...young adults entering the labor market today have roughly the same likelihood of moving up the income distribution ladder relative to their parents as those who were born in the 1970s...
Has intergenerational income mobility, a child's chance of eventually earning more than his or her parents, declined in the United States? In Is the United States Still a Land of Opportunity? Recent Trends in Intergenerational Mobility (NBER Working Paper No. 19844) Raj Chetty, Nathaniel Hendren, Patrick Kline, Emmanuel Saez, and Nicholas Turner explore this question using data from tax returns. They conclude that young adults entering the labor market today have roughly the same likelihood of moving up the income distribution ladder relative to their parents as those who were born in the 1970s and entered the labor market two decades ago.
The authors study all individuals born between 1980 and 1993 who are U.S. citizens as of 2013 and are claimed as dependents on tax returns filed in or after 1996. The researchers estimate the correlation between a parent's and a child's percentile ranks in the income distribution. They also compute the probability that individuals born between 1971 and 1986 will reach the top fifth of the income distribution conditional on their parents' income quintile. For individuals born after 1986, whose earnings histories are necessarily shorter, the researchers measure mobility as the correlation between parents' income rank and children's college attendance rates, which are a strong predictor of later earnings.
The results suggest that the probability that a child reaches the top fifth of the income distribution, conditional on having parents in the bottom fifth of the income distribution, is 8.4 percent for those born in 1971 and 9.0 percent for those born in 1986. Children born to the highest-income families in 1984 were 74.5 percentage points more likely to attend college than those from the lowest-income families. The corresponding gap for children born in 1993 is 69.2 percentage points, suggesting that, if anything, intergenerational mobility may have increased slightly in recent years. Furthermore, intergenerational mobility is fairly stable over time in each of the nine census divisions of the United States, even though the level of these mobility rates differs substantially across regions.
The researchers conclude that rank-based measures of social mobility have remained remarkably stable over the second half of the twentieth century. They note that this is somewhat surprising in light of evidence that socioeconomic gaps in early indicators of success, such as test scores, parental inputs, and social connectedness, have grown over time.
-- Matt Nesvisky