In last week’s speech in Osawatomie, Kansas, the president argued that if you play by the rules, work hard, and exercise personal responsibility you should be able to achieve a middle class lifestyle—a home, good health care, a college education for your kids, and financial security. He noted that even before the current recession, middle class families were struggling. Most of the wealth produced by a growing economy was going to a very small portion of our citizens while everyone else had been treading water.
It is a theme that should resonate with the public. But what are the facts?
In our book, Creating an Opportunity Society, Ron Haskins and I also sounded this theme. In particular we argued for a combination of effective government programs and personal responsibility as the best way to reduce poverty and help more people join the middle class. We showed that if you did just three things—graduated from high school, worked full-time, and delayed childbearing until marriage—your chance of becoming middle class was 74 percent in 2007. By contrast, if you did only one or two of these things, your chances of joining the middle class dropped to 25 percent. We also argued that helping people climb the ladder by, for example, rewarding work was a more effective strategy than giving them unconditional assistance. And we noted that as the nation's safety net moved away from providing welfare in the 1990s and toward making assistance conditional on work, employment rates among single mothers rose and poverty rates declined quite sharply. To be sure, a strong economy at the time helped to make this possible.
So playing by the rules helps people get ahead. That doesn't mean it isn't a struggle, especially in a job-deprived economy. To some extent, the deck is stacked against those who start at the bottom, even in good economic times. Various studies of social mobility find that more than two-fifths of the children of low-income parents end up with low incomes themselves. America, which prides itself on being a classless society, is not so classless after all. You need to pick your parents well, which we all know isn't really an option. The children of more affluent parents have better home environments, live in better neighborhoods, and go to better schools. They have more opportunity to go to college, even when they are no more academically prepared, and they have connections and knowledge that give them a leg up in the job market.
In new research at Brookings we are finding that poor children who navigate the rungs of the ladder by doing well in school, avoiding risky behaviors, and getting a postsecondary degree or valuable training do just as well as their more advantaged peers. The problem is they too often fall off the ladder. This may reflect their own failure to study hard and persist in maintaining a focus on their futures. There are nagging questions, for example, about why high school dropout rates are over 50 percent in many of our major cities, why so few young men enroll in college despite its unprecedented benefits, why the great majority of community college students fail to graduate, why over 50% of births to women under 30 now occur outside of marriage, and why employment rates have plummeted among low-skilled men while rising among equally low-skilled women. At the same time, these failures also reflect a lack of social supports and a sense of futility about one's future prospects. How depressing it must be for a high school student to see a parent working hard and earning as much in a year as those on Wall Street make in a day, to be bombarded with the lifestyles of the rich and famous on TV and maintain a focus on more modest goals like doing one's homework, to enter a job market where earnings for the less-skilled have declined, to witness the lack of basic fairness manifested in an argument that says allowing payroll tax breaks to expire for the middle class is fine, just don't tamper with those going to the top 2 percent.
Moreover, growing inequality is a real threat to social mobility. Some inequality is a spur to greater effort to win society's prizes. But when the rungs of the ladder become too far apart it becomes exceedingly difficult to climb the ladder. The result? Many people stop trying. Instead of a spur to greater effort, inequality becomes a scourge that leaves a growing heap of frustrated individuals at the bottom. The data on this relationship are quite clear. Nations with less inequality have more mobility. Many of today's U.S. elected officials grew up in modest circumstances, but that was in the 1950s and 1960s when everyone's incomes were growing together and broadly shared prosperity was the norm.
I conclude that both sides in the debate about the role of government have exaggerated what government can do. It is neither the big problem nor the big solution. In the end, how we fare as a nation rests primarily in the hands of individuals. That doesn't mean government has no role. The greater social mobility in other advanced countries likely reflects, in part, their more robust public sectors and smaller income gaps. The United States may not want to adopt the social welfare systems of Europe. But if Americans stop believing that anyone can make it if they stay in school, work hard, and form stable family ties; that rewards are based on merit and not connections; that government is committed to creating a level playing field; and that democracy is based on something other than well-funded special interests, then something important has been lost—the promise of opportunity at the core of the American Dream.