The biggest shortcoming of past research is that no one has looked at the intergenerational income mobility of Americans born after the early 1970s, mostly because of limited availability of data. Children born in 1980 are barely 30 years old today, and few data sets exist that tracked them as they grew up.
However, an ongoing Labor Department survey has followed men and women born in the early 1980s, starting in 1997 when they were adolescents. In 2008, the most recent year for which their incomes are available, they were in their mid to late 20s. A predecessor of this survey (also ongoing) has followed a group born in the late 1950s and early 1960s. Using these two National Longitudinal Survey data sets, I can compare children born between 1962 and 1964 to children born between 1980 and 1982, observing their parents’ incomes when they were 14 to 16 and their own incomes twelve years later when they were 26 to 28.
In contrast to the president’s claim of declining mobility, I found that upward mobility from poverty to the middle class rose
from 51 percent to 57 percent between the early-’60s cohorts and the early-’80s ones. Rather than assert that mobility has increased, I want to simply say — at this stage of my research (which is ongoing) — that it has not declined. If I include households that reported negative or no income, the rise in upward mobility I find is only from 51 percent to 53 percent, which is not a statistically meaningful increase. But the data provide absolutely no evidence that economic mobility declined, whereas the president said it had fallen by ten percentage points.
So where did the president’s numbers come from? Following up on a suggestion from New Republic writer Tim Noah’s blog that the source of the figures was Berkeley economist David Card and Council of Economic Advisors chair Alan Krueger, I reached out to Card in the days following the speech. Despite family obligations, Card graciously provided enough information for me to confirm with him that I understood how he produced the president’s figures. They turn out to come from a statistical model that we might call “Soup Cans in Six Numbers,” an elaborate attempt to estimate the “joint distribution” of parent and child incomes from aggregate income figures and various assumptions.
To understand the joint distribution of incomes, imagine standing in front of a large grocery-store display in which soup cans are laid out on a square base. At each spot on the square, a can is placed to represent both someone’s parents’ income as she was growing up, and her own family income as an adult. A can placed to the left rather than the right represents someone with low income growing up, and a can placed in the front rather than in the back represents a person who had low income herself in adulthood. If two people have roughly the same combination of childhood and adult income, their cans are stacked one atop the other.
If we created a display with 80 million cans, one for each American family, and looked to see where on the square cans piled up and where they did not, we could understand the relationship between parental income and the child’s subsequent income as an adult. Do they pile up along a diagonal ridge from front left to back right, meaning that parents and children tend to have the same income? Or is the height of the cans pretty much the same across the entire display, indicating that where children end up has little relation to where they start?