WASHINGTON - The ascent to dazzling affluence achieved by fictional farm boy Jay Gatsby is becoming increasingly less plausible, posing risks for U.S. economic prospects, studies show.
The widening gap between rich and poor -- exacerbated by wage stagnation, rising tuition costs and $6 trillion in wealth wiped out by the housing collapse -- is making it more difficult for today’s young people to have success climbing the income ladder than previous generations. Former White House economist Alan Krueger dubbed the income inequality-immobility link “The Great Gatsby Curve,” named after novelist F. Scott Fitzgerald’s protagonist.
The mobility of workers versus their peers has also declined, threatening productivity, business profitability and economic growth, according to Wells Fargo Securities LLC’s chief economist John Silvia. While the ability to ascend income brackets still exists, the likelihood of a household jumping from poverty into wealth declined in the decade ended 2009.
“It really flies in the face of what we believe to be true as a nation, that we have equality of opportunity,” said Diana Elliott, research officer for economic mobility at non-profit Pew Charitable Trusts in Washington. “For this current generation of adults, if you’re raised in the bottom it’s much harder to climb up the economic ladder.”
Stocks were little changed, after the Standard & Poor’s 500 Index dropped yesterday to the lowest level in a month, as lawmakers sought to avoid a debt default and investors waited for the start of earnings season. The S&P 500 fell 0.1 percent to 1,674.37 at 10:16 a.m. in New York.
Children from humble beginnings are less likely to make great gains in wealth and social status and 70 percent won’t ever reach the middle class, according to a Pew study.
The reverse also is true. Those at the top of the income scale are less likely to slip down, a phenomenon economists call “stickiness at the ends.”