Economic Mobility In A Global America Sociology Essay

Economic mobility essentially describes what most people in the US would call the American dream. The ability to make it to the top as long as a person puts in the work is a dearly held American ideal. But is it true? American folklore glorifies the Lois and Clarks, the pioneers, those who forge their own way. But, does 21st century America provide the same opportunities to set out and make it if one puts in the work? Research and statistics show that the American dream, rags to riches, still happens for some but not everyone has an equal chance of bettering their economic positions and their lives.

Economic mobility can be described in several different ways. One can talk about a person’s economic mobility in terms of absolute dollars – how much they were able to surpass or fall behind the income of the generation before them – or in relative terms. Often, economists divide the population into quintiles based on income ranges. Economic mobility then is used to describe the likelihood of a child born in one quintile to move up or down into another quintile in their life. The Brookings institute explained economic mobility as, “The ability of people to move up or down the economic ladder within a lifetime or from one generation to the next.”

A person’s economic mobility is often seen as an indicator of the fairness of a society. It seems fair that people should not be determined by their economic situation at birth, the standard of living that they will have the rest of their life. Americans in very large numbers believe that a person’s economic outlook is determined by the choices they make and the work the put in. When discussing economic mobility it is also important to consider economic inequality in a society. High inequality is less worrisome if people are moving in and out of these classes. However, if you have a society that has increasing inequality and limited mobility, there are reasons for concern. This would mean that “the rungs of the ladder” of economic success are getting farther and farther apart and people have less of a chance to move up the ladder. Statistics show that the US may be in such a position. In the US inequality has been steadily growing since the 1960’s. The prizes for being successful in today’s economy are larger than ever before, but the likelihood of the average American attaining these rewards is decreasing. Income is increasingly focused at the top of the economy, and fewer opportunities exist for people to get there.

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During this time of growing inequality a new force has transformed the US economy: globalization. Globalization is a term used to describe the interconnectedness of the world largely as a result of advancements in technology relating to telecommunications and travel. In the past 100 years, the world has changed from being a place where it takes weeks to travel overseas, to a place where even the farthest spot away on the globe could be reached within 24 hours. The world has changed from a place where communication could take weeks in the form of written letters, to a place where words can be written and words spoken and be heard or read instantaneously the world around.

The world suddenly thrust into an unprecedented age of connectedness. Never before had the world and everything in it – people, business, nations – been so interconnected. As we progress in an age of mobile internet access, the ability to travel anywhere in the world within 24 hours, and ever-increasing economic ties between nations, the effects of globalization are everywhere. Thomas Friedman described this new era saying “the world is flat.” As a result of advancements in technology, everyone is on a level playing field. A business in Anderson must compete with a business in China and a student in Carmel must compete with a student in India. This new global economy is and will shape the economic mobility of people in the US.

US mobility

Research has shown that nearly two-thirds of Americans are economically mobile in absolute terms, meaning they make more than their parents in absolute dollars. However, half of them remain on the same rung of the income ladder. Unfortunately, this is even more often true for children at the bottom of the ladder. For children born at the bottom, 80 percent will go on to make more than their parents in real dollars, but 42 percent stay at the bottom of the income ladder. For children born at the top, 39 percent remain there. If economic mobility had nothing to do with where a person is born in society, this number would be 20%. This is twice as high as would be expected by chance, so family income does have a significant effect on a child’s mobility in the US.

Gender

The rates of mobility are not equal across genders and races in the US Men tend to experience much higher rates of upward economic mobility than women do. For children who start out in the bottom quintile, 41 percent of women will stay there, while only 27 percent of men will. The mobility outlook for black people is also less “American Dream” like. Blacks in the United States experience dramatically less upward economic mobility than whites. 44 percent of blacks will remain in the bottom income quintile in adulthood compared with only 25 percent of whites who will remain stuck at the bottom. The majority of blacks in the bottom half of the income distribution will still exceed their parent’s place in the distribution, but their movement is much less than is typical of their white peers. Research by Mazumbder found that rates of upward economic mobility are highest for white men, followed by white women, black men and, finally, black women.

