Beleif that if you work hard, play by the rules you can become rich no longer true for most people
I attended a panel and presentation of a paper by Tom Hertz of American University in DC titled Understanding Mobility in America. It was given at the Center For American Progress. The conclusions of the paper supported by the panel is that there is less economic mobility in the US than in France, Germany, Sweden, Canada, Finland, Norway, and Denmark. This means that American children of the middle class have significantly less of a chance ending up rich then children of the rich regardless of their abilities which puts the lie to the long held American belief that if you work hard and play by the rules you have an equal chance with anyone else of becoming rich.
A panelist Bhaskar Mazundar a Senior Economist at the Federal Reserve Bank of Chicago said in answer to a question about economic mobility in the past that studies of the period between 1850 and 1870 and 1900 to 1920 did in fact justify the American view of high economic mobility
The paper can be downloaded from http://www.americanprogress.org/...
The key findings relating to intergenerational mobility include the following:
* Children from low-income families have only a 1 percent chance of reaching the top 5 percent of the income distribution, versus children of the rich who have about a 22 percent chance.
* Children born to the middle quintile of parental family income ($42,000 to $54,300) had about the same chance of ending up in a lower quintile than their parents (39.5 percent) as they did of moving to a higher quintile (36.5 percent). Their chances of attaining the top five percentiles of the income distribution were just 1.8 percent.
* Education, race, health and state of residence are four key channels by which economic status is transmitted from parent to child.
By international standards, the United States has an unusually low level of intergenerational mobility: our parents' income is highly predictive of our incomes as adults. Intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States. This is a selection from the key findings
Key findings relating to short-run, year-to-year income movements include the following:
* The overall volatility of household income increased significantly between 1990-91 and 1997-98 and again in 2003-04.
* Since 1990-91, there has been an increase in the share of households who experienced significant downward short-term mobility. The share that saw their incomes decline by $20,000 or more (in real terms) rose from 13.0 percent in 1990-91 to 14.8 percent in 1997-98 to 16.6 percent in 2003-04.
* The middle class is experiencing more insecurity of income, while the top decile is experiencing less. From 1997-98 to 2003-04, the increase in downward short-term mobility was driven by the experiences of middle-class households (those earning between $34,510 and $89,300 in 2004 dollars). Households in the top quintile saw no increase in downward short-term mobility, and households in the top decile ($122,880 and up) saw a reduction in the frequency of large negative income shocks.
* For the middle class, an increase in income volatility has led to an increase in the frequency of large negative income shocks, which may be expected to translate to an increase in financial distress.
I recommend you read the whole paper it is 39 pages long with some fascinating charts.