In our previous post, we discussed some evidence that poverty is not transmitted through culture, or the attitudes, preferences, and orientations of those living in poverty. If anything, the evidence suggests poor parents instill a culture of mobility among their children. This shouldn’t lead us to pin all of the responsibility for lifting children out of poverty on their low-income parents, however, any more than poverty’s persistence should be solely blamed on them. Instead, these findings highlight our collective obligation to provide these families with the inputs they need to keep their children from being stuck in poverty as they grow. Culture does not doom children to poverty, so policy changes are critical to helping children move up the economic ladder.
In order for economic mobility to occur, people have to be financially secure. From this perspective, financial security refers to having a floor (i.e., a minimum standard of living or amount of goods and services families must consume) from which to launch oneself forward. Trying to move up the economic ladder without being financially secure is like imagining yourself trying to jump while you are falling after jumping off a building; it is simply impossible. Based on my research on the culture of poverty, the following policies are recommended:
However, being financially secure at any level of the economic ladder you is not the same as having the capacity to move up to the next rung. Elliott & Lewis (2014) suggest that assets are needed to propel people up the economic ladder. This may be particularly true of low-income households. Rauscher and Elliott (2015) find evidence that suggests low-income households face a ceiling on what they can earn. While experience and seniority may improve income among those at the bottom of the income distribution within a particular field of employment, those at the top (of the low-income category) may cease to experience any income gains over time beyond a certain level. They also find evidence that indicates initial income is associated with more rapid wealth change among high-income, but not low-income households. Conversely, they find evidence that suggests low-income households accumulated net worth at a similar rate regardless of initial income. This suggests that low-income households earning less than others in their income category have a similar potential for asset accumulation as those earning more. These findings together support the idea that income, while important for providing a floor, carries less potential for stimulating intra-generational wealth mobility among low-income households than asset accumulation.
This raises questions about what policies might best facilitate economic mobility, particularly among the poor. We suggest three policy changes that are realistic and cost effective, based on research and American values of opportunity and equity, and provide tremendous mobility potential.
As a package, these policies should provide meaningful change for families living in poverty. Moreover, by incentivizing individual savings, amplifying families’ own investments, and building on children’s aspirations, they align with the American Dream of how upward mobility is supposed to work, and what we want to think about how people get ahead. As such, they could just be the answer to our search for that yet-elusive ideal: policies both the Right and Left can support, with real promise to create a path to prosperity for all.