Other research found that not only are black children less mobile than white children, but that the majority of black children born to middle-income parents in the late 1960s have been downwardly mobile, meaning that they have less family income than their parents did. At that same time, only 16 percent of white children fell down the economic ladder. Some might attribute the lesser economic mobility of blacks to differences in family structure. Black children are more likely to be raised in single parent homes than their white peers. However, when controlling for single and two-parent families, the gap in mobility between the races still remains.

There is also a significant difference in the extent to which black and white parents pass their economic advantages onto their children. Isaacs found that white children are more likely to surpass their parents’ income than black children at a similar point in the income distribution, but they are also more likely to move up the ladder, while black children are more susceptible to falling down. In the 1960’s almost half of black children whose parents were middle class ended up falling to the bottom of the income distribution. Only 16 percent of white children in the same situation fell to the bottom. Black children from poorer families also are more likely to stay at the bottom. 54 percent of black children born in the bottom income quintile stayed there, but only 31 percent of white children remained stuck.

Factors influencing mobility

Even though gender and race are strong predictors of a child’s economic mobility, there are other factors that greatly impact a child’s chances at moving up. Studies have found that both black and white children who score higher on academic tests are more likely to move up and out of the bottom quintile. Both black and white children at the bottom who achieve average academic test scores are two times as likely to move up and out of the bottom quintile than children who score in the bottom percentiles on academic tests.

Many other studies have placed education at the top of the list in terms of what determines a person’s mobility. Haskins found that attaining a college degree quadruples the likelihood that a child born to parents at the bottom of the income ladder will make it to the top. Because of this, many people point to education as the most effective tool our nation has for improving the upward mobility of those at the bottom of the economic ladder. The problem is that those who would most benefit from receiving a college degree, are the ones least likely to receive it. Only one-third of children from families at the bottom quintile of the income ladder enroll in college, and of those students, only a small portion will go on to graduate.pg2 Pg 12 Children from this background have only a 34 percent chance of enrolling in college, compared to an 80 percent chance of enrolling for children from the top quintile. Children who start out at the bottom are only 20 percent as likely to earn a college degree as children from the top quintile.14

There are various reasons why children from poor families are less likely to enroll in and graduate from college. Financial reasons, obviously, are a major obstacle. Even though there are Pell grants and various opportunities for financial aid, a person who has not come from a family whose parent’s went to college, may not have the information they need to access these resources. Haskins argues that improving the equality of educational opportunity-a traditional American value-is one key to promoting economic mobility for disadvantaged students.

The impact on education on a person’s earning potential clearly demonstrate the importance of education for moving up the economic ladder. Over the last four decades, adults who have degrees from either two or four year colleges have much higher family incomes than other adults who only completed high school, or who dropped out. During this time, the income of those with degrees has been growing steadily, while the income for those without a college degree has become stagnant or declined. The impact of having a college degree on the mobility of a person at the bottom is huge. Adult children from families in the bottom fifth of the income distributionare four times as likely to reach the top fifth if they achieve a four-year college degree, increasing their likelihood of doing so from 5 to 19 percent. Pg. 3 Nearly half the adult children with parents in the bottom quintile stay in the bottom unless they get a college degree. 10

Every poor and low-income child who achieves a four-year college degree can dramatically increase her chances of moving into the middle class. This is also likely true of those who get a two-year degree, since the rates of return per year of education are roughly the same for two-year and four-year colleges Importance of finding the right fit… finishing.

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Regardless of a person’s family background, getting a college boosts that person’s prospects of being upwardly mobile. However, this does not erase the impact of the family situation a person is born into. Children from low-income families with a college education are in fact no more likely to reach the top of the income ladder than children from high income families without a college education. Education is critical to success in today’s economy and an important explanation of why some groups get ahead while others are left behind, but it cannot completely erase the effects of family background on one’s ultimate success.

Children born to parents in the top quintile have the highest likelihood of attaining the top, and children born to parents in the bottom quintile have the highest likelihood of being in the bottom themselves.

