Why poor children are becoming poor adults

The White House is highlighting research that shows that when the rich have all the money, it's harder for kids to climb out of poverty.

By Kim Peterson Jun 13, 2013 4:17PM
The Great Gatsby Curve chart (© The White House via tumbler)The White House has released what it calls "The Great Gatsby Curve" on its Tumblr page, hoping to jump-start more discussion about why it's getting tougher to move up the economic ladder.

Why all the attention to the F. Scott Fitzgerald novel? Because the divide between the rich and poor in this country is growing, and by the time the Great Recession hit, it was as vast as it had been at any time since "The Great Gatsby" days, according to the Obama administration.

The Great Gatsby Curve was introduced by Alan Krueger, chief economist at the White House. It shows that in countries where income is more concentrated at the top, in the hands of the rich, it's harder for poor children to climb out of poverty as adults.

The horizontal axis shows income inequality, and the United States ranks the highest among several developed countries in that regard. The United Kingdom, France and Japan are roughly tied for second place.

The vertical axis shows intergenerational earnings elasticity, or how much your income is affected by that of your parents. As that number gets higher -- and it's very high for the U.S. -- the harder it is to move out of the economic class you were born into.

That's simply unfair, Krueger said in a speech last year. "Restoring fairness to the economy would be good for all parts of American society," he said. "This is not a zero-sum game. The evidence suggests that a growing middle class is good for the economy, and that a more fair distribution of income would hasten economic growth."

More on moneyNOW


221Comments
Jun 13, 2013 6:08PM
avatar
This article and those that believe this crap are fooling themselves about what the real cause is. I am the child of a 2nd generation food stamp family. I was an average student and went into the Army right out of high school. I have since earned 3 degrees using only student loans and not going to designer colleges. I earn over a 100.000.00 a year while my siblings earn minimum wages and have not degrees. The difference! They spend most of their time B*tching about how others get ahead and how they just can't get there! It's crap!!! I clean floors by night and went to school by day. I am good with my money and don't buy the latest gagit on credit cards. I paid cash for each tattoo, not financed it on credit. I have never used a check cashing agency! I am NOT special. I am of average intelligence but I have a high degree of pride and expect other to give me nothing. I am kind to others and work hard which opens doors more than any degree. I value other people and a hard days work. I understand that life is about hoops and you have to walk a harder road to jump through the right hoops. I could have sat on my **** and wasted my life but I choose to be different. Americans used to be hardy people that had high values and morals. Now we are fragmented, fighting, and frankly becoming BABIES! Grow a sack!!! Woman should act like woman. Men should act like men. Stop spending so much time buying into the b*llsh*t and focus! Success stories aren't about LUCK! Their about positioning yourself to walk through the next open door and having the intestinal fortitude to do so when it opens. Scary? Maybe? I know some will read this and think I am an idiot. But if one person reads this and takes a step forward then so be it. Honestly I hope we all do!!! America is still a great place! But for how long?
Jun 13, 2013 4:52PM
avatar

I think we need more parents talking about money.  My financial education in order (from when I was 3 to 18) is literally:

1. Money doesn't grow on trees.

2. Money doesn't grow on trees.

3. I can't afford that right now.

4. We can't afford that right now.

5. Get a job.

6. When you get a credit card, don't spend more than $30.00.

 

I wasn't taught the importance of saving the money I was given or the money I earned.  I wasn't taught how to budget.  I spent money and racked up debt like the financially ignorant person I was, until I finally got sick and tired of being broke.  I realized I can do precalculus but didn't have the discipline for a budget.

 

Much can be done to help poor kids not become poor adults; I'd like to start with the common sense approach first.

 

Jun 13, 2013 5:29PM
avatar
I was in the low-end of that category back in the 80s and I could have gone the easy route and stayed on welfare like many of my friends.  Instead, I went to college for 10 years while working full-time and got my CIS degree.  My wife and I together puts us in the 2% category as software engineers.  So, are people going to continue to make excuses or do something about it?
Jun 13, 2013 4:58PM
avatar
Maybe the kids are poor because they learned bad life habits from their poor parents.
Jun 13, 2013 5:53PM
avatar
The USA is becoming more and more like Western Europe in the sense that there's a rapidly growing segment of the population that is CONTENT with being poor.  In England where I grew up there's an entire social class that's perfectly satisfied living in "Council Estates" (public housing) and being "on the dole" (collecting welfare).  They've no ambition to better themselves through education and hard work because they're guaranteed their welfare checks and subsidised government housing until the day they die.  I see this phenomenon increasing here...millions of Americans are fine with being poor and on welfare because they're guaranteed income (although not much money, it's better to get paid for drinking Colt 45 and playing video games all day than working for a living).  The Democrat party has created an entire class dependent on the government for money, just like the Labour party has done in the UK.
Jun 13, 2013 5:27PM
avatar

It's all a question of education. Did your parents have stock ownership, retirement accounts, or an investment portfolio? If not, how can you expect that they'd be able to teach these practices to their children?

 

I grew up in a dirt-poor family, and my grandparents' and parents' version of investing was an old fashioned savings account at the bank, coupled with Social Security.

 

I had to go to college before I found out about C.D.'s, stock and bond ownership, IRA's, 401K's, Roth accounts and self-funded annuities!

 

Jun 13, 2013 5:17PM
avatar
"Why poor children are becoming poor adults"

Didn't realize welfare was the path to wealth.
Jun 13, 2013 6:10PM
avatar

I come from a single parent home with a mother who lived off the welfare system.  I am now a single mother; however, I have never been on the welfare system. I refuse to live off the welfare system.  I am considered part of the low income bracket, though.

