American Dream has become a nightmare for poorer families
Dr Cherrie Short explains how government policy has contributed to income inequality in the United States and helped to maintain the lowest level of social mobility in the developed world
THE Christmas holiday season is supposed to be a joyful time for families coming together. Children finally receive the many gifts that they have waited for expectantly for the past year. But for millions of Americans, this idyllic picture of the Christmas holidays does not reflect reality.
Recent census data show that about 13% of Americans live in poverty but that almost a third live in poverty or near-poverty and almost half the population is low-income.
Sadly, my home state of California, which has the fifth-largest economy in the world, also has the highest relative poverty rate, with about 20% of residents living below the poverty line. For many of these low-income families, the holidays are a time of struggle and worry about paying bills and fear for what the new year might bring.
America is supposed to be the land of opportunity. Perhaps many of these families living in poverty or near-poverty will see their children rise to the middle class or higher on the economic ladder, as children of recent immigrants and other lowincome groups attain an education with better paying careers.
Unfortunately, US Census data and other studies show this popular idea of equal opportunity for all is a myth. Among most developed countries, the US has the lowest relative social mobility, which is lower than the United Kingdom, Canada, France, Germany and the Scandinavian countries. Studies also show that this rate of social mobility has been stagnant and even falling since 1980.
What are the factors that explain this startling lack of upward mobility? It should be emphasised first of all that this seemingly simple question is actually quite complicated. For example, in the US, which is more the size of the European Union than the individual countries within it, some regions of the country, such as Seattle, San Jose (Silicon Valley), and Denver have social mobility comparable to Denmark, while others, such as Atlanta and Milwaukee, are lower than any other developed country. In general, very low social mobility is found in the South, sections of the Midwest, and sections of the Southwest.
A study by Ram Chetty and colleagues found areas with larger African-American populations and greater segregation have reduced social mobility, which means that racial discrimination and income segregation are correlated with lack of social mobility.
Family structure, defined as areas with a disproportionate percentage of single-parent families, negatively affects social mobility. The same is true for the quality of the K-12 school system, defined as the percentage of drop-out rates, class size, and tax revenue resources.
Many of these single-parent households are headed by women. For them, the chance for upward mobility might increase if pay equity became law. We know that for equal work, female full-time workers earn just 78 cents for every dollar earned by a male worker. It is estimated that closing the gender wage gap would cut poverty in half for working women and their families. The US lacks policies that support affordable childcare and early childhood education. These services have to be paid out of pocket by low-income families who struggle to pay their weekly bills. It is estimated that these costs amount to about one-third of parents’ income.
The United States is also the only developed country in the Western world without paid family medical leave, making it difficult for millions of American families to balance work and family obligations. Many low-income families in rural and inner-city areas lack health insurance and access to quality healthcare services.
The signing of the Affordable Care Act in 2010 was designed to alleviate this situation as well as prevent the millions of families who were suffering from high medical expenses paid out of pocket and mounting medical debts that frequently led to personal or family bankruptcies and future poverty. Still today, however, 23 states continue to refuse to expand their Medicaid programmes for supporting health coverage for low- income residents.
A second major factor hindering social mobility is extreme income inequality in the United States. The Chetty study shows that geographic areas with the highest Gini coefficients, a statistical measure of inequality, have less social mobility. In the US, the share of the top 1% of income earners had 9% of total income from about 1960-80.
Today, the top 1% has about 20%23% of total income in the country, the highest since the Great Depression. Perhaps just as striking, the top 10% of earners took home 50% of all income in 2012, which is the highest percentage in the past 100 years.
This kind of severe inequality also shows that even if people in the lowest quintile of income were to succeed in advancing to the second or third quintiles, they still would not advance very far in earnings and wealth. A recent study by the PEW Charitable Trust on income inequality estimates that only 4% of people born into the bottom quintile make it into the top quintile.
As Nobel economist Joseph Stieglitz points out, this lack of social mobility among generations in the US is not inevitable but is caused by social and economic policies. One key problem is the huge variation in the quality of the education system depending on where a person is born.
Another challenge concerns social policies that fail to support women and families in the workforce and support racial discrimination and segregation by race and income. The political system in the country also supports legal frameworks and tax policies that favor the rich over everyone else, reinforcing economic market trends toward greater income inequality.
Should Britain feel complacent, given this rather unflattering picture of social mobility and inequality is the United States? The answer is clear – no! Britain has the secondlowest social mobility among developed countries, just slightly more mobile than America but not nearly as mobile as Canada, Scandinavia or even Germany. The UK Government has also cut back on some of the social and health services on which poor families depend to be successful in the workforce and in bringing up their children. Income inequality in the UK has also risen dramatically since 1979 to historically high levels. The Institute for Public Policy Research study shows that more than a fifth of the population lives on incomes below the poverty line, when housing costs are taken into account, even though most of these households are in work, and nearly one in three children live in poverty.
The author of the book Hillbilly Elegy rose from poverty in the Appalachian Mountains to attend Yale Law school and have a successful career, thanks in part to the good fortune of having an enterprising and determined grandmother and enlisting in the US Army, which taught him discipline and skills. Throughout the book, however, he seems to view people who are poor as having made bad choices rather than as partial victims of circumstances and social and economic policies that severely hindered their chances for success. The data on the lack of social mobility and income inequality in the United States and Great Britain belie his viewpoint. If we want to become the land of opportunity that we idealistically aspire to be, we need to support social and economic policies and legal frameworks that benefit all of us.
■ Dr Short, a former Race Equality Commissioner for Wales, is now associate dean of Global and Community Initiatives and professor of practice at USC Suzanne Dworak School of Social Work in Los Angeles, California.