The American "Rags To Riches" Dream Is Now History For Most

Tyler Durden's picture




 

It would appear that the Horatio Alger myth - that hard work and pluck will lift a person from dire circumstances to enviable success - is not living up to expectations for Americans. As WSJ's Lauren Weber notes, 40% of Americans think it’s fairly common for someone to start off poor, work hard and eventually rise to the top of the economic heap but a new Pew study shows that in reality, only 4% of Americans travel the rags-to-riches path. Unfortunately, they discovered considerable “stickiness” at both ends of the income spectrum and that Americans attached to the rags-to-riches myth might be disappointed to know that other countries show greater mobility among have-nots - "this is what we call the 'parental penalty,' and it's really high in the U.S. - If you’re born in the bottom here, your likelihood of sticking in the bottom is much higher."

 

Via WSJ,

...only 4% of Americans travel the rags-to-riches path, according to new research from the Economic Mobility Project of the Pew Charitable Trusts.

 

...a great many  who are born into the poorest segments of the population are stuck there for life, a finding that suggests the U.S. has much to do to improve social mobility.

 

Forty-three percent of Americans raised in the bottom quintile of household income remain there a generation later (with income of less than $28,900 in 2009 dollars, adjusted for family size). Twenty-seven percent rise up slightly into the second quintile, 17% land in the middle of the distribution, and 9% end up in the 4th quintile.

 

...

 

Fed researchers looked at mobility for all Americans. They discovered considerable “stickiness” at both ends of the income spectrum. In other words, poor or wealthy children are most likely to stay in their respective wealth brackets as adults.

 

...

 

In a birthright economy – think India’s old caste system – 100% of individuals would remain in the economic category they’re born into. In an ‘equal chance’ economy, socioeconomic status would change in a random but predictable way, with 20% of people staying where they are and 20% moving into each of the other categories (imagine a lottery machine where 100 balls pop around a tank and 20 are randomly funneled into each of five different baskets).

 

...

 

But Americans attached to the rags-to-riches myth might be disappointed to know that other countries show greater mobility among have-nots.

 

In Sweden, Finland, Norway, Denmark and the United Kingdom, between 25% and 30% of people stay in the bottom quintile, according to Daly, compared to the 44% in the U.S.

 

This is what we call the ‘parental penalty,’ and it’s really high in the U.S.,” she said. “If you’re born in the bottom here, your likelihood of sticking in the bottom is much higher.”

 

...

 

and while there is plenty to worry about there, the last paragraph of Weber's note is perhaps the most worrisome in terms of the Fed's current policies...

Americans who moved up from the bottom had at least nine times more wealth than those who were stuck — $8,892 for people with no upward mobility versus $78,005 for people who moved one rung up and $94,586 for those who made it at least to the middle.

 

Especially in a nation where work is increasingly punished...

As quantitied, and explained by Alexander, "the single mom is better off earnings gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045."

 

 

We realize that this is a painful topic in a country in which the issue of welfare benefits, and cutting (or not) the spending side of the fiscal cliff, have become the two most sensitive social topics. Alas, none of that changes the matrix of incentives for most Americans who find themselves in a comparable situation: either being on the left side of minimum US wage, and relying on benefits, or move to the right side at far greater personal investment of work, and energy, and... have the same disposable income at the end of the day.

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Mon, 11/11/2013 - 20:40 | 4144153 A Lunatic
A Lunatic's picture

I'm going to pull myself up by my bootstraps just as soon a I can get my boots out of pawn.......

Mon, 11/11/2013 - 20:54 | 4144192 Cognitive Dissonance
Cognitive Dissonance's picture

I'm right behind you....just as soon as I remove the Fed's boot from my arse.

<At least I hope it's the Fed's boot back there.>

Mon, 11/11/2013 - 21:07 | 4144216 Mike Hunt Hurts
Mike Hunt Hurts's picture

If I stay at $0 income than my "return" is at maximum.

Cool, I'm going to tell my boss to fuck off and start getting free shit full time.

