Prisoners of the American Dream

To many observers, US Republicans’ recent passage of a sweeping tax bill was out of step with the country’s needs. With inequality worsening, would not most Americans want to close the income gap by instituting a more progressive tax system?

Surprisingly, the answer is no. 

Americans have a deep-seated, optimistic view of social mobility, rooted in history and rags-to-riches narratives. Today, however, that view is based more on myth than on fact.

According to survey research that colleagues and I recently conducted and analysed, Americans estimate that among children in the lowest income bracket, 12 per cent will make it to the top sometime in their lifetime. Americans also believe that with hard work, only 22 per cent of children currently in poverty will remain there as adults. 

In fact, only 8 per cent of poor kids will make it to the top, and 33 per cent will remain in poverty. In other words, Americans overestimate upward social mobility, and underestimate the likelihood of staying poor for generations.

Americans seem somewhat unique in this respect. In Europe, many people are more pessimistic about social mobility. Unlike Americans, most Europeans overestimate the odds of remaining in poverty.

Views about social mobility are not uniform across the political spectrum or geographic regions. In both the US and Europe, people who call themselves “conservative” on matters of economic policy believe that every child has equal opportunity, and that the free market is fair.

The opposite holds for those who call themselves “liberal” on economic issues. These people favor more government intervention, because they believe that, left to their own devices, markets will not ensure fairness and may generate more inequality.

Perhaps the most striking finding concerns people’s response to information that challenges their perception. When shown pessimistic data about mobility, for example, liberals become even more supportive of redistributive policies. Conservatives, on the other hand, remain unmoved.

Part of the reason stems from mistrust of government. Just 17 per cent of conservatives in the US and Europe say they trust their leaders. Many believe that political systems in their countries are rigged, and that politicians cannot or will not improve things because they have become captured by entrenched interests, mired in legislative stalemate, or stymied by bureaucracy.

Clearly, reality is not so neat. But what is clear is that people’s views about social mobility have as much to do with ideology and geography as with their circumstances.

Stefanie Stantcheva is a professor of economics at Harvard University. Copyright: Project Syndicate, 2018. www.project-syndicate.org