Factsheet: U.S. economic mobility and policies to increase upward mobility

The United States often has been touted as a land of opportunity, where hard work leads to success and children do better than their parents. But increasingly, these notions of opportunity and mobility are being challenged as economic inequality has widened over the past several decades.

This factsheet provides an overview of the different types of economic mobility in play across the U.S. economy and society, alongside key facts about economic mobility in the United States and potential policy solutions to increase upward mobility.

What is economic mobility?

Economic mobility refers to changes in the economic status of individuals or groups, generally as measured by income, over time. Economic mobility can be measured as intragenerational or intergenerational:

• Intragenerational mobility looks at changes in economic status within a generation, such as how individuals’ incomes change over their adult lives.
• Intergenerational mobility looks at changes in economic status over generations, such as how the economic status of adults compares to that of their parents at a similar point in their lives.

Economic mobility can also be viewed as absolute or relative:

• Absolute mobility considers whether the incomes of adults are higher than their parents’ income or similar cohort’s income at a similar age at different points in time, when adjusted for inflation.
• Relative mobility looks at how individuals’ status in the income distribution changes among their peers.

Key facts about economic mobility in the United States

Intragenerational mobility has declined

It is now more difficult for U.S. individuals to move up the income distribution over the course of their lifetimes than it was in the 1980s, even for college graduates.

Intergenerational mobility rates are low in the United States, with the lowest rates for children from low-income households

Economic mobility rates in the United States differ by class, with the lowest intergenerational mobility rates among children from the low end of the income distribution, meaning that children who grow up in low-income families are also likely to have low incomes as adults.

One study finds that average earnings decreased for White children born in 1992 to low-income families, compared to those born in 1978, while income went up for White children born to high-income families in that same timeframe.

Intergenerational mobility rates differ by race

Black and Native American individuals have lower rates of intergenerational upward mobility than White Americans, as well as having higher rates of downward mobility. This means that disparities in economic outcomes between Black and Native American individuals and White Americans will persist and compound across generations without specific policy interventions.

Women have more barriers to mobility than men

Women on average earn less than men, and that gap increases with age. Women earned about 83 cents per dollar earned by men in 2023, the most recent year for which full data are available, with Black women earning only about 67 cents and Latinas earning only about 58 cents per dollar earned by White men. Research shows that human capital factors, such as education and experience in the labor market, do not explain the current gender wage gap. Instead, the disparities are driven by factors such as occupational and industry segregation and differences in the division of labor by gender, particularly in caregiving for children.

Factors driving economic mobility levels in the United States

Parental economic status is the primary determining factor for children’s mobility

One study estimates that parents’ income determines about half of the mobility level of their child or children, when averaged across the parental income distribution. That rate is even higher for children from low-income families, with the same study finding that about two-thirds of the economic differences between low-income and higher-income families persist among their children.

High economic inequality is correlated with low intergenerational mobility

High levels of U.S. economic inequality are correlated with lower intergenerational mobility, also known as the Great Gatsby Curve. In other words, the more unequal the U.S. economy becomes, the less likely children from the lower end of the income distribution will be better off economically than their parents.

Intergenerational wealth transfers reduce upward mobility

Intergenerational wealth transfers account for high levels of wealth inequality and low economic mobility. Wealth inequality is high, and this trend is worsening over time. Evidence suggests that high levels of wealth inequality are likely to reduce intergenerational mobility, with the advantages of wealth passed on to an increasingly smaller share of children in the next generation.

Wealth and opportunity hoarding among the wealthy limit opportunity for others

A recent study provides evidence that the more parents believe in the American Dream, the more likely they are to feel threatened about their social status and hoard opportunity for themselves and their children. Moreover, while wealth is strongly associated with higher educational attainment, education does little to reduce wealth inequality among those individuals who do not have the advantages of inherited wealth and higher socioeconomic status.

Structural barriers limit opportunity and mobility

Low levels of economic and social mobility across generations are largely due to structural issues, which limit opportunity and keep economic statuses in place over generations. U.S. tax and transfer policies, for example, have become increasingly regressive due to policies such as the preferential treatment of capital gains, compared to income from work. Many transfer policies also disincentivize saving, thereby increasing inequality, which, in turn, limits mobility.

Or consider residential segregation by socioeconomic status, which remains a barrier to economic opportunity and critical social connections. Similarly, racial discrimination, both historical and current, keeps Black Americans and Native Americans largely stuck in place at the lower end of the income distribution.

Policies to address U.S. economic mobility

Much of the discussion around improving economic mobility in the United States focuses solely on human capital development, such as education. Yet many of the factors driving mobility are structural, rather than tied directly to individuals, which means that fostering more equitable opportunities to advance economically requires action on a broad range of policies, including:

• Tax reform to significantly improve progressivity and lessen inequality
• Improved social infrastructure to foster stability and enable economic advancement
• Investments in education, job training, and job creation in distressed communities
• Reducing residential segregation by socioeconomic status
• Addressing systemic racism and gender bias

For more information or to be connected to experts on economic mobility, contact info@equitablegrowth.org.

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