Only For Stanford Writer - English Essay

'1r Rana Foroohor is thc assista'rt managing editor otTime; she also appears o'l MSNBCI NN eithAlex Wagnerund writestor th€ Daily Beasl Edrlier in her care€r, sh€ uar Newsw€ek's ilzputy editot lot intemo- trbnal Dusiress and economics dnd uotefoT Forbes. She also spent six years in London, where sheJocued on couercge of th6e topics in Europe dnd the Middle Edst, dn(l rcceived an auad jtotn rhe Genrdn Morshall Fund Jor this trars-Atlantic repofing. As a BamfiA uniteryrca, Fotc,har was an Er{lish noior. This selection app.arel in he Novemb€J 74, 2017, eaition of TifiE as pan of a s€i€s €ntitled 'ropportuni9 Nation," itsef the nalne oJ a nonpanisan coalition composed of som€ tuo hundred orgomzdtioru uith d Jocus on increasihg sociai rnobiiity in the United Staks. As you redd this s€ledion, note the t{rays thal Foroohar contextualiz?s the situation in uhich Arn?rico fnds itseu loith respect to its history ond rrith respe.t to oth€r countri.s around th€ urorld.

What Ever Happened to Upward Mobility?

RANA FOROOHAR

m€rica! stor!', our Dationai n''thology, is built on the idea ofb€ing an opportunity society. From th€ taies ofHoratio Alger to the real

liv€s of Henry lord and Mark Zuckerberg, w€ have defined our country as a place \vhere everyone, ifh€ or she 1\'orl$ hard enough, can get ahead. As Al€xis de

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902 CHAPITN 2/ HOWDOWE DEFINE'INEQUALITY" IN AMERICAN sOCIETY?

opportunity in our societl Modern surveys.onff.nl vhat Tocqueville sensed back then; Americans care much more about being abie to move up the socioeco nomic ladd€r than rvhere we stand on it. We may be poor today, but as long as there's a chance that we can be rich tomorro\r, things are OK.

But does America slill work like lhal? The suspi cion that the ansrver is no inspires noi only the Occupy Wall Stre€t (OWS) protests that have spread across the nation but also a movem€nt as seemingll dh,crgent as the Tea Parry While OWS may focus its anger on rapacious bankers and the Tea Party on spcndthrift politicians, both would probably agree that therel, a cabal ofentitled elites on Wall Street and in Washington who hav€ som€holv loaded th€ dic€ and made it impossible for average people to get ahead. The American Drern, like the r€st of our economy, has become bifurcated-

Certainly the numbers support the idea that for most People, itt harder to get ahead than it's ever b€en in the postrvar era. Inequality ir the U.S., alrvays high compared wirh that in other developed countries, is risinS. The 1% decried by OWS tak€s home 2r% of the countryt income and accounls for 35% of its rvealth.

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Tocquevilie argued more lhan 150 years a8o, it3 this dream that enables Ameri€ans to tolerate much social tnequality-this corning from a lrench aristocrat-in €xchange for whar \re perceive as great d),namism and

FOROOHAR/wh.t Ev.r Happehed to Upward Mobjlity? 903

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llages, \yhich have stagnated in real lerms since lhe lq70s.l-dvc Deer fdlling ror mLch oilhe pr$ )ear' in part because ot Pervasively high unemplolment For the first lime in 20 years, the Percentage ofthe popu-

lation employed in the U.S. is lorver than in the U.K, Germany and the Netherlands. "We like 1o think of America as the norking€st nation on earth. But thatt no longer the casei' says Ron Hnskins, a co directot alongwith IsabelSa\vhili, of the Brookingslnstituiion! Center on Children and Families

Nor drc rve the $orld\ grealest opponunity 'oci ety. The Pew Charitable Trusts' Economic Mobility Project has found ihat if you $'ere born in 1970 in the bolrom one-frfth olthe socioeconomic \perlrum jn

rhe U.s., ).ou had only about 3 l7% chance of making jt into the spper two'fifths. 'fhat's not good by inter' national standards. A spaie of nerv rePorts from groups such as Brookings, Pew and the Organization

