Social mobility matters, but it is complex to measure and to make sense of. A new discussion paper by Chicago Fed economists Daniel Aaronson and Bhashkar Mazumder, on Intergenerational Economic Mobility in the U.S. 1940 to 2000, attempts to unpack trends over the last six decades. Their results indicate a significant decline in mobility since the 1980s:
We use two sample instrumental variables to estimate intergenerational economic mobility from 1940 to 2000. We find intergenerational mobility increased from 1940 to 1980 but declined sharply thereafter, a pattern similar to cross-sectional inequality trends. However, the returns to education account for only some of these patterns. The time- series may help to reconcile previous findings in the intergenerational mobility literature.
Our estimates imply a somewhat different pattern for the intergenerational income correlation, a measure insensitive to changes in cross-sectional inequality that has implications for rank mobility. We find the post-1980 decline in intergenerational rank mobility marks a return to historical levels.
Consequently, by 2000, the rate of intergenerational movement across the income distribution appears historically normal, but, as cross-sectional inequality has increased, earnings are regressing to the mean at a slower rate, causing economic differences between families to persist longer than earlier in the century.