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Wed February 27, 2013
Your Money

Americans Earn More Than Their Parents (With A Caveat), Study Says

Originally published on Wed February 27, 2013 7:54 am

Most Americans are earning more money than their parents, according to a new study from Pew's Economic Mobility Project. But those gains don't tell the whole picture.

Let's start with the good news. The Pew Charitable Trust study looked at actual pairs of children and parents. Around age 40, 83 percent of the children were earning at least a thousand bucks more than their parents were when they were 40.

"Economic growth over the last generation really has translated into income increases for many Americans," says Erin Currier, who directs Pew's economic mobility work.

Having a four-year degree made you more likely to exceed your parents' income, according to the study. And African-Americans tended to be less likely to out-earn their forebears. The economic mobility study also looked at wealth, finding that about half of Americans had banked at least $5,000 more than their parents had at the same age.

But there's bad news in this story. The Pew study only looked at absolute dollar gains in income and wealth. It did not look at where people stand on the economic ladder, or how that compares with their parents, Currier says.

"Sometimes you can see these big gains — what look to be big gains," she says. "But they don't necessarily help a person escape the economic place in which they began."

If you're earning $1,000 more than your parents, but your parents only earned $15,000 a year, that's not going to escalate you into the middle class — what we call social mobility.

Another factor: The Pew study looked at entire households. These days, it often takes two incomes to surpass the one salary that was enough for the younger generation's parents. While 93 percent of dual-earner families made at least $1,000 more than their parents, 77 percent of single-earner families did so.

Gregory Clark, an economics professor at the University of California, Davis, who studies social mobility, says he doesn't think people care about how much more they're earning than their parents. What matters, he says, is where your income ranks compared with other people in society.

"We can keep on producing statistics," he says, "but it's not going to give us any insight into how to change social mobility, and what the real mechanisms of social mobility are."

But on the bright side, at least most of us aren't earning less than our parents.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

LINDA WERTHEIMER, HOST:

When college kids graduate and start their careers, chances are over time they'll make more money than their parents did. A new study from the Pew Charitable Trust's Economic Mobility Project shows most Americans do earn more than mom and dad.

But as NPR's Dan Bobkoff reports, the gains don't show the whole picture.

DAN BOBKOFF, BYLINE: This is a good news-bad news story, so let's start with the good news. The Pew study looked at real pairs of children and parents. Around age 40, 83 percent of the children were earning at least a thousand bucks more than their parents were when they were 40.

Erin Currier directs Pew's Economic Mobility Work.

ERIN CURRIER: Economic growth over the last generation really has translated into income increases for many Americans.

BOBKOFF: Having a four-year degree made you much more likely to exceed your parents' income. African-Americans were less likely to out-earn their forbearers.

The study also looked at wealth. About half of Americans had banked at least $5,000 more than their parents had at the same age. But like I said, there's a bad news part of this story. The study only looked at absolute dollar gains in income and wealth. Currier says it did not look at where these people stand on the economic ladder.

CURRIER: Sometimes you can see these big gains, what look to be big gains, but they don't necessarily help a person escape the economic place in which they began.

BOBKOFF: If you're earning $1,000 more than your parents, but your parents only earned $15 grand a year, that's not going to lift you into the middle class, what we call social mobility.

And this study looked at entire households. These days, it often takes two incomes to surpass the one salary that was enough for the parents.

Gregory Clark is an economics professor at the University of California at Davis, and studies social mobility. He doesn't think the public cares about how much more they're earning than their parents. What matters, he says, is where your income ranks compared with other people in society.

GREGORY CLARK: We can keep on producing statistics, but it's not going to give us any insight into how to change social mobility or and what the real mechanisms of social mobility are.

BOBKOFF: But on the bright side, at least most of us are not earning less than our parents.

Dan Bobkoff, NPR News. Transcript provided by NPR, Copyright NPR.

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