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904 cHApTER 27 How Do wE DEFTNE "lNEeualtTy" JN AMERICaN soctFTy?

that irlt easier to ciimb the so€ioeconomic ladder in many parts of Europe than it is in the U.S. tts hard to imagine a bigg€r hit to the American Dream ihan thatryouA have an easi€r time getting a leg up in many parts of sclerctic, debt ridden, class-rive! old Europe than you would in the U.S.A. "The simpl€ truthi' says Sawhill, "is that we have a beliefsystem about ourselves that no long€r alig$ with the factsl'

The obvious question is, What happened? The ansivers, like social mobility itseli are nuanced and complex. You can argue about what kind ofmobility really matters. Many conservatives, for example, $ould be inclined to focus on absolute mobility, {'hich means the extent to lvhich people are beter off than their par€nis wele at the same ag€. That's a mea- sure thar focuses monly on horv much economic growth has oc.ur€d, and by that measure, the U.S. does fine- Trvo'thirds of40-year-old Americans live in households with larger incom€s, adjust€d for infla- tion, than theirparents had at the same age (though the gains are smaller rhan they were in the preious generation).

But just as rv€ dont f€el grateful to have indoor plumbing or nultjchannel digital cable relevision, we donl necessarily feel grateful thanve earn more than our parents did. Thatt beca!5e r{€ don't peg ourselves to our parents; we peg ourselves to the Joneses. Behavioral economics tells us that our sense of well- being is tied not to th€ past but to how we ar€ doing

compar€d with our p€ers. Relative mobility matters. By that standard, lve ar€n't doing very well at atl. Having the right par€nts increases )our chances of€nding up middle to upp€r middle class by a factor of rhree or four. It! very different in many other counrries, including Canada, Australia, the Nordic nations and, to a lesser extent, G€rmany and France. While 42% of Am€rican m€n ivith fathe$ in the botrom fifth ofihe

5 earning curve remain th€re, only a quarter ofDanes and Swed€s and only 30% of Britons do.

Yet itb important to understand rhar when yoa compare Europe and America. you are LomparinS very different so.ieties. High-grorvth Nordi€ nations with good social safety ners, lvhich have th€ gr€atest leads in social mobility ov€r the U.S., are smatl and homogeneous. On average, only about 796 oftheir populations are etlnjc minorities (who are often poorer and thus less mobile rhan the overall population), compared rvith 28% in the U.S. Even bigger nations like cermany dont have to deai wfth populations as socially and economically diverse as

Still, Europe does mor€ to encourag€ equaliry. That! a kq, point becaus€ high inequality-meaning a large gap b€$veell the rich€st and poorest in society-has a strong correlaiion to lo$er lnobiliry As Sa$,hill puts ir, "When the rungs on th€ ladder are farther apart, itt harder to climb up theml' Indeed, in ord€r to under stand rvhy so€ial rnobility jn the U.S. is falling, irt

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important to understand why inequality is rising, norv reaching l€i'els not seen since the Gtded Age.

'I here are many redsons for rhe huge and growing rveahh divide ir our country. The rise ofthe money cul- tule and bank de(€gulation in the 1980s and '90s cer- lainly contnbuled ro ir. As lhe fi nancial sector gre\v

'n relation to th€ rest of the economy (it's norv at historic highs ofabout 8%), a winner{ake'all econom} €merged. Wall Stre€t was less about creating ne$,business€s- entrepreneurship has stalled as iinan€e has becom€ a biffer industry-but it did help sei a n€w pay band for top talent. In the 1970s, corporate chiefs earn€d about 40 limes as much as lheir lowest-paid lvorker (stiil clos€r lo th€ norm in many parls of Europe). Now they earn more than 400 times as much.