 

There are opportunities and support that children have in higher income families that children in lower income families don't.  Financial support for continuing education, financial support for living expenses, more direct interaction with an adult figure, either from parent or nanny, that enhances skill sets, instead of latch key children because the parent(s) work long hours, opportunities to participate in extracurricular activities which promote self-esteem, teach teamwork, create social networking, etc.  I am not be able to provide these things for my daughter.  Please don't mistake this as an excuse; this is NOT an excuse. 

 

Half my monthly income pays for rent for a tiny place which enables me to live in an affluent neighborhood in the top school district in my state.  (The high schools have a 99% graduation rate.)  Why?  Because I am hoping that by providing at least a solid elementary educational foundation for my child, I can give her a leg up and hopefully counteract some of the other obstacles we may face.

 

It's not necessarily a learned behavior, laziness, or lack of effort.  Sometimes, it is just a fact.

Jun 13, 2013 6:22PM
avatar
If this is the case, then can you please explain to me how my father, who grew up literally dirt poor in a three-room farmhouse without indoor toilets, now earns a very high six-figure salary?  It's called hard work.  He taught me that if you want it, you work for it.  If you're not willing to do whatever that person did to get where they are, then don't envy what they now have. 
Jun 13, 2013 5:26PM
avatar
My parents were the poor of the poor. My fathers father left him when he was one. My mother lost her father when she was ten. They had five children in their family. My parents never were wealthy. We did not starve. Though we has some very cheap food. If you look at poor people and their children.  They are poor by choice. Children having children. No ambition, drugs, no school and no desire. Sure their are some poor because no fault of their own.
Jun 13, 2013 6:27PM
avatar
this definitely doesn't apply to me! I love my mother to death but truth is she came from Puerto rico and raised us here but barely learned the language and never got a drivers license, only thing she did do for herself was get a GED. My brother joined the army, my sister stayed a welfare statistic as we were raised and I decided to use our poverty to get financial aid and actually go to college. I refused to let that be my life. I spoke both languages and used it to work for me!  I now work for the state as a bilingual caseworker for the same welfare board I received assistance from as a child. My husband is an RN and we just bought our first home together at the age of 30. Soooo....point is, excuses, excuses, excuses! there is a way out but its the hard way which is why many don't choose it. But its possible...not every one has to stay poor forever
Jun 13, 2013 5:27PM
avatar

It's because the Democrat party wants there to be more poor people dependent on entitlements (most of which are promoted and voted for by the Democrats).  Poor people tend to vote Democrat, so that's a guaranteed voting bloc right there.

Jun 13, 2013 5:37PM
avatar

It is shameful that a lot of you are relating this to welfare, many families are poor and they are not on welfare. Being poor is not necessarily being on welfare. The problem they are stressing is that kids who grow up in a poor household will have a very slim chance of getting out of that classification. In my opinion these kids and their parents' don't have the know how to stop the cycle and that may have something to do with the ending results.

Jun 13, 2013 5:56PM
avatar
education is only a small portion of the wealth factor. There are lots of folks
smart, but dumb on money management.  Plus who in the hell would believe a study, supported by the Gov. on money management....
Jun 13, 2013 5:58PM
avatar

The reason why poor children are becoming poor adults is because of the transmission of learned behaviors. We learn what are parents were taught. If you want to break the cycle, you need to adjust the learning curriculum of elementary learning, particular in eighth and ninth grade. You can teach children at this age practical skills in budgeting. I propose a "Budgeting Project" where the children are taught how to run a household ON A BUDGET with the cost of a mortgage (or rent), the cost of food, the cost of maintenance, cost of gas, electric and water, etc. Teaching children how to save for home improvement and MOST IMPORTANTLY, the need for home improvements and why it's important in the long run. Sadly, parents don't teach these skills because they themselves don't possess them.

Jun 13, 2013 5:08PM
avatar
As long as they can vote the Obama's of the world don't give a sh*t, that's why the K12 foodstamp system keeps them dumb and poor and ready to mate.
Jun 13, 2013 5:27PM
avatar
There is a whole lot of factors that go into income.  Intelligence, work ethic, spending habits, education.  Poor kids often times learn how to bilk the system for welfare checks and handouts while kids higher up the income ladder learn skills that earn them higher incomes.  The term unfair does not apply to this situation cause more often then not it is the choices made by individuals that define their lifetime earning potential rather than a casting system that forces children into low income careers.  Although, the underfunding of state universities causing people to have take on seemingly insurmountable levels of debt will make it so that low income young adults truly have fewer opportunities than higher income ones (perceived that is). 
Jun 14, 2013 12:51AM
avatar

Why are the rich to blame for poor parents and poor children?  The choices that parents make in life and then pass down to their children influence how your life turns out.  If you DON"T finish highschool,if you get pregnant to young, if you KEEP getting pregnant when you can't afford more children and never marry.  If you are an abuser of alcohol or drugs.  If all you have are parents or a single parent who doesn't want to take the time or effort it takes to raise healthy children then of course you will more than likely be an unsuccessful earner.  Quit blaming the rich.

Jun 13, 2013 5:49PM
avatar
Why?  Because this administration wants it so.  We weren't wealthy by any means.  However, the kiddo is doing very well for herself.  So, this is bull.
Jun 13, 2013 6:08PM
avatar
For all you spoiled silver-spooners...try starting out from the bottom. Attend a public school, fund your own community college education and then talk to me about equal opportunity for all "if you just play by the rules". By the way, I've worked my **** off all my adult life and fought in Vietnam, yet you wormy pecker-heads make more money in a year than a hardworking poor person makes in ten. HYPOCRITES !!!
(I'm not talking about welfare bums, I'm talking about hard working people who never had the opportunities you Ivy Leaguers have).
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.

Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More

MSN MONEY'S