Odds plunge that chil­dren will earn more than par­ents

Ex­perts say jobs and eco­nomic growth eclipsed by in­come in­equity

The Denver Post - - NATION & WORLD - By Jim Tanker­s­ley

Ris­ing in­come in­equity has eroded the abil­ity for Amer­i­can chil­dren to grow up to earn more than their par­ents, ac­cord­ing to ground­break­ing new re­search from a su­per­star team of econ­o­mists that car­ries deep im­pli­ca­tions for Pres­i­dent-elect Don­ald Trump’s pol­icy agenda.

The re­search from a team of econ­o­mists led by Stan­ford’s Raj Chetty, and also in­clud­ing re­searchers from Har­vard and the Uni­ver­sity of Cal­i­for­nia, es­ti­mates that only half the chil­dren born in the 1980s grew up to earn more than their par­ents did, af­ter ad­just­ing for in­fla­tion. That’s a drop from 92 per­cent of chil­dren born in 1940.

The fall-off is par­tic­u­larly steep among chil­dren born in the mid­dle class.

“If we sim­ply care about ab­so­lute mo­bil­ity,” Chetty said, “these re­sults show, you have to care about in­equal­ity.”


Pre­vi­ously, Chetty’s team has stud­ied a dif­fer­ent mea­sure of mo­bil­ity: the abil­ity of chil­dren to move up or down Amer­ica’s in­come lad­der as they grow up, when com­pared with other Amer­i­cans. The new re­search at­tempts, for the first time, to quan­tify so-called “ab­so­lute mo­bil­ity,” which peo­ple of­ten as­so­ciate with the Amer­i­can Dream: the odds of a child earn­ing more as an adult than his or her par­ents earned at the same age.

The econ­o­mists say ris­ing con­cen­tra­tion of in­come among the rich­est Amer­i­cans ex­plains 70 per­cent of what has been a steady de­cline in ab­so­lute mo­bil­ity from the baby boom gen­er­a­tion to mil­len­ni­als, while a slow­down in eco­nomic growth ex­plains just 30 per­cent.

Ab­so­lute mo­bil­ity “is some­thing that was a fea­ture of the Amer­i­can econ­omy for kids born around 1940, that baby-boomer gen­er­a­tion,” said Nathaniel Hen­dren, a Har­vard econ­o­mist who is one of the authors of the study. “As we look for­ward, there’s just been a dra­matic de­cline in that mea­sure” — which, he said, runs par­al­lel to a decades­long stag­na­tion in earn­ings for typ­i­cal Amer­i­can work­ers, even as earn­ings for the very rich have soared.

“If you don’t have that kind of wide­spread eco­nomic growth across the in­come distri­bu­tion, it’s tough to grow up and earn more than your par­ents,” Hen­dren said. For pol­i­cy­mak­ers, “This is a dis­tinct rea­son to fo­cus on in­equal­ity.”

That find­ing sug­gests Trump’s tax-cut plans would do lit­tle to im­prove eco­nomic mo­bil­ity for strug­gling blue-col­lar fam­i­lies, even if they help ac­cel­er­ate growth, be­cause an­a­lysts pre­dict the cuts would ben­e­fit high earn­ers dis­pro­por­tion­ately. Put another way: Trump has promised his cuts would help work­ers by su­per­charg­ing growth, but the new re­search sug­gests past growth has done lit­tle to boost the ab­so­lute mo­bil­ity of mid­dle-class Amer­i­cans.

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