This phenomenon is referred to as “stickiness” at the ends of the income distribution. As shown in Figure 4, it is fairly hard for children born in the bottom fifth to escape from the bottom: 42 percent remain there and another 42 percent end up in either the lower-middle or middle fifth.

Only 17 percent of those born to parents in the bottom quintile climb to one of the top two income groups. At the other end of the distribution, 39 percent of children born to parents in the top fifth attain the top themselves with an additional 23 percent landing in the fourth highest quintile. Surprisingly, American children from low-income families appear to have less relative mobility than their counterparts in five northern European countries, according to a recent international study of earnings of fathers and sons. Whereas 42 percent of American sons whose fathers had earnings in the bottom quintile had low earningsthemselves, the comparable percentages ranged from 25 to 30 percent in Denmark, Finland, Sweden, Norway, and the United Kingdom (see Chapter III, “International Comparisons of Economic Mobility”).

One measure of “stickiness” is the measure intergenerational income elasticity. This figure would be 0.0 in a hypothetical society where a parent’s income has no effect on a child’s economic prospects and 1.0 where there is a one-to-one correspondence between parental income and adult child income. Recent estimates of the intergenerational income elasticity in the United States range from about 0.4 to 0.6, meaning that about half of the difference in income between families in one generation persists into the next generation.

Discussion of globalization

Globalization is a very broad term, so it can be hard to discuss how it affects economic mobility in the US, because has changed our world so much in a short time. However, a globalized economy in the US has led to significant changes in the demands of our economy that will shape the US’s economic mobility for years to come. The Hoosier economy has been the most heavily manufacturing based economy in the United States. The five US states that depend most on manufacturing are all in the Midwest.( Loc. 353) This statewide and even regional dependence on manufacturing has impacted the state’s culture and commitment to education.

Richard Longworth in his book “Caught in the Middle” describes the way that manufacturing enriched the region, but is now hampering their ability to adapt to a global world. He states that Indiana in particular is in denial about globalization, and instead of pursuing ways to reshape the economy, is pursuing losing efforts to keep businesses from moving out of the country.

Indiana held the crown as the state with the largest percent of jobs in the manufacturing sector. This led to significant growth and wealth in the past century, but it is apparent it will not have the same effects now that we are living in a globalized world. More and more manufacturing jobs are being shipped overseas, where labor can be had for a fraction of the cost. In the 20 years manufacturing output in the Midwest soared by 50 percent or more. But the number of jobs in manufacturing fell by about 20 percent. Over that same time, the unemployment rate in the state has grown from _ percent to over _ percent. Globalization is leading to a loss of jobs in Indiana, and the state has not kept up in creating jobs that are sustainable and profitable in a global economy. At least part of this is due to a mismatch in the skills employers have, and the skills possessed by Hoosiers. Indiana ranks _ in the number of adults with a bachelor’s degree or more. As technology and global labor competition continue to shape the way manufacturing is done, there will be less and less demand for unskilled, high wage labor that Indiana has a supply of and has lived off of in decades past.

It is apparent that for Hoosiers to get good jobs they must have the education and skills that make them competitive. Unfortunately, for many Midwest residents, there is not a strong commitment to education. Longworth linked this to the region’s past where high school drop outs could get a job in a factory and live well. This is obviously not the case now in a globalized Indiana, but many families continue to place little value on education. (loc 930)

In order to “move up the ladder” or be more well off than someone is raised, the single biggest factor is whether or not that person gets a good education. Unemployment rates by education level in the US make clear the impact that education can have (see figure b). As expected, states that depend heavily on manufacturing (which is demanding less labor, and often does not require college education) are suffering high unemployment rates during the current recession/recovery.

Unfortunately, even though education is so key to getting employed and being upwardly mobile, the current state of education has been found to reinforce family economic status more than to encourage upward movement. Figure b.

http://www.bls.gov/emp/ep_chart_001.htm

Globalization may be challenging Indiana to redefine its economy in order for Hoosier to be upwardly mobile, but it also allows us an opportunity to learn from other countries. Globalization has not only changed our economies, but has also changed our knowledge base. We now have the ability to look at other countries and see how they have dealt with or are dealing with similar situations that the IS is facing.

