The notion that anyone in America who is willing and able to “pull themselves up by their bootstraps” can achieve significant upward mobility is deeply embedded in U.S. society. Conventional wisdom holds that class barriers in the United States are the lowest among the world’s advanced economies. Motivating this belief is the notion that there is a tradeoff between market regulation and mobility; advanced European economies are characterized by higher taxes, greater regulation, more union coverage, universal health care, a more comprehensive social contract, etc. Because some see these policies and institutions as impediments to mobility, mobility is believed to be greater in the United States.
While faith in the American Dream is deep, evidence suggests that the United States lacks policies to ensure the opportunities that the dream envisions. According to the data, there is considerably more mobility in most other developed economies. The figure below, from The State of Working America, 12th Edition, measures the relationship between earnings of fathers and sons in member countries of the Organisation for Economic Co-operation and Development (OECD) with similar incomes to the United States and for which data are available. An elasticity of zero would mean there is no relationship, and thus complete intergenerational mobility, with poor children just as likely as rich children to end up as rich adults. The higher the elasticity, the greater the influence of one’s birth circumstances on later life position.
The relationship between father-son earnings is tighter in the United States than in most peer OECD countries, meaning U.S. mobility is among the lowest of major industrialized economies. The relatively low correlations between father-son earnings in Scandinavian countries provide a stark contradiction to the conventional wisdom. An elasticity of 0.47 found in the United States offers much less likelihood of moving up than an elasticity of 0.18 or less, as characterizes Finland, Norway, and Denmark.