By Roberta Kwok
Americans love a good rags-to-riches story. Take Oprah Winfrey, who rose from a poor childhood in the rural South to her current status as a multi-billionaire media powerhouse. Or Howard Schultz, the son of a blue-collar worker in a Brooklyn housing project, who then catapulted to success as the CEO of Starbucks.
People frequently cite cases like these to argue that, with hard work, anyone can make a fortune in the United States, no matter how poor they start out.
But how well do perceptions of the American Dream match reality? And are Americans similar or different from people in other countries when it comes to their beliefs about how easily people can move between socioeconomic classes?
Edoardo Teso, an assistant professor of managerial economics and decision sciences at Kellogg, and colleagues explored these questions by surveying people in the United States and four European countries. They found that Americans overestimated people’s chances of climbing from the bottom to the top of the economic ladder. Meanwhile, Europeans underestimated the probability of rising out of poverty. And this happened despite the United States’ relatively limited government programs, as compared to European nations’ more generous safety-net policies in areas such as education and health care.
“American respondents are, on average, much more optimistic about the chances that a kid born in a poor family can become rich,” says Teso, who collaborated with Alberto Alesina and Stefanie Stantcheva of Harvard University on the study. “And the opposite is true in European countries.”
The researchers also identified key differences between politically liberal and conservative participants, both in the U.S. and Europe.
Liberals believed that social mobility was more difficult and were more likely to support government policies aimed at fixing inequality; conservatives tended to lean the opposite way. But among conservatives, those who considered it hard for poor people to rise into the middle or upper class did not favor government intervention any more strongly than did conservatives who felt differently—perhaps because they believed that policymakers would botch the job. Compared to liberals, the conservatives surveyed “don’t trust the government to have the tools to solve the problem,” Teso says.
Those results point to a way to change some people’s minds about government policies targeting inequality. Simply giving conservatives more information about low social mobility in the United States is not likely to work. Instead, politicians would need to show these voters that the government can be trusted to carry out effective solutions, Teso says.
Land of Opportunity?
Teso’s interest in the topic was piqued by recent research that assessed rates of mobility between social classes in various countries. Studies suggested that, despite the common American Dream narrative, people in the United States were less likely to rise from the bottom to the top of the economic hierarchy than those in other nations such as Denmark and Canada.
“If anything, it’s the opposite. It doesn’t look like the U.S. is really this land of opportunity.”
— Edoardo Teso
Those data made him wonder how people’s perceptions compared to reality. A disconnect might explain why the United States often resists income redistribution policies such as higher taxes for the wealthy, while many European nations embrace them.
For instance, if Americans believe that anyone can rise to the top with enough effort, they might think there is no need for the government to spend taxpayer dollars smoothing this path. In contrast, “if you think that you’re stuck in poverty if you’re born in a poor family, then you may be more likely to think that it’s fair for the government to step in and redistribute income,” Teso says.
To test these ideas, Teso’s team worked with survey companies to collect online responses in 2016 from more than 12,000 people in the United States, France, Italy, Sweden, and the United Kingdom, covering representative samples of ages, genders, and income levels. The questions probed participants’ beliefs about issues such as social mobility, government intervention, and whether working hard could improve one’s chances of moving up in life.
Rising to the Top
In one set of questions, people were asked to imagine 500 families in their country spread evenly across five economic tiers. Then participants estimated how many kids from the 100 poorest families would reach each of the other four tiers once they grow up. The researchers compared those responses to data on actual mobility rates in each country.
For the most part, the respondents’ guesses weren’t too far off. “People were not giving crazy numbers,” Teso says. “But there are systematic biases.”
For instance, Americans estimated that 12% of the poorest kids would move to the top tier, but in reality, about 8% do. And French participants estimated that 35% of the poorest children would be stuck in their current position; the actual number in France is 29%.
Teso believes that the countries’ histories might explain these patterns. America is famously a land of immigrants where many people did in fact build their own fortunes. In contrast, Europe practiced feudalism for centuries, during which a person’s fate was largely governed by their family circumstances.
Given that Europeans have since instituted many social-welfare policies and improved economic mobility, shouldn’t they have become more optimistic by now? Apparently not. “These perceptions are really deeply rooted,” Teso says.
Despite these differing ideas about social mobility, respondents in Europe and the U.S. nonetheless agreed that individuals have some power over their circumstances. When American and European participants were told that kids from the 100 poorest families were very hard-working, both groups gave higher estimates for the children’s chances of reaching the middle class. Even in Europe, people believe that “effort matters,” Teso says.
The Role of Government in Social Mobility
Next, the team investigated how these views were tied to people’s beliefs about the role of government. Participants were asked about their support for policies such as spending on education, social security, and health care, as well as their overall views on government intervention and taxes, and how liberal or conservative they considered themselves.
Not surprisingly, Americans looked less favorably upon government interventions than Europeans did. But among participants from all countries, responses were split by political orientation. Conservatives expressed less trust in government and were less likely to agree that the government had the tools to solve inequality. About 60 percent of conservatives agreed that inequality should be addressed by reducing government programs and “freeing” the economy; only about 20 percent of liberals did.
The more pessimistic American or European liberals were about mobility, the more likely they were to support policies of income redistribution. But, surprisingly, this connection was absent among conservatives.
“It seems that right-wing respondents simply do not want much redistribution, regardless of their views on mobility,” the authors write.
Finally, the researchers wanted to examine causality. The results so far suggested that beliefs about mobility were linked to policy preferences, but they didn’t show that one led to the other.
So the team conducted a test with two groups of online participants in the U.S. and Europe. Before asking them about their beliefs, the researchers provided one group with general statements about mobility based on real research studies. Those participants read that the chances of a poor kid becoming rich were very low, and the chances of a wealthy kid staying rich were very high.
People who read these statements—both liberals and conservatives—tended to be more pessimistic about social mobility than participants who were not shown the statements. But while, among liberal participants, those who read these statements also showed higher support for government programs that reduce inequality, this was not true among the conservatives. The information “has an effect only on left-wing respondents,” Teso says.
Perhaps some conservatives prefer that private charities step in instead of government, Teso speculates. Or they might believe that any effort to address the problem is pointless because “there is no way to solve it,” he says.
The results suggest that if politicians cites data demonstrating inequality, they may convince conservatives that mobility is lower than they thought. But that does not mean those voters will support income redistribution policies. For that to happen, policymakers would need to increase the right’s trust of government, perhaps by becoming more transparent about their actions or giving evidence of past successful programs.
If people were fully informed about the real degree of mobility in their country, liberal Americans might support more government intervention—and Europeans might support less.
“It does seem to be the case that there are consistent and systematic misperceptions across countries,” Teso says.