Getting unstuck: Why some people get out of poverty and others don't
Jeffrey D. Allred, Deseret News
Call it rags to rags.
While many Americans believe the poor can rise up from the bottom, statistics show the majority do not. New research by Pew's Economic Mobility Project finds 70 percent of those who are born in the bottom fifth never climb to even the middle of the economic ladder.
"One of the hallmarks of the American Dream is the belief that anyone who works hard and plays by the rules can achieve economic success," says Diana Elliott, who manages Pew's research on economic mobility.
While that dream may seem no longer in reach for the poorest Americans, some do move up, Elliott says.
Seventeen percent who were born in the bottom fifth of income make it up to the middle as adults. Nine percent make it up to the fourth highest fifth and a measly 4 percent climb to the top fifth of income in the United States. What did they have or what did they do differently that enabled them to rise above not only their parents but their peers?
Elliott says this new analysis by Pew shows for the first time what those differences might be — and the surprising role of savings in making the jump upward in income.
It probably isn't a surprise that one of the reasons some people make higher incomes is their education level. Elliott says past research by Pew has also shown education is important. She says this new analysis, however, shows how powerful of a difference it makes.
If someone at the bottom graduated from college, there was an 86 percent chance they would jump up at least one fifth on the income ladder. They also had a 53 percent chance of jumping up two levels to the middle fifth of income. This is almost a complete flipping of the chances people have without a college degree.
Another factor that propelled people up in income was dual-earning, although it was not quite as clear an indicator as having a college degree. If a household had two earners, then there was an 84 percent chance they would jump up a level on the income ladder. Fifty percent would climb at least as high as the middle.
Timothy Smeeding, director of the Institute for Research on Poverty based in Madison, Wis., says that dual-earning implies some amount of intact families — something that is becoming less common.
A third huge factor in helping people break from the bottom was their history of unemployment. People who did not have a period of unemployment were 64 percent likely to move up one level of income and 34 percent likely to reach the middle.
Smeeding laments the trend of employers not even looking at hiring unemployed people.
While many of the factors related to increasing income are at least potentially under the control of people born in the lowest income level, at least one important item is not: race.
"If you look at the findings, there are some that are not potentially encouraging," says Elliott. "This study reinforces how difficult movement is upward out of the bottom (fifth) for blacks rather than whites."
The study is based on the Panel Study of Income Dynamics — a look at actual parent/children pairings starting in 1968 and continuing to today. This means that because so few samples were taken in the 1960s from Latino families, there isn't enough data available to see how those families have fared over time. So the study is best able to look at black and white families. Elliott says Pew has found a persistent gap between white and black families.
Whites were two times more likely to leave the bottom fifth of income than blacks. Forty-five percent of blacks got out of the bottom versus 68 percent of whites.
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