Those headlines and feature stories confront us more often. We don't want to hear it, we don't. We certainly don't want to believe it. After all, through all generations, the vast majority of Americans came here from many other places for that best opportunity to get ahead, the highest probability of being upwardly mobile. But now, not so much. The reports are true: America's upward mobility has been stalled, then jammed into reverse, and our vaunted middle class is shrinking. And most of those formerly enjoying middle-class life have become poorer, not richer.
If we read a little further, we are also informed that the gap in economic opportunity and mobility between America's "haves" and "have-nots" is steadily increasing.There are many factors, but a more dominant financial sector, more a winner-take-all social and economic environment, globalization and, particularly, the failures of American K-12 education, all loom large. What is less often reported, certainly less often heard and understood, is that other countries, at least seven of them have moved past us and now offer more accomodating access to a comfortable middle-class income and lifestyle. The American dream is now more easily realized elsewhere.
The US is now 8th in economic mobility behind Denmark, Norway, Finland, Canada, Sweden, Germany and France. Yes, France. And yes, there are those more ideological American's who have long flogged some of these countries as "socialist" countries--mixed economies to the extent that they place social support and services on a level of priority commensurate with the values of an advanced society, and supported by effective, open markets, regulated to protect consumers, the economy, and society as a whole. Some of us would just call them more balanced, effective and civilized societies.
But there are differences to be considered and reasons to be understood. Let's look at some recent articles that make these understandings quite clear.
From a recent article in Time Magazine:
The Pew Charitable Trusts' Economic Mobility Project has found that if you were born in 1970 in the bottom one-fifth of the socioeconomic spectrum in the U.S., you had only about a 17% chance of making it into the upper two-fifths. That's not good by international standards. A spate of new reports from groups such as Brookings, Pew and the Organisation for Economic Co-operation and Development show that it's easier to climb the socioeconomic ladder in many parts of Europe than it is in the U.S. It's hard to imagine a bigger hit to the American Dream than that: you'd have an easier time getting a leg up in many parts of sclerotic, debt-ridden, class-riven old Europe than you would in the U.S.A. "The simple truth," says Sawhill, "is that we have a belief system about ourselves that no longer aligns with the facts."
[...] Yet it is important to understand that when you compare Europe and America, you are comparing very different societies. High-growth Nordic nations with good social safety nets, which have the greatest leads in social mobility over the U.S., are small and homogeneous. On average, only about 7% of their populations are ethnic minorities (who are more often poorer and less mobile than the overall population), compared with 28% in the U.S. Even bigger nations like Germany don't have to deal with populations as socially and economically diverse as America's.
Still, Europe does more to encourage equality. That's a key point because high inequality--meaning a large gap between the richest and poorest in society--has a strong correlation to lower mobility. As Sawhill put it, "When the rungs on the ladder are further apart, it is harder to climb them." Indeed, in order to understand why social mobility in the U.S. is falling, it's important to understand why inequality is rising, now reaching levels not seen since the Gilded Age.
There are many reasons for the huge and growing wealth divide in our country. The rise of the money culture and bank deregulation in the 1980s and '90s certainly contributed to it. As the financial sector grew in relation to the rest of the country (it is now at historic highs of about 8%) a winner-take-all economy emerged. Wall Street was less about creating new businesses--entrepreneurship has stalled as finance has become a bigger industry--but it did help set a new pay band for top talent. In the 1970s, corporate chiefs earned about 40 times as much as their lowest paid worker (still closer to the norm in many parts of Europe). Now they earn more than 400 times as much.
The most recent blows to economic equality, of course have been the real estate and credit crises, which wiped out housing prices and thus erased the largest chunk of middle-class wealth, while stocks where most the rich hold much of their money, have largely recovered.
---"Whatever Happened to Upward Mobility?" by Rana Foroohar, Time (11.14.11)
We're not really that surprised by these reports, are we? In fact, we've all come to better understand these troubling realities as the financial crisis and housing crisis stubbornly refuse to give way to a return to economic normalcy. But what of the underlying systemic and structural changes? More from the Foroohar article in Time:
[...] [T]he causes of inequality and any resulting decrease in social mobility are also very much about two megatrends that have been reshapng the global economy since the 1970s: the effects of technology and the rise of the emerging markets. Some 2 billion people have joined the global workforce since the 1970s. According to Goldman Sachs, the majority of them are middle class by global standards and can do many of the jobs that were once done by American workers, at lower labor costs....
While there is no clear formula for ascribing the rise in inequality (via wage compression) and subsequent loss of mobility to the rise of China and India, one key study stands out. Nobel Laureate Michael Spense's recent examination...found that since the 1980s, companies that operated in the tradable sector--meaning they made things or provided services that could be traded between nations--have created no new jobs. The study is especially illustrative of the hollowing out of the American manufacturing sector in that period as middle-wage jobs moved abroad. The only major job creation was in more geographically protected categories like retail and health care (another reason wages are shrinking, since many of the fastest-growing jobs in the U.S., like home health care aide and sales clerk, are low-paying.
