The American Dream, Quantified at Last

http://www.nytimes.com/2016/12/08/opinion/the-american-dream-quantified-at-last.html

David Leonhardt DEC. 8, 2016
Kevin Quealy contributed research.

The phrase “American dream” was invented during the Great Depression. It comes from a popular 1931 book by the historian James Truslow Adams, who defined it as “that dream of a land in which life should be better and richer and fuller for everyone.”

In the decades that followed, the dream became a reality. Thanks to rapid, widely shared economic growth, nearly all children grew up to achieve the most basic definition of a better life — earning more money and enjoying higher living standards than their parents had.

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About 92 percent of 1940 babies [born in 1950] had higher pretax inflation-adjusted household earnings at age 30 than their parents had at the same age. (The results were similar at older ages and for post-tax earnings.)

The few 1940 children who earned less than their parents were also, for the most part, doing just fine. They were generally earning less because they had grown up rich — children of top corporate executives, say, who became, or married, doctors, lawyers or professors.

Achieving the American dream was a virtual guarantee for this generation, regardless of whether people went to college, got divorced or suffered a layoff. Why? Because they spent their prime working years in an economy with two wonderful features. It was growing rapidly, and the bounty from its growth flowed to the rich, the middle class and the poor alike.

Not even the oldest baby boomers, born in the late 1940s and early 1950s, would be quite so lucky. Economic growth began to slow as they were entering the job market in the 1970s, thanks in part to the energy crises. Still, more than three-quarters of these early Baby Boomers would ultimately make more than their parents.

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For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did. In the industrial Midwestern states that effectively elected Donald Trump, the share was once higher than the national average. Now, it is a few percentage points lower. There, going backward is the norm.

Psychology research has shown that people’s happiness is heavily influenced by their relative station in life. And it’s hard to imagine a more salient comparison than to a person’s own parents, particularly at this time of year, when families gather for rituals that have been repeated for decades.

•••••

For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did. In the industrial Midwestern states that effectively elected Donald Trump, the share was once higher than the national average. Now, it is a few percentage points lower. There, going backward is the norm.

Psychology research has shown that people’s happiness is heavily influenced by their relative station in life. And it’s hard to imagine a more salient comparison than to a person’s own parents, particularly at this time of year, when families gather for rituals that have been repeated for decades.

•••••

For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did. In the industrial Midwestern states that effectively elected Donald Trump, the share was once higher than the national average. Now, it is a few percentage points lower. There, going backward is the norm.

Psychology research has shown that people’s happiness is heavily influenced by their relative station in life. And it’s hard to imagine a more salient comparison than to a person’s own parents, particularly at this time of year, when families gather for rituals that have been repeated for decades.

But education is not the only answer. Incomes have also stagnated because of the rise of corporate power and the weakening of labor unions, leading profits to rise at the expense of wages. The decline of two-parent families plays a role, too. And tax policy has not done enough to push back against these forces: The middle class, not the affluent, deserves a tax cut.

The painful irony of 2016 is that nostalgia and anger over the fading American dream helped elect a president who may put the dream even further out of reach for many people — taking away their health insurance, supporting ineffective school vouchers and showering government largess on the rich. Every one of those issues will be worth a fight.

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