Thanks for heping me to be more "productive" with my time.

Mon, 11/11/2013 - 21:12 | 4144236 johnQpublic
johnQpublic's picture

simple high school level sociology at play

Mon, 11/11/2013 - 21:19 | 4144263 CH1
CH1's picture

All surplus is skimmed away, all the time.

What other result would we expect?

Mon, 11/11/2013 - 21:36 | 4144320 akak
akak's picture

If you like your rags (or even if you don't), you can keep your rags.

In a few more years, most Americans will be lucky to have rags.

Mon, 11/11/2013 - 21:39 | 4144333 James_Cole
James_Cole's picture

As quantitied, and explained by Alexander, "the single mom is better off earnings gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045."

Exactly right, pay attention all yee single moms, your hard work is being punished!

Mon, 11/11/2013 - 22:56 | 4144623 RafterManFMJ
RafterManFMJ's picture
The American "Rags To Riches" Dream Is Now History For Most

Well look at the bright side; Most 'Rich' Amuricans can now enjoy the excitement of going from riches to rags! And won't that be fun?

Mon, 11/11/2013 - 21:05 | 4144214 BigJim
BigJim's picture

 ...In an ‘equal chance’ economy, socioeconomic status would change in a random but predictable way, with 20% of people staying where they are and 20% moving into each of the other categories (imagine a lottery machine where 100 balls pop around a tank and 20 are randomly funneled into each of five different baskets).

Sigh. What a load of bullshit. This argument that in an 'equal chance' society everyone would be randomly distributed is patently absurd. People's culture is the biggest determinant to their attitudes to thrift, education, hard work, and deferring gratification, which in turn have the greatest influence on how you progress in life. And one acquires one's culture principally from one's parents. If your parents are lazy, or have a low IQ, or blow their week's wages on payday, the chances are pretty good you will too.

So lots of other 'developed' countries have more social mobility? Have they done a breakdown of mobility vs race? Mobility vs how many generations the family have been in a country?

So what amount of social mobility is the 'right' amount of social mobility? If I'm in the upper quintile, why would you expect my children - who would inherit my wealth, along with my attitudes to investment, work, thrift, education, etc - not be likely to be in the upper quintile too?

Mon, 11/11/2013 - 21:43 | 4144339 RaceToTheBottom
RaceToTheBottom's picture

"So what amount of social mobility is the 'right' amount of social mobility?"

100% works for me.

The last person I want to be given passing grades for free or a prime job is some Jamie Dimon snatch daughter....

I would have thought the Wild west, I pulled myself up by my bootstraps, Shrugist, liberterariums here would have been blowing up the blog on this one....

Mon, 11/11/2013 - 21:49 | 4144367 James_Cole
James_Cole's picture

If I'm in the upper quintile, why would you expect my children - who would inherit my wealth

The takeaway is, though the children may be as stupid and useless as their parents in the US caste system they'll do a-ok - wealth being the divider of importance. In other countries actual merit matters more, so if kids are born poor yet are smarter than BigJim's minions (likely not a big accomplishment) they'll do better. 

Mon, 11/11/2013 - 22:11 | 4144462 BigJim
BigJim's picture

My 'minions'? lulz

I didn't say I was in the upper quintile, BTW.... if you examine the statement you'll see the first word is 'If'.

 The takeaway is, though the children may be as stupid and useless as their parents in the US caste system they'll do a-ok - wealth being the divider of importance.

I see... so you'd like the government to confiscate everyone's estate upon death and hand out the deceased's goods... 'fairly'?

Any other impressive ideas you'd like to share with us all this evening?

Mon, 11/11/2013 - 22:52 | 4144612 acetinker
acetinker's picture

At the end of the day, I actually love LTER.  She don't know it yet, but by the time this debacle plays out, she will be forced to admit that her nemesis was, in truth correct.  She may flame out in a bloody mess, or come to realize that vagina envy is futile.  The worst I ever had was absolutely wonderful, btw.

