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Economic mobility for all

Economic Mobility For All

The Dēmos Power Agenda: A Framework for Building People Power offers a roadmap for our shared future. Economic Mobility For All is the second of five pillars of the Power Agenda, reflecting our affirmative vision for ensuring economic progress for all.

 

Dēmos envisions an economy where everyone has an opportunity to improve their economic situation over time and each generation is better off than the last. 

Our economy fosters deep income and wealth inequality, making it difficult for working families to reach or stay in the middle class. Resource-depressed communities and structural racism in our economic institutions have made economic mobility much less likely for Black and brown people. 

To secure economic mobility for all, Dēmos is focused on:

  • Ensuring all individuals have an opportunity to accumulate wealth through savings, investments, and fair tax treatment.
  • Investing robustly in public goods to promote economic mobility for children, families, and communities, particularly Black and brown communities.
  • Ensuring all children can transition into adulthood with the economic support that puts them on the right path toward income growth and wealth accumulation.

Where We Are and How We Got Here

Ensuring all children can transition into adulthood with the economic support that puts them on the right path toward income growth and wealth accumulation.43 Communities of color fare worse.44 For example, 60 percent of Black adults who were in the lowest-income quintile in 2000 stayed there over the next 14 years.45 Even Black and Hispanic individuals in higher income distributions are more likely to slide down the income ladder than their white counterparts.46 Only about 50 percent of adults born in the 1980s earn more than their parents,47 and Black families are 16 times more likely than white families to experience third-generation poverty.48

This lack of economic mobility both fuels and reflects significant wealth and income inequality. In 2022, the top 1 percent of wealthy households held nearly 14 percent of wealth; the bottom 50 percent held about 3 percent.49 In 2022, white households held about 85 percent of wealth, compared to 6 percent for Black and Latino households.50 Similarly in 2022, the top 5 percent of households brought in nearly 24 percent of all income, compared to 3 percent of total income going to the lowest fifth of households.51

Black and brown people have struggled with economic mobility within financial and tax systems that limit opportunities to save, invest, and build assets. Private banks have a long, well-documented history of excluding Black and brown people from basic financial services. Private banks denied loans to Black applicants in “redlined” neighborhoods, excluding them from the opportunity to purchase a home and build wealth.52 Private banks targeted Black and brown communities for predatory subprime mortgage loans, and these communities became among the hardest hit during the mass foreclosures of the Great Recession.53

Black and brown communities continue to face obstacles to accessing even the most basic financial services that promote saving and wealth-building.54 Black and brown individuals face higher costs to “open and maintain” a basic checking account in their communities55  and are nearly twice as likely to pay overdraft fees than their white counterparts.56  Our credit reporting system “disproportionately represents Black and Latino loan applicants as ‘riskier’ customers” and further disadvantages consumers without a robust credit history—who are more likely to be Black or Latino.57  According to a 2022 study from the Federal Reserve, at all income levels, Black and Hispanic people are denied credit at higher rates than their white counterparts.58

Our tax system also worsens the racial wealth gap. According to a recent Institute on Taxation and Economic Policy report, regressive state and local tax systems in the vast majority of states are making inequality worse.59 For example, state taxes on groceries have a greater impact on low-income families, who spend a far higher percentage of their income on groceries.60 Similarly, wage income tends to be taxed at a higher rate than other forms of income, such as dividends and long-term capital gains.61  Because Black and Hispanic families tend to receive more income from wages and less income from dividends and capital gains, they are effectively taxed at a higher rate.62

Black and brown people are overrepresented in resource-depressed communities with fewer opportunities.63 Where we live, especially as children, has a great impact on upward mobility.64 Research shows that local communities that spend more per capita on low-income families have higher rates of upward mobility.65 But decades of racial segregation have left Black and brown families concentrated in under-resourced communities. Without robust and equitably dispersed public investments from the government, these communities will continue to struggle. 

Limited opportunities to save have made it harder for Black and brown families to start their adult children on the path toward economic success. Young adults are both at their lowest earning potential66 and at a key period to take advantage of education, training, and job opportunities that can increase their income over time.67 Economic choices during these years can be critical. Adults experience more economic mobility, upwards or downwards, in their 20s and 30s than later in life.68

But it can be difficult for young adults to take on the costs of living or pursuing education and training programs alone. An estimated 15 percent of adults 18 to 29 received financial help from their families or friends.69 However, families that struggle with economic security often lack the savings or income to provide help or may even need support from their young adult children.70 Black mothers rely more on their children for financial support as compared to their white counterparts.72

What This Means For Our Families, Communities, And Our Nation 

When families lack economic mobility, they have less agency to make decisions that can improve their standard of living over time. For example, this means less ability to choose whether to move to a house in a better neighborhood with better schools.73

Economic immobility is also a clear signal that our government’s decisions regarding our economy, from how financial institutions are regulated to how government funds are spent, primarily benefit only a few.74 This leaves us all worse off. When communities have limited resources and opportunities for mobility, it raises collective costs and lowers access to quality choices for everyone.75 When people, including Black and brown people, have limited opportunities to earn more later in life, our economy loses out on the increased tax revenue and consumer buying power. 

In contrast, widespread economic mobility fuels economic growth. Furthermore, when there is more economic mobility, our nation’s overall economic growth is felt more evenly across communities, leading to a higher standard of living for more people.76

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The Dēmos Power Agenda: A Framework for Building People Power offers a roadmap for our shared future.

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