The most recent blovs to economic equality, of io course, have been th€ r€al €stal€ and (redil crises, whi.h rviped out housing prices and thus erased the largest chunk of middle-class wealth, while stocks, ehere the rich hotd much of their money, have largely recovered. It is telljng that in the state by-srat€ Opportunity Index rccently rel€ased by Oppo!tunity Nalion. a coal'rion ofpfllale and publ'c

'nnirulions dedicated to increasing social mobility, many of the lorvest'scoring states-including Nevada, Arizona and llorida rvere rhose hardesr hir by lh€ houring

FOROOHAR /What Ever Happened to Upward Mobility? 905

crash and are plac€s rvh€re credit continues to be

But the caus€s of inequality and any resulaing decrease in social mobilityare also very much about trvo m€Satrends that have been r€shaping the global economy since the 1970s: th€ effecrs of t€chnology and the rhe of the em€rgin8 markets. Some 2 billion people have join€d the global workfor€e slnc€ lhe 1970s. According to Goldman Sachs, the majority of them ar€ middle class by global standards and can do many ofthe jobs rha{ were once done b) American norkers, ai loiv€r labor costs. Coldman estimat€s that 70 million join that group €v€ry year.

While theret no .lear formula for as€ribing th€ rjse jn inequality (via wage compression) and subse- qu€nt loss ofmobility to the rise ofchina and India, on€ k€y sludy stands o!t. Nobel laureate Michael Spencei recent examination ofmajor U.S. rnulrina- tionals for th€ Coun€il on Foieign Relations found that since th€ I980s, companies that operat€d in the iradable sector-meaning they made things or pro- 'i'ided s€rvi.es that could be traded bchveen nations- have created virtually no net nervjobs. The study is esp€cially illustrative of the hollowing out of th€ American manufacturinS secior in that period as rniddle-rvage jobs moved abroad. The only major job

905 C HAPTER 27 TIOWOOWE DEF'NE 'INEQUA!Iry" IN AI\,IERICAN sOCIEry?

creation we! in more geo$aphically protected catego, dcs like retail and health c.re (anothcr rcason wages ale shrinking, since many of the fartest-gowing jobs in th€ U.S., like home health carc aiale atrd sales clcrk, are low-paying).

That so many of thc job6 we now deate are low €nd undcrscores a $owing dcbate orll technology and its role in increasi$8 or d.creasiry opponunity. Man), of the jobs that havc disappealed from the U.S. .conomy have done so not only b.caus€ thcy wlr€ outsourc€d but also be.ause they are now done by computers or robots. Advocates of techDology-driv€n economic glowth, like the McKinsey Global Institute, would

argue that the cr.ative destruction wrought by such innolrations creatcs morc and bctter iob,s in th€ future;

microchlp rnaldnS.mploys just 0.6% ofthe U.S. work- force, but chips makc aI sorts ofbusiness€s more €Ifr- cient so they can develop new producls and s.rvices Th€ probkm is that those iobs tend to be skewed toward the very top (software engineer) or the bottom ($les clerk). The jobs io the middle have disaPPeared According to the N.w America Foundation, a Public- policy thinl tank the share of middle-income jobs in the U.S. feu frorn 52% in 1980 to 42% in 2010.

While ther€'s no doubt that so far, technolo$r has been a net plus in terms ofthe number ofiobs in our economy, a growing grouP of €xperts believe that link is bcing brok€n. Two cconomists at MIT, Erik Bryniolfsson and Andrcrv McAfc€, havc iust pub-

lished an ir uential book litled Rac. against the Md.fiire,looking at how computers are in€reasingly able to perform task b€tter than humans do, from driving (Google softwar. recendy took a s€lf-drivinS Prius on a 1,000-mile trip) to sophisticated pattern

recoSnition to $'riting creati\€ essays and composil award-winning music. The result, they say, is th technoloSy may soon be a net iob destroyer.

The b€st hope in fithtint rhe machines is r improve education, the factor that is more clos€ly co r€lated with upward mobility lhan any othcr Resear. has shown that as long as educatioml achieveme: keeps up with technologkal gains, more jobs are cr at€d. But in th€ late 1970s, that link was broken in tl U.S. as educatlonal gains slowed. Thatt likely a important reason that Europears have pass€d the L'.: in vadous measures ofmobility. Theyve been expos€ to the same Malthusian fg''es oJjdohalirafin+ Ju they ve been better at using public money to buffe tbem. By firnding postsecondary education .nd keep ing public primaryand secondary schools as good a if not better than privale ones, Europeans have mai sure that the best and bnghtest can rise.