Mon, 11/11/2013 - 22:53 | 4144617 akak
akak's picture

You'll have to forgive James --- he was born in the 2nd lowest quintile of intelligence, and in the bottom quintile of integrity.

Mon, 11/11/2013 - 22:59 | 4144640 acetinker
acetinker's picture

Key-rist!  Did I mistake Lames_Cole for LTER, or am I in some kind of time-warp?

Mon, 11/11/2013 - 23:13 | 4144689 akak
akak's picture

LTER has come a LONG way from his former statist ways here (not all the way, but definitely is on the right road), whereas James_Cole is mostly just a low-key MDB without the humorous slant.

Mon, 11/11/2013 - 23:11 | 4144654 James_Cole
James_Cole's picture

I see... so you'd like the government to confiscate everyone's estate upon death and hand out the deceased's goods... 'fairly'?

No, wealth increasingly means access - access to the best schools, best tutors, best resources etc. Equality of access should be prioritized, folks can keep their wealth. 

If you look around the world for the most part you'll see a familiar trend, countries with high social mobility tend to do much better than countries with low social mobility, this isn't by chance. It's actually not economically healthy to have an entitled upper class and a disillusioned lower class. 

The last thing rich folks want is their stupid kids competing toe to toe in the classroom with poor kids. 

http://www.youtube.com/watch?v=acLW1vFO-2Q

Tue, 11/12/2013 - 18:28 | 4147715 BigJim
BigJim's picture

 No, wealth increasingly means access - access to the best schools, best tutors, best resources etc. Equality of access should be prioritized, folks can keep their wealth.

Jesus, you're even dumber than I thought. You appear to have no concept of resource scarcity. Folks can somehow keep their wealth, but the poor - ie, everyone - will be given 'equality of access' to 'the best schools, the best tutors, best resources'?

lulz^2

Mon, 11/11/2013 - 21:10 | 4144228 FredFlintstone
FredFlintstone's picture

Luna,

 

Maybe you could do this instead?

http://www.theguardian.com/world/2013/nov/11/artist-nails-testicles-red-square-pyotr-pavlensky

Let me know if you are not interested as I might take the lead.

 

Fred

Mon, 11/11/2013 - 20:41 | 4144156 no life
no life's picture

They should just take a few minutes and learn how to flip stocks around for a living... really good money and you get to skip all the shit like worrying your boss is gonna gig you for not having enough pieces flare on your uniform. Just become another guy riding the bubble... but never hold anything more than an hour.

Mon, 11/11/2013 - 20:42 | 4144161 I am Jobe
I am Jobe's picture

Ah the AMERIKAN DREAM, 

 

Mon, 11/11/2013 - 21:28 | 4144300 prains
prains's picture

never was a dream but always was a SCHEME

Mon, 11/11/2013 - 20:43 | 4144162 Running On Bing...
Running On Bingo Fuel's picture

Nepotism, and tribal connections will get you there.

Over.

Mon, 11/11/2013 - 20:47 | 4144169 Kirk2NCC1701
Kirk2NCC1701's picture

A large part that's fostering this situation, is the fashionable but long gone myth of the Lone Hero from the Frontier mentality.

Lone wolves do not amount to much. You need to work as a Pack, a Clan or (better still) as a Tribe, to get ahead and stay there.

We no longer live in a frontier homestead, where individuality brings in the harvest, for a long cold winter ahead. Just like generals fight new wars with lessons and methods of old wars, so do the masses keep solving new problems with old/antiquated solutions.

Some Tribes have figured this out, most have not.

Mon, 11/11/2013 - 21:16 | 4144255 Yenbot
Yenbot's picture

Its the cows that are missing, Kirk-san. No cows, just boy.

Mon, 11/11/2013 - 21:44 | 4144351 RaceToTheBottom
RaceToTheBottom's picture

The myth is not gone, apparently.....  but it is a myth

Mon, 11/11/2013 - 20:49 | 4144177 Alcoholic Nativ...
Alcoholic Native American's picture

No, shit, You can still win the lottery though, but as a minimum wage employee that works at a lottery terminal, that is highly unlikely.