Economic mobility is essentially the American Dream, so it would be reasonable to assume that the US is a world leader in that respect. But reasonable assumptions aren’t always true, as in this case. Even though economic mobility characterizes the American dream, other countries do better at making it a reality for their residents. Studies routinely show that the US lags behind other nations in the economic mobility of its population. Again, there are differences in relative and absolute mobility. The US has led the pack in terms of absolute mobility due to rapid economic growth this century. As the saying goes, a rising tide lifts all boats. As mentioned before, however, this tide is increasingly unevenly distributed, leading to tidal waves for some and droughts for others.

In terms of relative mobility the US lags behind many European nations, and our neighbor to the North Canada. Canada in particular is an interesting comparison because of how much it and the US share in common. According to research by Corak, Curtis, and Phipps; both the US and Canada value the ideal of equality of opportunity and define it in terms of individual freedoms but also individual responsibilities. One difference, however, was that Americans were more likely to view the government an obstacle to equality of opportunity rather than helpful in promoting it. Even though Americans were more reluctant to government intervention, residents of both countries recognized the need for public policy to contribute to reaching this ideal. Somewhat counter-intuitively, this study found that Americans believe more than Canadians that a host of interventions would be effective in improving the prospects for economic mobility. The authors of this study interpreted that as a possible sign that this need is going unmet in the US.

The study found that (4)On average Canada is up to three times more mobile than the United States. Stated another way, US citizens pass along three times as much inequality than do Canadians. They also found that not only does less mobility occur in the US, but that it is more heavily concentrated at the top and bottom of the economic ladder. Some of the reasons the authors point to as to why this may be the case are differences in health care, parental work leave laws, and tax transfer programs for poor families in Canada. The authors concluded that Mental and physical health, school readiness, and some education outcomes are all more developed in Canada, leading to better outcomes for children and increased economic mobility.

Despite American’s lesser likelihood of reaching the top compared to their counterparts in Canada and some European nations, Americans are far more optimistic about their ability to control their own economic destiny. They are far more likely to believe that people get rewarded for intelligence, skill, and effort and far less likely to believe that it’s the government’s responsibility to reduce differences in income. 4

In a comparison of mobility in the United States with mobility in several developed European nations, Miles Corak concluded that America is a low-mobility country in which about half of parental earnings advantages are passed onto sons. Canada, Norway, Finland, and Denmark are considered high-mobility countries, where less than 20 percent of income advantages are passed onto children. This would mean that in the US about half of parental earnings advantages are passed onto sons. If this trend holds steady, it would take an average of six generations for family economic advantage to disappear in the United States. While American’s seem to strongly believe that everyone has a shot to make it to the top, it is clear that people’s ability to do so is greatly shaped by the family they are born into. In the high mobility countries the effects of being born into a wealthy family would wear off in half the time – three generations instead of six. Contrary to American beliefs about equality of opportunity, a child’s economic position is heavily influenced by that of his or her parents. Forty-two percent of children born to parents in the bottom fifth of the income distribution remain in the bottom, while 39 percent born to parents in the top fifth remain at the top. Children of middle-income parents have a near-equal likelihood of ending up in any other quintile, presenting equal promise and peril for those born to middle-class parents. Only 6 percent of children born to parents with family income at the very bottom move to the very top.

In another study,Markus Jäntii looked at how the relationship between the earnings of parents and children varies for individuals who are on different rungs of the economic ladder. They find that starting at the bottom of the earnings ladder is more of a handicap in the United States than in other countries. Again, finding greater amounts of stickiness at the bottom of the economic ladder in America.

If it is obvious that education has great potential to boost the economic mobility of the less fortunate, it is important to ask whether the nation’s schools do enough to promote economic mobility. An examination of preschool, K-12, and undergraduate and graduate education in the United States reveals that the average effect of education at all levels is to reinforce rather than compensate for the differences associated with family background and the many home-based advantages and disadvantages that children and adolescents bring with them into the classroom. This may be due to achievement gaps that US continues to struggle with in education. The poor and minorities on average perform less well in school and are less likely to graduate. There is a cycle at play in the US – the poor and minorities are on average born to lower income families and as a result receive a poor education. These same students then are not able to move up the economic ladder, and pass the disadvantage onto their children who will be poor, likely receive a poor education, struggle with finding employment and repeat the cycle.

