Journal Issue: Opportunity in America Volume 16 Number 2 Fall 2006
The United States has long been viewed as a place where with hard work most people can succeed, whatever their family background. Immigrants flock to the United States because of the nation's image as “the land of opportunity.” An immigrant candle maker's son, Benjamin Franklin, grew up to become one of the Founding Fathers. An immigrant weaver's child, Andrew Carnegie, began by working at a cotton mill and went on to build a vast empire of wealth. And compared with some of the older democracies of Western Europe, the United States is often presumed to be a less class-based society. It is understood, of course, that opportunity has not been available to all. African Americans, in particular, have long struggled to escape the legacy of slavery. And women, denied political and economic opportunities until relatively recently, are still trying to catch up to men. But the dominant ideology in America has been a deep-seated belief in equality of opportunity.
Americans' commitment to the ability of individuals to fashion their own success has made them less willing than the citizens of other Western democracies to redistribute income, leading to large income disparities between families at the top and those at the bottom of the economic ladder.1 One reason such inequality may be less troubling to Americans than to many Europeans is the conviction that opportunity is available for all to achieve economic success.
But does this set of beliefs comport with reality? Is the United States such a classless society after all? And to the extent that the nation has fallen short of its ideals, what can be done? This volume attempts to answer these questions, drawing on some of the best research and data available. In the articles that follow, the authors examine opportunity in the United States today, how opportunity has changed over time, and how it varies by race, gender, and national origin. They also explore how education, health, and culture affect social mobility for children born in different circumstances and what government might do in each of these domains to make opportunity in the United States more equal.
Before going any further, we should say a few words about what we mean by opportunity, how it is measured, and how it relates to economic growth and inequality. A society with economic opportunity is one in which all children have a roughly equal chance of success regardless of the economic status of the family into which they were born. Stated differently, in such a society, the association between one's parents' income and one's own income should be small. This does not mean it should be zero. Some association between parent and offspring status is to be expected, as we discuss below—but a large connection suggests that the playing field is not level.
In these articles, the authors focus on several different measures of opportunity, but perhaps the most common is intergenerational elasticity (IGE), which measures the persistence of income across generations. A number of studies find that the IGE in the United States is in the neighborhood of 0.5, which means that about half the difference in income between families in one generation continues into the next generation. In short, Americans still experience both upward and downward mobility across generations, but a father's income says a lot about where his son will end up.
Questions about opportunity in America are especially important now, for several reasons. First, income and wealth are more unequally distributed in the United States than at any time in the past half century. In 2003, the average CEO earned 185 times as much as the average worker, up from 24 times in 1965.2 In 1979, the after-tax income of the top fifth of the population was 6.2 times higher than that of the bottom fifth; in 2003, the top fifth had 9.8 times as much as the bottom fifth.3 According to Congressional Budget Office data, from 1979 to 2003 the average after-tax income of the top 1 percent of the population increased 129 percent, while that of the poorest fifth of Americans rose just 4 percent.4 Wealth is even more unevenly distributed than income.5 With the rewards for economic success becoming bigger, as they have in recent decades, ensuring that competition is fair and open becomes even more important.
Second, one reason why the United States has been considered the land of opportunity is that as a young nation with an open frontier and an unusually entrepreneurial spirit, it has been blessed with relatively strong economic growth through much of its history. Growth has meant that each generation could do better than the previous generation, even if children remained in the same relative economic position as their parents. Indeed, starting in 1820, per capita gross domestic product has risen an average of 52 percent for each succeeding generation.6 In short, growth can go a long way toward neutralizing any negative effect of low mobility. Although it is quite possible that the nation's economy will continue to grow rapidly, family income growth has slowed in recent decades, suggesting that the process may now be less of a positive-sum game than it once was. From 1953 to 1973, median family income rose swiftly, at an annual rate of 2.8 percent. Since 1973, however, median family income has grown an anemic 0.6 percent a year, a rate that would entail a 17 percent increase in the typical family's income for each generation.7 Thus, unless economic growth picks up, the next generation will experience an improvement in its standard of living that is only about one-third as large as the historical average for earlier generations.
We took an informal poll among some of the authors and discussants of this volume and asked, if they could be born with just one of the following characteristics, which would it be: their race, their class, their gender, or their national origin? Interestingly, the vast majority picked their class. Because the survey was casual, the results are only suggestive. But what they imply is that in public debates, Americans may give too much attention to race, ethnicity, and gender, and too little to class, or what sociologists call “the socioeconomic status of one's family of origin.”
So class is important. But what can and should government do to promote greater opportunity? First, as the authors of this volume recognize, there are limits to what government can accomplish. One reason why children from high-income families are more successful than those from low-income families is that some of the attributes that contribute to success in both generations— ability, motivation, and health—are at least partially inherited. In other words, genes matter, and short of genetic engineering, children from different socioeconomic backgrounds will always have unequal chances for this reason alone.
A second reason why children of higher status parents are more successful economically is that their parents often work hard to give them a variety of advantages, and by virtue of their income, education, and social networks, have the means to do so. If, as a nation, we were willing to separate children from their parents at an early age, we could theoretically eliminate this second source of variation in child outcomes. Though such a policy is one that few people could support, public policies can nevertheless do quite a lot to compensate children for what their parents cannot provide. And because the kind of family one is born into is a matter of pure luck, we would argue that government should be doing more. (Indeed, it is interesting that the public and the political system reacted so generously in the wake of Hurricane Katrina, probably because people said to themselves, “There, but for the grace of God, go I.” For some reason the bad luck of being born into a disadvantaged family does not always elicit the same kind of response.) So we asked our authors to consider the most promising ways for government policies to reduce the intergenerational persistence of income, and especially to focus on how to increase the chances that children at the bottom of the economic ladder have an opportunity to move up. After summarizing the most important findings in this volume, we will return to this question.