Is The American Dream Dead?

Is The American Dream Still Alive?

In 1970, 92% of 30-year-old Americans were earning more than their parents when they were 30, adjusted for inflation, of course. Now? Only 50% earn more than their parents did at age 30.

For centuries, Presidents have been citing the American dream as they promise to build a better America. Regardless of your status, if you work hard and play by the rules, you will be rewarded with financial security.  While income certainly isn’t the best representation of well-being across households, its a pretty interesting statistic.

So what’s happening to The American Dream? Are millennials just not working hard enough to reap the benefits that are available? Does everyone really have equal opportunity in today’s economy?

In a recent study, Stanford economist Raj Chetty set out to find what percentage of children born in low-income families actually rose to the top of the income distribution, and more importantly, why. The answer to this, he found, was that 7.5% of children in the bottom fifth of the income distribution rose to the top quintile. Not a bad percent. So why is it that Americans have such a hard time surpassing the generation before them?

Chetty looked closer at his data and found shocking trend in childhood environments. In some situations, the divide was glaring. Children who grew up in San Francisco, for example, have twice the likelihood of climbing from the bottom to the top as children who grew up just across the Bay Bridge in Oakland.

After extensive research, Chetty concluded that there were five main factors in a child’s life that correlated with upward mobility: residential segregation, income inequality, family structure, social capital, and school quality.

Although these correlations don’t necessarily explain the causal mechanisms at work, it points us in the right direction. Income mobility has proven to become more accessible to children who grew up in integrated communities. This means different races, different incomes, different values, etc. all in one zone. When children grow up surrounded by these differences, they are more likely to succeed later in life.

Now that we can identify what correlating factors reside in our social and political constructs, we can take strides to identify the causal mechanisms and reallocate our resources to policies that can aid these areas specifically.

In short, there is no doubt that the American Dream is suffering. The dream can be revived if action is taken to integrate all types of people into communities. Segregation between classes further divides the wealth as “climbing the ladder” stops at the top of an individual’s social circle.

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