Is Social Mobility Fact or Fiction?
|October 6, 2012||Posted by Roshawn Watson under Uncategorized|
Is America the land of exceptional opportunity? I certainly think so. Where else can someone who is remarkably poor, such as Farrah Gray, wind up a millionaire before the age 15? It may be somewhat naive to believe his story is possible just ANYWHERE. The problem is this doesn’t prove that social mobility is obtainable on a significant scale in America and similarly industrialized nations. The data may forever change your view of the importance of wealth to your future . Let’s explore whether opportunities for social mobility for the masses are fact or fiction.
Focusing on Outliers Obscures the Real Issues
One of the first things that I had to suppress when looking at social attainment research was my urge to provide countless examples of people who made it against all odds. After all, 8 out of 10 millionaires are first generation affluent.The problem using these as examples for social mobility for the masses is that they are people most would consider “outliers:” an extraordinary deviation from the norm. Outliers are remarkable because they are NOT what you would expect given the circumstances. Outliers provide a great deal of inspiration and insight into the attributes of those who are different, which is valuable, but the fact that some people beat the odds doesn’t disprove the fact that the odds exist and are stacked against people who don’t have wealth.
The fact that some people beat the odds doesn’t disprove the fact that the odds exist and are stacked against people who don’t have wealth.
Perils of Social Mobility Research
Now, most social attainment research focuses on parental income, education, and occupation. As we discussed in Does Wealth Reduce Compassion?, there are many perils to ignoring wealth as a determinant of financial behavior. Income serves as a poor proxy of wealth because building substantial wealth is significantly more difficult than obtaining a high income. Thus, the character traits and values of the wealthy differ from drastically those of the merely income affluent.
Income is simply a poor proxy of wealth because building substantial wealth is significantly difficult than obtaining a high income. Thus, the character traits and values of the wealthy differ drastically from those of the merely income affluent.
Related Article : Does Wealth Reduce Compassion?
The fact that wealth is omitted in the majority of social attainment models is not novel. It is often not included because reliable wealth data is a lot more sparse than income data. Also, wealth can vary more, as asset values (i.e., portfolio, real estate, and business values) fluctuate. Net worth can be subjective; for example, many businesses, as pillars of building wealth, are privately held, making their valuations anything but straightforward. Additionally, wealth is private, perhaps even more private than income to some people.
Wealth and Opportunity
Despite these challenges, the reason why inclusion of wealth is paramount, particularly in social attainment research is that wealth buys opportunities and protects us. It provides access to better health care and education and insulates us against economic instability including job losses. However, sociologist Fabian Pfeffer argues the implications of wealth on social mobility are far more significant and subtle than would be predicted based on income, partly because the distribution of wealth is far more unequal than the distribution of income (Keister and Moller; Wolff 2006). Moreover, he argues that wealth creates inequalities that are independent of AND more important than any other familial socioeconomic characteristic including income. Thus, even if you took income out of the equation, parental wealth would still confer a significant benefit to children. Studies by Conly (1999, 2001), Morgan and Kim (2006). Haveman and Wilson (2007) and Belly and Lochner (2007) confirm the educational advantage of children from families with money.
Wealth as a “Transformative Asset”
You may wonder how can this be? In 2004, Thomas Shapiro proposed viewing parental wealth as “transformative assets that lift [children] beyond their own achievement.”
The purchase of a home has central implications to the wealth one accumulates. We know, for instance, that most millionaires purchase homes in neighborhoods where their wealth exceeds that of their neighbors by six fold. However, your home also affects the educational opportunities available to your children. Parents often select neighborhoods based on the reputation of the school districts. In other words, where you live affects the quality of your education.
De-facto Purchases of Educational Resources
Another example of how wealth affects available opportunities is with the purchases of educational resources. In his book Outliers, Malcolm Gladwell evaluated Johns Hopkins University sociologist Karl Alexander’s research about the achievement gap. He looked at the test scores of first through fifth graders of low, middle, high socioeconomic status (SES). Although there was a modest and proportional improvement of grades associated with better SES during the first grade, the gap was more than doubled by the time the students reached fifth grade. However, the raw numbers are deceiving. He also tested the students before and after summer vacation and compared those with the before and after the school year results. The data then told an entirely different and more accurate story. During the school year, there was no discernible differences between how much low SES students learned compared with those of high SES. However, during the summer the students of high SES status had a such a substantial improvement in their overall test scores that the differences were large enough to account for for the overall achievement gap noted in the fifth graders. Thus, we cannot diminish the impact of de-facto purchases of educational resources by concerned parents who will leverage their wealth for sake of their children.1
Given that tuition costs continue to rise disproportionately to inflation, it is no surprise that students tuition and living costs are often not met by parents’ disposable income. Even if students assume debt to meet the gap between school costs and their family’s wallet, student debt is associated with a lower likelihood for postgraduate education and decreased quality of life including delayed marriage, delayed starting family, delayed moving out of parents house, and stress from creditors. Nobel laureate and Columbia University professor Joseph Stigliz recently pointed out that a mere “8% of students at America’s elite universities come from households in the bottom 50% of income” even though many of those universities are “‘needs blind’— meaning admission isn’t predicated on your ability to pay.” Thus, familial wealth appears to play an undeniable role in college education as well.
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Labor Market Advantages
Wealth also provides safety nets (both tangible and psychological). The tangible safety net wealth provides is typically most apparent when one is out of work. If your provision is not directly associated with your current production, then you tend to make different choices. For example, your reservation wage, the minimum you require to do a job, will likely be higher. If offspring are supported by parental wealth, their job searches can be maintained for longer until they receive an “appropriate” job offer. Additionally, the psychological safety net allows young people to explore careers that may be high-risk but also provide high rewards for success.
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“There’s not much mobility up and down. The chances of someone from the top [income bracket] who doesn’t do very well in school are better than someone from the bottom who does well in school.” — Joseph Stigliz
It is hard to argue with the above statement when I can think of so many celebutarts who qualify for doing better than those who did well in school. Also recall that most millionaires are C students (gasp, horror!). That said, I don’t think this research neatly fits in any political agenda. For example, Pfiffer had another surprising observation: the same wealth inequality and social mobility problems observed in the US were also present in Germany, where higher education has been tuition free (I hear this is changing) and many living costs are covered by need-based aid. Germany has also had very generous unemployment benefits for several years that have served as a tangible safety net for the unemployed, and Germany’s labor market had been relatively stable compared to the US, so the psychological safety net may not be as much of an issue there. Based on these dynamics, one would expect that these government provisions and this economic environment would diminish the impact of parental wealth in Germany, yet this is NOT supported by the data. All we can conclude is that a disparity in opportunities exist despite government intervention and a more stable job market, work to provide children with the best opportunities we can, endeavor to be outliers, and stop discounting the role wealth has on our wellbeing and that of our families.
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