Compared to other nations, the US is falling behind academically. The most recent results from the PISA test released in December of 2010 show that the US continues to trail other countries in education. Secretary of Education, Arne Duncan, said the findings show that “the United States needs to urgently accelerate student learning to remain competitive in the knowledge economy of the 21st century. The education American students are receiving would have been fine a few decades ago when low-skill manufacturing jobs were abundant. Today, however, these jobs continue to disappear or move overseas. Living in a global economy means that our students now must compete with students all over the world for employment. And in a knowledge economy where education is the essential component to getting a job, the US is failing its students.

The PISA results showed that US students are not among top performing OECD nations in any subject that was tested. However, US students did express the most self-confidence in their academic skills than did students in nearly all other OECD nations.

Trends in US education do not bode well for the economic mobility of children growing up in a globalized world. Perhaps even more worrisome are the achievement gaps for Latinos and Blacks in the US education system. In 2008, McKinsey & Company released a study on the economic costs of achievement gaps in US education, and found them to be the equivalent of “a permanent national recession.”

To fix education, and to improve economic mobility of those who are most likely to be at the bottom, the US must make some changes. The OECD found that “socioeconomic disadvantage leads more directly to poor educational performance in the United States than is the case in many other countries.” The US prides itself on being the land of opportunity, but with poor educational outcomes in a globalized world, there will be very little opportunity for this and future generations.

Seeing that other countries are more successful in education, we have the opportunity to learn from what they are doing that works. This opportunity seems to be ignored though. The US, Israel, and Turkey are the only OECD nations that do not devote as much or more funding for schools facing the biggest socioeconomic challenges as they do to schools with more privileged students. Directing resources towards youth who need it the most seems like a no-brainer, but due to the way schools are funded in the US, it doesn’t happen. Much of the debate around education-reform in the US and Indiana has revolved around teacher accountability. Proponents say that rewarding teachers based on student performance is the best way to improve educational outcomes. However, this is not what the top performing education countries do. Outside of the US, most high-performing educational countries prioritize high teacher salaries over small class sizes, and they professionalize the teaching profession. Compare this to the current education debate in Indiana where the Governor is essentially demonizing teachers as free-loaders. The US and Indiana don’t seem to be taking advantage of the global insight available for shaping education, and this will likely have consequences for the education and mobility of the nation’s youth.

Combatting economic immobility in the US in a globalized world

Research seems to pretty clearly state that education is the key for improving economic mobility in the US. However, studies also find that education currently is not helping students become mobile adults, but rather reinforcing their family background. Poor kids are more likely to go to poor schools which are more likely to produce poor, immobile adults. Reforming education and closing achievement gaps in education will likely be the action that can have the greatest effects on Hoosier economic mobility.

Conclusion

Economic mobility is essentially the American Dream. The idea that someone can be born without a dime to their name, but through hard work can reach the top, being limited by nothing. Globalization is making this more of a dream and less of a reality in Indiana each day.

Much has been said about the cycle of poverty, and how the lifestyle, ethics, and decay of poverty are passed on from one generation to the next. With globalization, Americans face an ever more urgent task of helping people escape this cycle. Globalization has no need for the uneducated and unskilled labor that has been the basis of American manufacturing. For every unskilled American worker there are hundreds in the developing world willing to do the same job at a fraction of the pay.

The poor in the US stand ready to conceivably be some of globalization’s biggest losers. The US, the most wealthy country in the world that prides itself on the rags to riches story of people rising up to reach the top, has failed to take the steps needed to close achievement gaps and give the poor the opportunities to better themselves that we as a nation misguidedly pride ourselves on so doing.

Globalization will likely decrease economic mobility in the US unless the US begins to better educate the nation’s youth. The US would be wise to take advantage of something else globalization provides – insight into other cultures and the opportunity to learn from other nations – in shaping its policies on education and efforts to improve mobility.