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As tax time approaches, I find myself searching for a little balance.  Why do I have to pay so much in taxes?  I'm sure a lot of Americans feel like that up and down the tax bracket.  

The alternative, of course, is to not earn enough to pay high taxes. We all know that the global economy, the advent of technology eliminating jobs and more has conspired to make the gap separating the haves vs have nots larger.

A secondary question to that reality is economic mobility.  Can people born into poverty actually bootstrap their way to the American Dream?  The answer is yes, but it doesn't happen as much as we'd like it to.  Check out this great chart (enable images or click through if reading via email) based on a study from the Federal Reserve Bank of St. Louis:

Economic mobility

 Here's a run down from Business Insider:

"The notion of an American Dream can be boiled down to a simple concept: a meritocracy in which place of origin and social status do not preclude success for hard workers.

Talk of that dream fading has been present since the Great Recession sucked 9 million jobs out of the economy and knocked down already-depressed wages for millions.

Now, a study published by the Federal Reserve Bank of St. Louis has found a way to measure that decay. It does so by coming up with a simple, mathematical definition of the American Dream as represented by social mobility defined as "the probability that a child born to parents in the bottom fifth of the income distribution makes the leap all the way to the top fifth of the income distribution."

In the US, children born to parents in the bottom fifth of the income distribution have a 7.5% chance of reaching the top fifth, according to Stanford's Raj Chetty, the paper's author.

Hmm. It's one thing to say that 7.5% chance of starting from the bottom and arriving at the top is low.  But when you think about it, that's almost 10% - probably the hardest working, smartest and most gifted 7.5% for sure.  That kind of follows the bell curve and seems reasonable.

But - and there is a but - the older I get, the less I judge people for being different than me related to language, behavior, values and more.  That's especially true for children and young adults.  The stats related to presence of 2-parent families, education and more are scary when you look at the bottom fifth of this same distribution.  If you didn't have the same level of access to resources, education and yes - parents being unyielding in what they value, provide and expect - you can't be expected to have the tools to bootstrap yourself to the top fifth.

That means that kids with the raw gifts to make the leap get left behind through no fault of their own.  That sucks.

A more important measurement might be the probability the same citizens in the bottom firth can bootstrap themselves to the median of income distribution.  That's another version of the American Dream that might look pretty good to someone starting in the bottom fifth of income slotting.

I can't solve any of the red in the chart above.  But I've long since stopped judging most of the people who start in the lower fifth.  The next step for people like you and me is to try and impact a couple of kids who start there and make sure they have what they need to arrive at the top fifth - or even the middle fifth - based on their own merits rather than where they started.

Comments

tom schott

Point taken Kris, but the idea of ANYONE making it to the top 1/5 should be harder than someone making a 1, 2 or 3 stage jump. However, once someone moves up a rung, logic says that the next rung should be easier.

We should not be equating the American Dream, nor "success" with the top 1/5...and don't think you are. We should equate it with advancing. So, IMHO, the chart could use a different (and far less provocative) title, and show folks the pathway and the odds to "better".

KD

Agree Tom - I think the american dream is moving up - and it doesn't have to be to the top 20%...

Thanks - KD

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