[...] Many of the jobs that have disappeared from the U.S. economy have done so not only because they were outsourced but also because they are now done by computer or robots... Advocates of technology-driven economic growth...argue that the creative destruction wrought by such innovations creates more and better jobs in the future... The problem is that those jobs tend to be skewed toward toward the very top (software engineer) or bottom (sales clerk)....
While there's no doubt that so far, technology has been a net plus in terms of the number of jobs in the economy, a growing group of experts believe that link is being broken... The result, they say, is that technology may soon be a net job destroyer.
But what role education in delaying or reversing this trend? And how might that play out? Ms. Foroohar:
The best hope in fighting the machines is to improve education, the factor that is more closely correlated with upward mobility than any other. Research has shown that as long as educational achievement keeps up with technological gains, more jobs are created. But in the late 1970s that link was broken in the U.S. as educational gains slowed.
That's likely an important reason that Europeans have passed the U.S. in various measures of mobility. They've been exposed to the same Malthusian forces of globalization, but they've been better at using public money to buffer them. By funding ost-secondary education and keeping public primary and secondary schools as good as if not better than private ones, Europeans have made sure that the best and brightest can rise.
In the same issue of Time, the always insightful Fareed Zakaria reports that the American K-12 educational system has now fallen to a ranking of 26th in the world, and offers some well-informed thoughts on America's failing education system. Mr. Zakaria:
In 1972, the year [Steven] Jobs graduated, California's public schools were the envy of the world. They were generally rated the finest in the country, well funded and well run, with excellent teachers. These schools were engines of social mobility that took people like Jobs and Wozniak and gave them an educational grounding that helped them rise.
Today, California's public schools are a disaster, beset by dysfunction and disrepair. They rank at the bottom of the country, just as the U.S. now sits at the bottom of the industrialized world by most measures of educational achievement. The World Economic Forum ranks the U.S.'s educational system 26th in the world, well behind those of countries like Germany, Finland, the Netherlands, Denmark, Canada and Singapore. In science and math, we score even worse.
We've been talking about America's education decline for three decades now, so much so that we are numbed by the discussion. But the consequences of that crisis are only just becoming fully apparent. As American education has collapsed, the median wages of the American worker have stagnated, and social mobility--the beating heart of the American dream--has slowed to a standstill. Education is and always has been the fastest way up the socioeconomic ladder. And the payoff from a good education remains evident even in this weak recovery. The unemployment rate for college graduates is just 4%, but for high school dropouts it is 14%. If you drop out of high school--and the U.S. has a 25% dropout rate--you will have a depressed standard of living for the rest of your life.
The need for better education for most Americans has never been more urgent. While we have been sleeping, the rest of the world has been upgrading its skills. Countries in Europe and Asia have worked hard to increase their college-graduation rates, while the U.S.'s--once the world's highest--has flatlined. Other countries have focused on math and science, while in America degrees have proliferated in "fields" like sports exercise and leisure studies.
Bill Gross, the head of Pimco, the world's largest bond fund, sums it up in no uncertain terms: "Our labor force is too expensive and poorly educated for today's marketplace." There are two variables here: our educational levels, which are low, and our wages, which are high. Either we will raise our educational level or markets will lower our wages.
[...] How to do it? Well, there is one simple, time-tested method. Work harder. Thomas Edison said that genius is 1% inspiration and 99% perspiration. Malcolm Gladwell found that behind many supposedly natural-born talents like musical ability lay lots of practice--by his calculations, about 10,000 hours of practice. U.S. schoolchildren spend less time in school than their peers abroad. They have shorter school days and a shorter school year. Children in South Korea will spend almost two years more in school than Americans by the end of high school. Is it really so strange that they score higher on tests?
If South Korea teaches the importance of hard work, Finland teaches another lesson. Finnish students score near the very top on international tests, yet they do not follow the Asian model of study, study and more study. Instead they start school a year later than in most countries, emphasize creative work and shun tests for most of the year. But Finland has great teachers, who are paid well and treated with the same professional respect that is accorded to doctors and lawyers. They are found and developed through an extremely competitive and rigorous process. All teachers are required to have master's degrees, and only 1 in 10 applicants is accepted to the country's teacher-training programs. The contrast with the U.S. is stark. Half of America's teachers graduated in the bottom third of their college class.
Bill Gates has spent about $5 billion trying to research and reform American education. I asked him, if he were running a school district and could wave a magic wand, what he would do. His response: hire the best teachers. That's what produces the best results for students, more than class size or money or curriculum. "So the basic research into great teaching, that's now become our biggest investment," he says. One study estimates that if black students had a top-quartile teacher rather than a bottom-quartile teacher four years in a row, that would be enough to close the black-white test-score gap.
[...] I went through the Asian educational system, which is now so admired. It gave me an impressive base of knowledge and taught me how to study hard and fast. But when I got to the U.S. for college, I found that it had not trained me that well to think. American education at its best teaches you how to solve problems, truly understand the material, question authority, think for yourself and be creative. It teaches you to learn what you love and to love learning. These are incredibly important values, and they are why the U.S. has been able to maintain an edge in creative industries and innovation in general.