There ar€ many other lessoB to b€ lealn€d fro: the most fiobile nations. Funding univ.rsal heali: car€ without tying it to iobs €an incteasc labor fler] bility and r€duce thc chance that pcople will fall inl poverty because of medical em€rgencies-a commr'. occurrence in the U.S., where such medical cris€s a.:

a big reasor a third ofthe population cycl€s in aiJ out of pov€rty €v€ry tear. Focusing more on le.i exp€nsive prevenlive cate (including fam ily Plannr r. j since hiSh teen birtlrat€s €orrclale with lack of mo: ity) rather than on expensive Procedures caJI incre;- the gen.ral health levels in a societ, whi€h is also i. : rclated to mobility.

Europ€s higher spen&ng on social3afcty n.ts i : cctt.inly bolstcrcd th€ middle and workjnS clas.e. (Indeed, you could argue that some ofAmerica's gI.::

social programs, in€luding Social Security and Medicaid, enabl€d us to become a middle-class nation.) Countries like Cermany and Denmark that have inv€sted in youth-enployment proSrams and technical schools where young people can learn a high-prying trade have done weli, which is not sur- prising given that in many studi€s, inciuding the Opportuniry Nation inder, ther€ii a high correlation betw€e[ the oumber of teenag€rs who are not in school or not working and lowered mobility.

Of course, the debt crisis in Europe and the Fotests ov€r austeriiy cuts in plac.s like Athens and London make it €lear that the traditional Europ€an wellare sys- tems are undergoing very profound chlnges that may reduce mobility throughoul lhe coDdnent. But there is still opportunE in €mciency. Cermans, for example, made a command decision after the financial dowr- turn in 2008 oot to let unemploym€nt rise because it would ultimately b€ more expensive to put p€ople back to work than to pay to keep lhem in th€ir iobs. The government subsidiz€d companies to kcep workeN (as

many as I.4 milion in 2009) on the payroll, even part time. On(e the economy began to pick up, companies were ready to capitalize on it quickly Unemployment is now 6%-lower than before the recession-and growth has stay€d relativdy high.

The Nordic nations, too, hav€ figured out clever ways to combine strong €conomi€ gronlh with a decent amount of security. As in Germany, Iabor and corporate relations are collaborative rather than con-

FOROOHAS/Wh6t lver H.ppened to Upward Mobility? 907

t€ntious. Union reps often sit on company boards, which makes it easier to curb ex€essive ex€cutive pay and negotiate compromises over working hours. Worker retraining is a high prioritt. Danish adults spend a lot of time in on-the-job training. That's one reason they also enjoy high real $,ages and relatively low unemployment.

The final lesson that might be learned is in txx 20 policy. The more-mobile European nations have fewer coryorate loopholes, more redistribution to the poor and middle class via consumption ta*es and far less complication. Irancet tax cod€, for example, h 12% as long as the U.S.'s. Tax levels are also higher, som€thing that lhe enliShlened rich in lhe U.S. are very publicly advocatin&

No wonder. A larSe body of acad€mic research shows that inequality and lack of social mobilitt hurt not iust lhose at the bottod! they hurt everyone, Unequal societies have lorver levcls oftrust, hi8her levels of anxiety and more illness. They have aryuably less stabl. economies: International Monetary Fund research shows that countri€s like the U.s. and thc U.K. are more prone to boom-and-bust cycles. And they are ultimarcl), at risk for social instability.

That's the infl€ction point that w€ are at right now. The m)'rhology ofthe American Dream has made it difficult to start a serious conv€rsation aboul how lo cr€ate more opportunity in our soci- ety, since manyofus still believe that our mobilityis the result of our €lbow greas€ and nothing more.