The dream of a land where there’s opportunity for life to be better, richer and fuller for anyone who’s willing to work for it, is what defines the American Dream.
Today, If you’re born into a low income family in America is there still a chance of rising up no matter your background?
The United States has created great technological and economic advances in the 21st century, but not everyone in the nation has shared in its prosperity. The wealth of the nation is concentrated to a handful of individuals and theres greater inequality between the rich and the poor than ever before.
Disillusioned by the American Dream
People are increasingly becoming disillusioned by the American Dream. Why is this happening? Renowned Stanford economist Raj Chetty set out to study this phenomenon. In a recent study, his team found that only 50% of America’s 30-year-olds are earning more money than their parents did at the same age. This is a steep decline compared to the 1970s when 92% of 30-year-olds were bringing in larger pay checks than their parents did at the same age.
In the past, the majority of people living in the United States were able to create a better, richer and fuller life for themselves. Whereas today the opportunity for creating the American Dream is slipping out of the hands of the average American.
Is the American Dream Dead?
Donald Trump campaigned that the “American Dream is dead” and his promise to revive it played a large part in helping him win the election. According to Gallup Polls, more than half of Americans saw the economic conditions of the nation worsening. A separate poll conducted by the Harvard Institute of Politics also found that over 50% of Millennials believed that the American Dream is “Dead…
If you were born into a low income family in America today, do you really have a chance of rising up no matter what your background is? To answer this, Chetty’s team delved into the question of income mobility, examining the number of low income families from the bottom percentile that made it into the top twenty percent of the income distribution scale.
Chetty discovered that the percentage of low income families which move from the bottom income percentile into the top twentieth percentile today in the United States is 7.5%. In Southeastern States this figure is low as 4.5%.
How Do Americans Compare?
In a cross country comparison with other developed nations, the United States’ average figure for income mobility of 7.5% is relatively low. In the United Kingdom, the percentile of low income families which move from the bottom percentile to the top percentile stands at 9% and in Canada at 13%. You’re almost twice as likely to realise the American Dream in Canada than you are in the United States.
There is less inequality in Canada than in the United States, and this could help to explain the higher rate of income mobility, as the “jump” from the bottom percentile to the top percentile is not as large.
In an interview with the Wall Street Journal, Chetty cites “Wages have stagnated in the middle class”. Increases in wealth in the United States is more frequently concentrated among the rich. As a result, economic growth is not benefitting the middle class. “When you’re in that situation, it becomes very hard for children to do better than their parents.”
Chetty’s findings are supported by separate studies conducted by economists Piketty, Saez, and Zucman. Despite overall economic growth in the United States, half of all Americans have “been completely shut off from economic growth since the 1970s. However, there is a silver lining. There are certain areas where income mobility rates continue to outperform the global average. These areas include Salt Lake City, Utah and the Bay Area, with a rate of around 13%. Iowa has a staggering income mobility rate of 15%. The American Dream is not dead but it is fading away