The U.S. should truly fix its educational system by emphasizing the basics--like hard work--again but also by renewing its distinctly American character. We will succeed not by becoming more Asian but by becoming, as the writer James Fallows put it once, "more like us." That's what made America the world's most dynamic society--and it can make it so again.
---"When Will We Learn?" Fareed Zakaria, Time (11.14.11)
Now lets return to the Rana Foorahar article for some insights on the role of health care, government support of employment and training, and tax policy.
There are many other lessons to be learned from the most mobile nations. Funding universal health care without tying it to jobs can increase labor flexibility and reduce the chance that people will fall into poverty because of medical emergencies--a common occurrence in the U.S., where such medical crises are a big reason a third of the population cycles in and out of poverty every year. Focusing more on less-expensive preventive care (including family planning, since high teen birthrates correlate with lack of mobility) rather than on expensive procedures can increase the general health levels in a society, which is also correlated to mobility.
Europe's higher spending on social safety nets has certainly bolstered the middle and working classes. (Indeed, you could argue that some of America's great social programs, including Social Security and Medicaid, enabled us to become a middle-class nation.) Countries like Germany and Denmark that have invested in youth-employment programs and technical schools where young people can learn a high-paying trade have done well, which is not surprising given that in many studies, including the Opportunity Nation index, there's a high correlation between the number of teenagers who are not in school or not working and lowered mobility.
[...] Germans, for example, made a command decision after the financial downturn in 2008 not to let unemployment rise because it would ultimately be more expensive to put people back to work than to pay to keep them in their jobs. The government subsidized companies to keep workers (as many as 1.4 million in 2009) on the payroll, even part time. Once 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 stayed relatively high.
The Nordic nations, too, have figured out clever ways to combine strong economic growth with a decent amount of security. As in Germany, labor and corporate relations are collaborative rather than contentious. Union reps often sit on company boards, which makes it easier to curb excessive executive pay and negotiate compromises over working hours. Worker retraining is a high priority. Danish adults spend a lot of time in on-the-job training. That's one reason they also enjoy high real wages and relatively low unemployment.
The final lesson that might be learned is in tax policy. The more-mobile European nations have fewer corporate loopholes, more redistribution to the poor and middle class via consumption taxes and far less complication. France's tax code, for example, is 12% as long as the U.S.'s. Tax levels are also higher, something that the enlightened rich in the U.S. are very publicly advocating.
No wonder. A large body of academic research shows that inequality and lack of social mobility hurt not just those at the bottom; they hurt everyone. Unequal societies have lower levels of trust, higher levels of anxiety and more illness. They have arguably less stable economies: International Monetary Fund research shows that countries like the U.S. and the U.K. are more prone to boom-and-bust cycles. And they are ultimately at risk for social instability.
That's the inflection point that we are at right now. The mythology of the American Dream has made it difficult to start a serious conversation about how to create more opportunity in our society, since many of us still believe that our mobility is the result of our elbow grease and nothing more. But there is a growing truth, seen in the numbers and in the protests that are spreading across our nation, that this isn't so. We can no longer blame the individual. We have to acknowledge that climbing the ladder often means getting some support and a boost.
Many other articles have offered examples and perspectives on America's declining upward mobility, it's slide toward a smaller middle class and a bigger gap between rich and poor. One study reports that in 2007 only 44% of American families lived in middle-income neighborhoods, down from 65% in 1970. ("Middle-class areas shrink as America divides into "two-tiered society of rich and poor," by Sabrina Tavernise, New York Times (11.16.11)). That's a lot of damage in a relatively short time to our middle-class strength, and a threat to our economic and social stability. And it won't be reversed overnight.
The reality and the implications are clear enough. We are just now experiencing the unwelcome results of policies and circumstances long in their development. We cannot further delay a national corrective that will move us back on the upward path we've always so proudly claimed. The failings of our education system must be reversed. Germany's approach to the economic effects of the financial crisis reflected sound thinking: to fail to provide for social needs and training would just result in worse conditions that would exact greater social and economic costs in the end. That is thinking that will not come naturally or easy to America's anti-government spending advocates. It's not just the stimulative economic effect--although that is important--but also the reduction of national stress and pain, and reduced volatility of economic cycles.
We have to get past our misguided notions that America is by virtue of its very existence and nature a more advanced, better functioning and economically stronger country than all others. We have to get past this baseless nationalistic hubris and outmoded thinking, too often misled my misguided ideologues and populist demogogues. We must reclaim America's historical pragmatism, education leadership, hard work, and boldness of government investment in our future, a future which threatens to quickly and globally leave us behind. We can and must learn from other countries, many of which we once considered lesser lights. We will require a stronger partnership among government, education, business, and our citizenry, one built on the old foundations of American vision, innovation and hard work, but combined with a respectful view of the new, global, governmental, economic, and educational realities. Amen.
