of the xi will yield a pure exchange mobility. Measures of inequality (e.g. the Gini coefficient) will not change under pure exchange mobility. Structural mobility is mobility that results from a change in the income distribution function without regard to the identity of the agents. For two agents, a change in income distribution might be {1,3}->{2,2}. This case may involve some exchange mobility, depending on one's definition, but there is certainly some structural mobility since it does not involve a simple reshuffling of incomes. Growth mobility is mobility that results from an increase in total income. For two agents, a change in income distribution might be {1,2}->{2,4} or perhaps {1,2}->{3,5}.
By country
In recent years, several large studies have found that vertical inter-generational mobility is lower in the United States than in most developed countries.Harder for Americans to Rise From Lower Rungs | By JASON DePARLE | 4 January 2012 ] A 1996 paper by Daniel P. McMurrer, Isabel V. Sawhill found "mobility rates seem to be quite similar across countries."Economic Mobility in the United States Urban Institute 1 October 1996 Daniel P. McMurrer, Isabel V. Sawhill However a more recent paper (2007) found a person's parents is a great deal more predictive of their own income in the United States than other countries. The United States had about 1/3 the ratio of mobility of Denmark and less than half that of Canada, Finland and Norway. France, Germany, Sweden, also had higher mobility, with only the United Kingdom being less mobile.
Economic mobility in developing nations (such as those in Africa) is thought to be limited by both historical and global economic factors. Economic mobility is correlated with income and wealth inequality everywhere.Jonathan Chait, "No Such Thing as Equal Opportunity", New York, 7 November 2011, pp. 14– 16.Stiglitz, Joseph E. (4 June 2012). The Price of Inequality: How Today's Divided Society Endangers Our Future (p. 17). Norton. Kindle Edition.
A 2018 World Bank study found that relative income mobility was generally lower in developing regions than in high-income economies. Of the 25 economies in the bottom third of its relative income-mobility distribution, all but one were low- or middle-income countries. The study distinguished income mobility from educational mobility and used a database covering 96 percent of the world's population.
United States
Intergenerational mobility According to the 2007 "American Dream Report" study, "by some measurements"—relative mobility between generations—"we are actually a less mobile society than many other nations, including Canada, France, Germany and most Scandinavian countries. This challenges the notion of America as the land of opportunity." Other research places the U.S. among the least economically mobile countries.Federal Reserve Bank of Chicago, Revised Estimates of Intergenerational Income Mobility in the United States, November 2003
Another 2007 study ("Economic Mobility Project: Across Generations") found significant upward "absolute" mobility from the late 1960s to 2007, with two-thirds of those who were children in 1968 reporting more household income than their parents (although most of this growth in total family income can be attributed to the increasing number of women who work since male earnings have stayed relatively stable throughout this time).
However, in terms of relative mobility, it stated: "contrary to American beliefs about equality of opportunity, a child's economic position is heavily influenced by that of his or her parents." 42% of children born to parents in the bottom fifth of the income distribution ("quintile") remain in the bottom, while 39% born to parents in the top fifth remain at the top. Only half of the generation studied exceeded their parents economic standing by moving up one or more quintiles. Moving between quintiles is more frequent in the middle quintiles (2–4) than in the lowest and highest quintiles. Of those in one of the quintiles 2–4 in 1996, approximately 35% stayed in the same quintile; and approximately 22% went up one quintile or down one quintile (moves of more than one quintile are rarer). 39% of those who were born into the top quintile as children in 1968 are likely to stay there, and 23% end up in the fourth quintile. Children previously from lower-income families had only a 1% chance of having an income that ranks in the top 5%. On the other hand, the children of wealthy families have a 22% chance of reaching the top 5%.
Intragenerational mobility According to a 2007 study by the US Treasury Department, Americans concerned over the recent growth in inequality (after-tax income of the top 1% earners has grown by 176% percent from 1979 to 2007 while it grew only 9% for the lowest 20%) can be reassured by the healthy income mobility in America: "There was considerable income mobility of individuals [within a single generation] in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period".
