‘Myth’ of social mobility in USA

Social mobility is relatively poor in the USA, contrary to the popular perception, according to a report prepared by the Congressional research service. The USA also appears to be have one of the most unequal distributions of income of all major industrialised countries, and to be among the nations experiencing the greatest increases in measures of income dispersion. The share of income in the USA going to the bottom quintile (the poorest 20 per cent) has remained little changed in recent few decades at less than 4 per cent, whereas the share taken by the top 5 per cent rose from 16.3 per cent in 1968 to 22.3 per cent in 2011.

Key points

  • The distribution of earnings, which account for most household income, is more unequal in the USA than in other countries – possibly affected by low levels of trade union membership.
  • Other advanced economies devote a larger share of national output to transfer spending such as social security benefits, which tends to equalise income across households. Transfer payments reduce inequality by twice as much as taxes on average in OECD countries, whereas the opposite is true in the USA: that is, government cash transfers actually make a smaller contribution to reducing inequality than income tax payments and social security contributions.
  • In the USA, a long-standing argument against redistributive policies is that everyone has an equal opportunity to move up the income ladder – which tends to have a blocking effect on policies to alter income distribution.
  • But independent research raises questions over whether Americans' perceptions about upward mobility are in fact exaggerated. Empirical analyses show the USA to be a comparatively immobile society – that is, where someone starts in the income distribution influences where they end up to a greater degree than in many other advanced economies. Children raised in families at the bottom of the USA income distribution are especially less likely to climb the income ladder later on as adults.

Source: Linda Levine, The U.S. Income Distribution and Mobility: Trends and International Comparisons, Congressional Research Service
Link: Report

Category: