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The Missing Rungs: Has the 'land of opportunity' left the majority behind?

America's lack of economic mobility has left most income earners stuck where they are.

Largest private yacht new york city 2013Enlarge
The Eclipse, reported to be the largest private yacht in the world, is viewed docked at a pier in New York on February 19, 2013 in New York City. The boat, which measures 557 feet in length and is estimated to cost 1.5 billion US dollars, is owned by Russian billionaire Roman Abramovich. (Spencer Platt/AFP/Getty Images)

HENDERSON, North Carolina — Garland Sanders came of age working the textile mills that once dotted this rural county along the border with Virginia. That is, until 10 years ago when he was laid off along with several hundred others as Harriet & Henderson downsized, part of a drastic shrinking of an industry that could not compete with lower Asian wages.

“It wasn’t a lot of money, and I thought life was hard then, but it got a whole lot harder since,” said Sanders, 41, sitting at the Smithfield’s Chicken ‘N Bar-B-Q restaurant here on a recent visit. He said he and his wife eventually had to move on from their hometown in search of work, migrating to Florida where Sanders now has a job as a security guard.

“My daddy never made any more than me, really, but when we were kids, there always seemed to be money for stuff — a little fishing trip, we went to Disneyland one year,” he said.

“We just can’t seem to get ahead now, even with my wife working flat out too. We’d love to move back, but it would be a move down, and at my age, I can’t afford to risk that,” he added.

It may be no consolation, but Sanders has a lot of company in this fate. After two centuries in which the United States was virtually a synonym for “land of opportunity,” social mobility in America has stalled.

This has left a majority of the country’s workforce — those in the bottom three fifths of the American earning pyramid — facing a far steeper upward climb, and indeed a significant challenge just to hold on to what they have.

Measuring social mobility is not easy. Economists generally believe the best method is to compare the inflation adjusted incomes of parents with those of their children and, if possible, grandchildren. For generations, the “American Dream” included the assumption that anyone willing to put in the hours and keep his or her nose to the grindstone could make their way up the rungs of the income ladder to a better — or at least more economically secure life.

Yet today, in study after study, the hard fact is that a child born in the past two decades in France — or in Germany, Sweden or Japan — stands a better chance of earning significantly more than their parents than a child born in America.

“Only 4 percent of those raised in the bottom quintile make it all the way to the top as adults, confirming that the ‘rags-to-riches’ story is more often found in Hollywood than in reality,” one report by the Pew Center for the States revealed last year.

A 2010 study by the Organization for Economic Cooperation and Development looked at social mobility in the largest European and North American economies and found that children born in the US, UK and Italy have the worst prospects for advancement

Canada, long thought of as something of a nanny state by its southern cousins, is also more mobile. Miles Corak, an economics professor at the University of Ottawa, led an intensive study of generational mobility in both the US and Canada. His 2006 study, the gold standard on the matter to date, found Canada to be as much as three times as mobile as the ‘land of opportunity,’ and concluded most of the reason is the “stickiness” of those at the very top and very bottom.

Specifically, he found that those born into the bottom of the economic heap in both countries (in the US, that is the bottom 10 percent, or those earning about $12,000 a year) had very different odds of rising. In the US, the likelihood of a child being stuck there too is about 22 percent. In Canada, it’s 16 percent.

On the other end of the ladder (in the US, that means the top 10 percent, or those earning over $126,000 a year) have a much better chance of remaining there. Those born in the United States have a 26 percent chance of staying at the top rung compared with 18 percent in Canada. In other words, Canada’s pool of upper income households makes more room for newcomers.

How has this happened? Economists believe it is caused in part by the same tax policy changes that have over the last two decades created the surging income inequality that is at the center of this series.

GlobalPost’s Special Report, “The Great Divide,” found in instance after instance that the huge spike in inequality in America beginning about the time “trickle down” economics became an article of faith in some quarters of industry and government has seen wealth trickle up instead.

Indeed, the share of all US income captured by the top 10 percent of earners was as bad in 2007 as it was just before the Great Depression in 1929. The 2008 crisis pushed it down, but it has already begun climbing again.

But there’s more to the equation than taxes.

The failure of those fiscal policies that assumed wealth would “trickle down” has greased the rungs of the American ladder to success. That has meant important changes in social policy, in access to education and health care. And the changes have coincided with enormous global historical shifts. And, economists point out, this multitude of factors has conspired to remove many of the rungs on the ladder altogether.

Global trends have exacerbated the stagnation in the middle and lower rungs of society. The waning of trade union power, particularly in the US, removed some of the leverage working class people once had to keep wages growing. The collapse of Soviet communism freed millions but also added millions of low-wage workers to the global economy, placing downward pressure on middle and lower tier incomes, and giving American corporates the option of simply moving jobs abroad.

Information technology and the addition of women to the workforce combined to cause a spike in US worker productivity. Yet it has not translated into wage growth, at least not for the majority of Americans. In some industries, it has fed joblessness. In effect, modern supply chain management, cheaper and better communications, other advances have made it possible for 100 workers in 2013 to do the work 1,000 or more did in 1983.

Not all the news is bad. The American economy and its workforce have traditionally been first adopters, and adapters, and there are signs this characteristic has survived The Great Divide. The cost of manufacturing in some Asian countries, even China, is rising as their own citizens demand rights and protections and as energy costs make trans-Pacific shipments more costly. That has led to some significant “re-shoring” of jobs that had left for Asia coming back to the US.

Even when jobs do appear, they appear in lesser numbers than before, thanks to technology. And indeed, the sense of optimism that news of a new factory can bring often evaporates as the details emerge.

Garland Sanders, for instance, flew hundreds of miles on his day off to look into reports that a solar panel company Semprius planned to site a new plant in Vance County that will employ 250 people. But the jobs on offer required experience Sanders lacks, and anyway he and his wife Laura are underwater in their Jupiter, Florida condominium.

“If I’d have known where this was all going, I suppose I would have stayed in school longer,” Sanders said. “But it really wasn’t too long ago when a working man could make a living with his hands.”
 

http://www.globalpost.com/dispatch/news/regions/americas/united-states/130414/america-economy-opportunity-mobility-income