Mon, 11/11/2013 - 21:13 | 4144240 AlaricBalth
AlaricBalth's picture

State lotteries. A great way to tax those that can least afford it. Although it is "voluntary", to some it is their weekly dose of hopium.

"Duke University researchers found that the more education one has the less one spends on lottery tickets: dropouts averaged $700 annually compared to college graduate’s $178; and that those from households with annual incomes below $25,000 spent an average of nearly $600 per year on lottery tickets, while those from households earning over $100,000 averaged $289; blacks spent an average of $998, while whites spent $210."

Mon, 11/11/2013 - 21:36 | 4144322 RaceToTheBottom
RaceToTheBottom's picture

I think they have programmed winning the lottery into Quicken's budgeting programs.  Or at least that was my feedback to them.

Mon, 11/11/2013 - 21:41 | 4144344 Miffed Microbio...
Miffed Microbiologist's picture

I put one dollar a week in our lab's lottery pool. Just because I don't want to be left here alone working still as a stupid wage slave when all my sheeple work associates are out buying McMansions and BMWs with Lotto13 vanity plates. That would be my typical dumb luck. But spending $52 a year on such nonsense is embarassing.

Miffed;-)

Mon, 11/11/2013 - 23:30 | 4144733 Agent P
Agent P's picture

4% travel the rags-to-riches path.....0.00000004% (or so) win the lottery.....yet what do people do more of, work hard to move up in the world or buy lottery tickets?

Tue, 11/12/2013 - 02:37 | 4145103 El Crusty
El Crusty's picture

well to be honest, the chances of being one of those 4% seems to be getting increasingly remote. in such a situation, the lottery tickets appear to be the better play.

Mon, 11/11/2013 - 20:49 | 4144178 Two Theives and...
Two Theives and a Liar's picture

Seems like "Shrugging" makes more and more sense..

Mon, 11/11/2013 - 21:10 | 4144232 Platinum
Platinum's picture

Shrug, then hunker down.

Mon, 11/11/2013 - 21:14 | 4144248 Dagny Taggart
Dagny Taggart's picture

Every skill you learn and tool you acquire to become more self reliant, every way you can find to withdraw your consent - is what seems sensible at this point. Atlas is Shrugging.

Mon, 11/11/2013 - 20:55 | 4144186 Cognitive Dissonance
Cognitive Dissonance's picture

The American Dream Myth.

We tend to believe we (as in me, myself and I) are exceptional....even when we are not. Combine this tendency with the American Myth of upward mobility and we slaves trudge off to work each day believing magic can and does happen.....or at least it will for me.

<Or maybe it's as simple as.....I owe I owe, so off to work I go.>

Mon, 11/11/2013 - 20:56 | 4144196 I Write Code
I Write Code's picture

Let's just agree that all Americans are above average and leave it at that.

Mon, 11/11/2013 - 21:04 | 4144212 Cognitive Dissonance
Cognitive Dissonance's picture

There is a silly story I occasionally tell that highlights the sense of self importance and excellence we all seem to suffer from to one degree or another.

"As part of HIS screening process God meets with every soul who has recently passed before they are sent on their way. At one such screening 100 recently deceased souls are told by God that 99 of the 100 in that room will be going directly to hell, but that one soul was blessed and would ascend with God to heaven. Within seconds 99 of the gathered souls have convinced themselves they alone are the chosen one and the actual blessed soul is convinced he is destined for hell."

Mon, 11/11/2013 - 21:09 | 4144224 willwork4food
willwork4food's picture

Hell? As in working for Wal-Mart during Black Friday week?

That's inhumane.

Tue, 11/12/2013 - 02:43 | 4145113 El Crusty
El Crusty's picture

you have no idea how bad that is. i've actually worked there on black friday. take your worst imagination, then multiply it times ten. huge crowds and a $4 waffle maker will turn people into crazy fuckers in a hurry.

