FARGO — North Dakotans who grew up poor have the best odds in the U.S. of becoming rich, but people in the Peace Garden state think achieving that dream is unrealistic — at least compared to the rest of the country, research shows.
Local economic experts say the data collected may have been impacted by the state's oil boom and downfall.
A Harvard University study titled “Intergenerational Mobility and Preferences for Redistribution” surveyed 4,705 U.S. residents on their perceptions of moving from the poorest tier of society to the richest group. The research published in February 2018 compared those perceptions to the probability that children whose families were among the poorest families between 1996 to 2000 could be among the richest people by the early 2010s.
“Americans are more optimistic than Europeans about intergenerational mobility, and they are over-optimistic relative to actual mobility in the United States, especially about the probability of a child from a family in the bottom quintile making it to the top quintile: the ‘American dream,’” the study said. “We show that, paradoxically, optimism is particularly high in U.S. states where actual mobility is particularly low.”
Based on the surveys conducted in 2016, North Dakotans were the second least confident in the U.S. — behind only Rhode Island — that children born to families in the bottom 20% of pretax household income ranks could move to the top group, according to numbers reported in a New York Times article citing the study. The North Dakotans surveyed believed only 7% of the group could achieve the “American Dream," the report said.
But about 19% of the children born between 1980 and 1985 to the poorest families in North Dakota were counted in the richest tier for 2011 and 2012, the Times article said. That was the highest tally in the U.S., the study found.
The timing of the study, when data was pulled, and views on wealth could have played a role in the study, said Jeremy Jackson, a North Dakota State University associate professor for the department of agribusiness and applied economics.
The state’s economy was booming in 2011 and 2012 — the oil industry was ramping up in the Bakken — while the rest of the country was recovering or still going through a recession.
“I tend to think that relative to the rest of the country, we might be partly overestimating just how many people made the jump,” he said, noting there was an unprecedented level of growth in the early 2010s in North Dakota.
In 2016, the state was dealing with the aftermath of a dramatic plunge in oil prices, Jackson said. The state government had initiated budget cuts, and jobs left the Bakken at a fast pace.
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Perception of the economy often lags behind reality, said David Flynn, a professor and chair for the economics and finance department at the University of North Dakota.
"You're dealing with one full iteration of boom-bust sequence in North Dakota at that time," he said, adding that the significant volatility of the economy could have played into residents' perceptions. "They saw tremendous upswing in the economy due to oil and tremendous downswing in the economy due to oil at this time."
North Dakotans have a culture of not expressing how wealthy they are, Jackson and Flynn said.
“I think a lot of people are generally surprised when they find out how wealthy the state of North Dakota actually is, because people just tend to not show it off,” Jackson said.
Jackson questioned the size of the Harvard survey, which divided evenly would equal less than 100 respondents per state. The researchers might have gotten a different result for North Dakota if they had surveyed more people in the state, he said.
Among Minnesotans, South Dakotans and Montanans, the perceived odds of moving up the income ladder were close to the actual chances of achieving that goal, the study said.