Rich Kids Have It Better — and Poor Kids Worse — Than We Thought

The American dream of upward social mobility looks more like a pipe dream, judging by new research.

Children born into lower-income families can expect “very different futures” than those born into higher-income families, according to a report released Thursday by nonprofits The Pew Charitable Trusts and the Russell Sage Foundation.

The report, titled “Economic Mobility in the United States,” was written by David B. Grusky, director of Stanford University’s Center on Poverty and Inequality, and Pablo A. Mitnik, research associate at the center.

Grusky, who is also a Stanford sociology professor, presented the findings during a conference call. According to CBS Money Watch, he explained:

“Children who are born toward the bottom of the [income] distribution aren’t getting full access to the economy. That means we’re wasting their talents and that our economy isn’t exploiting all of their talents. There’s a big economic cost.”

The report measures how economic advantage is transmitted from one generation to the next in terms of what researchers call intergenerational elasticity, or IGE. It is the first to do so based on tax data, according to Pew.

The report shows that, across all income levels, roughly half of parental income advantages are passed on to children. The average IGE, which ranges from zero to 1.0, is estimated at 0.52 for men and 0.47 for women. According to the report:

These estimates are at the high end of previous estimates and imply that the United States is very immobile.

Parental income advantages are more persistent for children raised in the middle to upper reaches of the income distribution.

For children of parents whose income is between the 50th and 90th percentile, the IGE increases to 0.68 for men and 0.63 for women — meaning roughly two-thirds of parental income advantages are passed on to such children.

Russell Sage Foundation President Sheldon Danziger states in a blog post:

“Over recent decades, the rising income and wealth of affluent parents have allowed them to increase investments in their children, from day care through college. At the same time, wages have stagnated for most workers and low-income families have struggled to pay for routine expenses.”

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