Nobody really needs to be told any more that the American middle class is struggling. If you don't already feel this in your own life, there's a fresh report seemingly every week spelling out the grim news.
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Median income has been falling. Income inequality is rising. The rich have more and the poor have less. Got it, got it, and got it.
A new report from the Economic Policy Institute, a left-leaning think tank, reprises all the familiar findings about how the working class can't keep up these days. But it also contains some important findings related to economic mobility—the ability to improve your own socioeconomic standing—which is something that anybody worried about the fragile state of the middle class ought to be paying attention to. The availability of opportunity and the belief in self-improvement are core tenets of the American Dream, and Americans have long found ways to get ahead, no matter what the aggregate data say.
Except, perhaps, for now. The EPI report includes data showing that more Americans are staying stuck in the socioeconomic stratum they're born into, which means fewer people are moving up and those at the top are staying put. This might not be much of a problem if incomes were rising substantially at every level, and overall living standards were improving. But that's not what's happening.
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Instead, people are remaining stuck in socioeconomic brackets at the same time that median income is falling. That's why living standards are gradually deteriorating. The EPI report also isolates when this started to happen. Early baby boomers—those now aged between 58 and 67—were the last generation to enjoy higher living standards than the one that came before. For those younger than 58, upward mobility has slowed dramatically.
This matters because economic mobility has typically been the antidote to a higher level of income inequality in America than in other developed nations. In other words, Americans have typically tolerated bigger gaps because the rich, the poor, and everybody in between believed that hard work and innovation can rapidly springboard them into a higher income bracket.
That was probably true for many years following the Great Depression, but these days, the odds of an ambitious young bootstrapper rising from humble origins are better in many other countries than they are in the United States. The EPI researchers cite data from other economists showing that the United States, for instance, only ranks 13th out of 17 developed nations by one measure of economic mobility. Young Americans enjoy better economic mobility than their counterparts in Slovenia, Chile, Italy and the U.K. But young workers have a better chance of moving up in 12 other countries, including supposedly socialist states like Sweden and Denmark, along with France, Spain, Germany, Australia and Canada.
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Polls show that even after a withering recession, most Americans still believe that their nation provides unique opportunities to get ahead for people willing to work hard. But the EPI data suggests that's wishful thinking left over from the past. "While faith in the American Dream is deep," the report says, "there is considerably more mobility in most other developed economies."
It's hard to pinpoint why economic mobility would be declining more in the United States than elsewhere, especially given the weak economies in parts of Europe. But education is probably a big factor. In the latest competitiveness rankings issues by the World Economic Forum, the United States ranked 34th in the category measuring primary education, a weak showing that's consistent with declining academic achievement for U.S. teenagers, compared with kids in other countries.
It's important to keep in mind that a decline in overall mobility doesn't prevent any given individual from defying the trend and rising far beyond his or her starting point. It just means the barriers are higher, with fewer people likely to bound over them. Adjust your dream accordingly.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
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