Other studies were less impressed with the rate of individual mobility in the United States. A 2007 inequality and mobility study by Wojciech Kopczuk and Emmanuel Saez and 2011 CBO study on "Trends in the Distribution of Household Income," found the pattern of annual and long-term earnings inequality "very close",Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data since 1937 Wojciech Kopczuk, Emmanuel Saez, Jae Song, 15 September 2007, Figure 4B or "only modestly" different.Congressional Budget Office: Trends in the Distribution of Household Income Between 1979 and 2007. October 2011. Another source described it as the mobility of "the guy who works in the college bookstore and has a real job by his early thirties," rather than poor people rising to middle class or middle income rising to wealth.Krugman, Paul. "The Rich, the Right, and the Facts: Deconstructing the Income Distribution Debate"prospect.org, 19 December 2001
Relative vs. absolute There are two different ways to measure economic mobility: absolute and relative. Absolute mobility measures how likely a person is to exceed their parents' family income at the same age. Research by the Pew Economic Mobility Project shows that the majority of Americans, 84 percent, exceed their parents' income. However, the size of absolute income gains is not always enough to move them to the next rung of the economic ladder.
A focus on how Americans' rank on the income ladder compares to their parents, their peers, or even themselves over time is a measure of relative mobility. The Pew Economic Mobility Project's research shows that forty percent of children in the lowest income quintile remain there as adults, and 70 percent remain below the middle quintile, meaning 30% moved up two quintiles or more in one generation.
Causes and issues
Gender Women
Women in their 30s have substantially higher incomes today than their counterparts did in their parents' generation. Between 1974 and 2004, average income for women in their 30s has increased almost fourfold. This is a stark contrast to the growth in income of their male counterparts. The employment rate of women in their 30s has increased from 39% in 1964 to 70% in 2004. This sharp increase in income for working women, in addition to stable male salaries, is the reason upward economic mobility is attributed to women.
Men The average income of men in their 30s has increased from 31,000 in 1964 to 35,000 in 2004, an increase of only 4,000. The rate of employment for men in this same age group has decreased from 91% in 1964 to 86% in 2004.
Social stratification
Data shows substantial social segregation correlating with economic income groups.Data from Charted in
Geographic effects In addition to the generally accepted factors of gender, race, and education, the geography of an individual's upbringing also affects his or her future family income. Understanding the impact of geography on intergenerational income mobility is crucial for comprehensively addressing socioeconomic inequality and promoting economic opportunity across different regions. Policymakers, economists, and social scientists can use these insights to design targeted interventions and policies aimed at reducing inequality and fostering social mobility. Moreover, recognizing the influence of geography on income mobility underscores the broader structural determinants of socioeconomic outcomes, emphasizing the importance of addressing disparities in access to resources, quality education, housing affordability, and economic opportunities across various geographical areas.
According to a 2015 study by Rothwell and Massey, geography and neighborhood conditions do have an impact on intergenerational income mobility. The study found that the influence of neighborhood income on future earnings was about half that of parents' income. It is estimated that if someone born in a lower-class neighborhood grew up in an upper-class neighborhood, their household income would increase by $635,000. These effects become larger when income is adjusted for regional purchasing power, with the neighborhood effect being two-thirds as large as the parental income effect and the lifetime income difference increasing to $910,000. The study considered the impact of housing costs and local government regulations on community quality. Geographic factors as defined by the authors include price growth at national level and hometowns level, differences in house prices between regions, and geographic location. The paper notes that national house price growth may be higher or lower than hometowns price growth, and the differences between regions can be large. It also shows that geography can capture unobserved differences between regions, such as proximity to the coast, weather, proximity to the Mexican border, a history of slavery, or the fact that Western states have a higher proportion of immigrants. In terms of neighborhood conditions, class segregation, average home values, and housing market conditions are included to examine their impact on intergenerational income mobility.