How Income Inequality and the Lack of Economic Mobility Threaten the American Dream

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JANUARY 20, 2014

Published on Jan 20, 2014

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.

Socio-economic mobility in the United States refers to the movement of Americans from one social class or economic level to another, often by changing jobs or marrying. This "vertical" mobility can be the change in socioeconomic status between parents and children ("inter-generational"); or over the course of a lifetime ("intra-generational"). It typically refers to "relative mobility" — the chance that an American's income/status will rise or fall compared to others in another income/status group—but can also be "absolute"—whether (and by how much) living standards in America have increased.

Belief in strong social and economic mobility—that Americans can and do rise from humble origins to riches—has been called a "civil religion", "the bedrock upon which the American story has been anchored", and part of the American identity (the American Dream), celebrated in the lives of famous Americans such as Benjamin Franklin and Henry Ford, and in popular culture (from the books of Horatio Alger and Norman Vincent Peale to the song "Movin' on Up"). Opinion polls show that this belief has been both stronger in the US than in years past, and stronger than in other developed countries. However, in recent years several large studies have found that vertical inter-generational mobility is lower, not higher, in the US than in those countries.
The Brookings Institution said in 2013 that income inequality was increasing and becoming permanent, sharply reducing social mobility.

Income inequality in the United States has grown significantly since the early 1970s, after several decades of stability, and has been the subject of study of many scholars and institutions. While inequality has risen among most developed countries, and especially English-speaking ones, it is highest in the United States. Income inequality (as measured by the Gini coefficient) is not uniform among the states: after-tax income inequality in 2009 was greatest in Texas and lowest in Maine.

Most of the growth has been between the middle class and top earners, with the disparity becoming more extreme the further one goes up in the income distribution.[12] A 2011 study by the CBO[13] found that the top earning 1 percent of households increased their income by about 275% after federal taxes and income transfers over a period between 1979 and 2007, compared to a gain of just under 40% for the 60 percent in the middle of America's income distribution.[13] Other sources find that the trend has continued since then.[14] In spite of this data, only 42% of Americans think inequality has increased in the past ten years.[15] In 2012, the gap between the richest 1 percent and the remaining 99 percent was the widest it's been since the 1920s.[16] Incomes of the wealthiest 1 percent rose nearly 20 percent, whereas the income of the remaining 99 percent rose 1 percent in comparison.[16]
Scholars and others differ as to the causes, solutions, and the significance of the trend,[17] which in 2011 helped ignite the "Occupy" protest movement. Education and increased demand for skilled labor are often cited as causes,[18] some have emphasized the importance of public policy; others believe the cause(s) of inequality's rise are not well understood.[13] Inequality has been described both as irrelevant in the face of economic opportunity (or social mobility) in America, and as a cause of the decline in that opportunity.[19][20][21]
Yale professor and economist Robert J. Shiller, who was among three Americans who won the Nobel prize for economics in 2013, believes that rising economic inequality in the United States and other countries is "the most important problem that we are facing now today."[22] Pope Francis echoed this sentiment in his Evangelii Gaudium, stating that "as long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, no solution will be found for the world's problems or, for that matter, to any problems."[23] President Barack Obama referred to the widening income gap as the "defining challenge of our time."


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