Mon, 11/11/2013 - 22:57 | 4144632 RafterManFMJ
RafterManFMJ's picture

tl;dr :)

Tue, 11/12/2013 - 20:21 | 4148145 acetinker
acetinker's picture

See ya' in hell then.  Godspeed!

Mon, 11/11/2013 - 21:13 | 4144241 Row Well Number 41
Row Well Number 41's picture

"where all the women are strong, all the men are good-looking, and all the children are above average."

#41

Mon, 11/11/2013 - 21:19 | 4144264 Yenbot
Yenbot's picture

"where all the women are strong, all the men are good-looking, and all the children are above average."

That's RUSSIA, Comrade 41.

Mon, 11/11/2013 - 23:39 | 4144768 RaceToTheBottom
RaceToTheBottom's picture

Lake Wobegon, right next to Lake Baikal. 

Mon, 11/11/2013 - 21:16 | 4144250 Urban Redneck
Urban Redneck's picture

Mr. Ed is overdue for a trip to the glue factory. He's getting bitch slapped by every world leader that Barry has managed to piss off. The the only thing above average about American politicians is their opinion of themselves.

http://en.ria.ru/world/20131107/184576114/Egypt-Eyes-4Bln-Arms-Deal-With...

Mon, 11/11/2013 - 21:59 | 4144414 Miffed Microbio...
Miffed Microbiologist's picture

I think modern education has made this even worse. Focusing on self esteem, everyone gets a trophy day, high merits awarded to middling performance ...etc. All these things contribute to a warped self importance.

What a shock for kids when they enter the real world and their boss doesn't tell them they're wonderful every five minutes. Constructive criticism isn't seen as an evaluation but a personal attack. What's even worse, I've heard nightmare stories from employers that mommy and daddy often complain to their child's boss after a poor performance review. Thus perpetuating the " I must be exceptional" fantasy. True happiness occurs when you can observe and accept yourself honestly and objectively, faults as well as talents and do your best with what you have.

Miffed;-)

Mon, 11/11/2013 - 22:48 | 4144580 RaceToTheBottom
RaceToTheBottom's picture

STEM education is still fairly world-class, at the college level.  The issue is not there, it is below that in the college level and in the non STEM curriculum.

The main issue with College STEMS, is People make the mistake thinking that Engineering school is a good representation of work as an Engineer.  100% of engineers say that communication is what helps them advance.  Yet most people leave engineering because they think that engineering calcs is what they will do 100% of the time.  

For that I blame teachers/profs and councilors and stupid kids and their moronic parents.

Mon, 11/11/2013 - 23:14 | 4144690 Miffed Microbio...
Miffed Microbiologist's picture

This is so true. When my husband graduated in computer science he thought he would just program. Instead he had to draft projects/ proposals, document all his work so others could understand his logic for debugging, go to countless meetings to coordinate his work with other pertinent groups, draft plans where each feature would be included in what upgrade...etc. He called me once so frustrated " I never knew I would be working with so many people!" Quite hard for a loner.

He gave a few talks at our local high school on career day and tried to enlighten the kids who were interested in Computer Science. Most were completely clueless and only wanted to program games.

Miffed;-)

Tue, 11/12/2013 - 00:06 | 4144836 RaceToTheBottom
RaceToTheBottom's picture

I have excelled in Engineering firms and consulting engineering roles and I barely made it through undergraduate, mostly because of the math.  But I continued, mostly in part because I knew (was told) that once I got the paper, I would be competing with people who could not communicate, or think systemically.  Graduate Engineering was different, partway because the profs were nicer as they wanted money from you when you graduate. I was also the only person born in America in my graduate program.

My wife wanted to be an engineer but was afraid of the math and from a family that was business not engineering, yet her skills have led her to management of the engineers since they did not have the skills or desires to move up. 

I am extremely bummed that the US are not filling up classes with engineers, because it teaches critical thinking.  The undergraduate is not a terminal degree.  They can later on become MBAs or lawyers or dickheads on ZH, but at least they would do it from a point of base intelligence.

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