Economic Inefficiency Threatens American Dream – OpEd

By Vladimir Gladkov

It is getting increasingly harder for Americans to rise from poverty. This problem has been widely discussed by liberals and economic experts, but the fact that even conservatives are now raising the question of economic mobility signals that the gap has reached an enormous scale. And what especially worries economists and politicians is the fact that Americans now enjoy fewer opportunities than citizens of Canada and much of Western Europe. With a collapsing housing market and escalating unemployment, the rapidly growing mobility gap adds up to the mass discontent of American people. It’s threatening one of main fundamental pillars of the American Dream: the belief that anybody has the opportunity to rise from rags to riches.

“It’s becoming conventional wisdom that the U.S. does not have as much mobility as most other advanced countries,” said Isabel V. Sawhill, an economist at the Brookings Institution. “I don’t think you’ll find too many people who will argue with that.”

“Republicans will not feel compelled to talk about income inequality,” said John Bridgeland, a former Assistant to the President under George W Bush. “But they will feel a need to talk about a lack of mobility — a lack of access to the American Dream.”

However, even the most conservative players on the American political scene are starting to raise this question. “Most Western European and English-speaking nations have higher rates of mobility,” writes The National Review, which describes itself as America’s most widely read and influential magazine and web site for conservative news.”

The numerous studies and surveys conducted in recent years only confirm this theory. A project by a Swedish economist Markus Jannti shows that the level of persistent disadvantage in the US is much higher than in Denmark and even in Britain, which is well- known for its class restrictions. The reviews also question the perception of America as a “classless society”. The research conducted by the Economic Mobility Project of the Pew Charitable Trusts has shown that about 65 percent of Americans “born in the bottom fifth of income levels stay in the bottom two-fifths”.

While the roots of America’s economic mobility problem remain a bone of contention among scientists and politicians, some of its causes seem clear enough. The most important one is the enormous gap between the richest parts of American society and the rest of its citizens. While the banking elite enjoys huge bonuses, the middle class, hailed as the foundation of American society, is suffering from huge debts and unemployment. This problem has become the main message of the Occupy Wall Street protests, which have spread across the nation like a forest fire.

Among other reasons for the rapidly diminishing economic mobility is the lack of social guarantees and government support, which literally leaves children from the lower rungs on their own.

“Family background plays more of a role in the U.S. than in most comparable countries,” says Professor Corak, an economist at the University of Ottawa, who reviewed more than 50 case studies on generational earnings mobility considering 9 countries in 2006.

Children of the highly educated parents have access to better education, which automatically guarantees them a higher income.

“Upper-income families can invest more in their children’s education and they may have a better understanding of what it takes to get a good education,” said Eric Wanner, president of the Russell Sage Foundation, an institution which gives grants to social scientists.

At the same time, America’s trade union system is weaker than in most West European countries. This results in lower wages for the less educated. The problems inherited in the US public healthcare system also affect workers from the poorest groups of American society.