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President Barack Obama has stated his view clearly: "Income inequality is the defining challenge of our time."1 There are a numerous studies that support the President's position that, generally speaking, about 20 percent of the American population controls about 85 percent of the wealth.2 But the President's remarks can easily be confused with a different but related issue: income mobility, or what is often referred to as social mobility.
Income inequality is the gap between rich and poor or the wealth gap. Income mobility is the ability of an individual to move up or down the economic spectrum relative to others. Income mobility can refer to an individual's mobility, intergenerational mobility, or the ability of children to match their parents' economic status.
While the United States does have income inequality, income mobility has remained much the same over the last several years,3 but-as is often the case-statistics can be misleading. Relying on aggregate statistics often ignores or obscures important phenomena. Some argue that because income mobility has remained steady for the last several decades there is no real problem.4 This argument fails to understand that while income mobility may be unchanged, it is also highly disproportionate, resulting in what the President has referred to as a "dangerous and growing inequality and lack of upward mobility."
Studies show that a child born into a family at the lower end of the economic spectrum has only about a 7 percent chance of moving up to the highest quintile (the top one-fifth). Forty-two percent of children born to parents in the bottom quintile of the income distribution remain in the bottom, while 39 percent born to parents in the top fifth remain at the top.5
Closely related to the relationship of these two concepts of income and mobility inequality is the issue of opportunity versus outcomes. Equal opportunity, a fundamental tenet upon which the "American Dream" is built, is the stipulation that all people should have the same chance in life to be successful. Or to put it another way, everyone has the same income mobility potential, notwithstanding differences in physical attributes that are foreordained. The American Dream holds that if an individual works hard they can get ahead, meaning that they can move up the economic ladder.