How much is being born into a certain part of the income distribution correlated with where you end up in the income distribution as an adult? U.S. Economic Mobility: The Dream and the Data," written as the Federal Reserve Bank of San Francisco Economic Letter for March 4.and
The best way to compare life outcomes across generations is a disputed topic, and Bengali and Daly tackle it this way. They use data from the Panel Study of Income Dynamics, which is a "longitudinal" survey: that is, it started off in 1968 with a sample of 5,000 families and has tracked those families, and their children, over the decades. As they write: "Specifically, we adjust family income for inflation and family size, and compare families with fathers age 36 to 40 with those of their children when they reached the same age bracket." This measure of family income includes both taxable income and transfer payments.
First, the appropriate level of mobility across the income distribution is a difficult question upon which to be honest. Most parents I know are more in favor of economic mobility in the abstract than in the particular case of their own children. In the abstract, sure, it's easy to argue that every child should have an equal opportunity for their efforts and abilities to take them to the top of the income distribution. But it's a hard mathematical fact that not everyone will end up at the top; indeed, half of all students will inevitably fall below the median. It's a little less comfortable to argue that every child should have an equal opportunity for their efforts and talents to land them in the middle of the income distribution; and it's downright uncomfortable to argue that every child should have an equal opportunity for their talents and efforts to land them at the bottom of the income distribution. As parents, my wife and I make a considerable effort to assure that the opportunities for the efforts and talents of our own children will be above-average.
Second, for the record, the original idea of the "American dream" as discussed by the Pulitzer prize-winning historian James Truslow Adams in his 1931 book The Epic of America wasn't just about economic mobility, but was also about social equality and the greater freedom that Americans had to to choose their own personal path than did European societies that were more bound by class and social expectations. For my post from back in July 2011 on this subject, see here.