How to Get Ahead In This Economy
What does it mean to “get ahead” economically? In this piece Nathan Palmer tries to answer this question by using the concepts of absolute and relative economic mobility.
“Congratulations!” Your boss says to you as he makes his way toward you. He snaps a envelope in front of you before continuing, “You my friend, just got a raise!” You don’t even try to hide your sense of surprise. Snatching the envelope from his hands you tare into the letter like an animal. “A dollar an hour raise? Wow! Thank you so much,” you tell him.
Elated, you head straight to your co-worker BFF to share the good news. Before you can even open your mouth, she rushes to you grabbing your shoulders, “Did you get a raise too?” You frantically nod yes and then a tandem jumping/squealing momentary freakout ensues. “I can’t believe these tightwads gave us all a three dollar an hour raise,” you hear her say. Emotional whiplash. She senses your change in demeanor. “Wait, you got a three dollar an hour raise like the rest of us, right?” White hot rage engulfs what was profound joy.
Economic Mobility and You
What does it mean to “get ahead” economically? As the scenario above illustrates, the answer to that question can be complicated. You earned a $1 an hour raise, so in one sense you got ahead, but if all of your co-workers got a $3 an hour raise, you also got left behind. What you’ve just experienced is the difference between absolute and relative economic mobility.
Economic mobility is a fancy way of describing how individuals increase or decrease their net worth. When an individual receives a raise or takes on a new higher paying job, this is an increase in absolute economic mobility. That is, absolute economic mobility measures an individual’s financial gains or losses. Relative economic mobility does the same thing, but it also compares an individual’s financial gains or losses to everyone else in that individual’s community.
So you experienced upward absolute economic mobility (with your $1 raise) and downward relative economic mobility (relative to all of your coworkers who received a $3 pay hike).
Economic Mobility at The National Level
Can people “get ahead” economically? How likely are you to die in the same economic class that you were born into? Do we see the same families in poverty/wealth for generation after generation? These are the questions sociologists like you and I should be asking about economic inequality. To answer these questions, we need to look at the rates of absolute and relative economic mobility for the United States.
In the U.S. we are experiencing a moderate amount of upward absolute mobility. For instance, 84% of people in 2012 reported incomes greater than their parents (Pew 2012). At the same time, we see downward relative mobility. That is, on the whole Americans are earning more money, but a select few are earning money at a much faster rate than the rest of us. For instance, take a look at the chart below. When comparing income distribution from 1979 to 2007 we see that only the top 20% of all income earners saw growth and almost all of that growth was only experienced by the top 1% (CBO 2011).
When we look at national economic mobility we see “stickiness at the ends”. That is, people born into the top or bottom fifths of the economic ladder are likely to die in the same economic bracket. Pew compared the incomes of fathers and sons and found that 31% of sons raised in the poorest fifth remained in the poorest economic bracket as adults (Pew 2012). On the flip side, 43% of sons raised in the richest fifth remained in this affluent bracket as adults. On an interesting side note, this research found that earning a four-year degree promoted upward mobility for those in the poorest fifth and prevented downward mobility for those in the richest fifth.
Dig Deeper:
- Reflect on the chart above. How does that make you feel? Do you think it’s fair? Do you think it suggests we should change our economic policy to address income inequality? Explain your answers.
- Explain, in your own words, the escalator metaphor used in the video above to illustrate absolute and relative upward mobility.
- Think of another situation where a person could experience upward absolute economic mobility while simultaneously experiencing downward relative economic mobility.
- In the U.S. people often say, “anyone can become successful as long as they are willing to work hard.” Do the research findings discussed in this article challenge this idea and if so how?