The American Dream is Now a Coin Flip: Here's Why and What We Can Do (#287)
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What does the American Dream mean today?
The American dream says, if you work hard, you'll get ahead. Now, new data lets us follow lives over decades and see what actually makes a difference. For generations, parents have believed that if their kids work hard, they'll get ahead. But when you look at what really happens over time, the picture isn't so simple. So what really helps kids succeed? Hi, everyone. I'm Lynn Thoman, and this is Three Takeaways. On Three Takeaways, I talk with some of the world's best thinkers, business leaders, writers, politicians, newsmakers, and scientists. Each episode ends with three key takeaways to help us understand the world and maybe even ourselves a little better. Today, I am really glad to be joined by Raj Chetty.
Raj is a Harvard professor who studies opportunity in America. He and his team at Opportunity Insights follow people's lives over time to see what truly helps kids get ahead. Their findings are being used by more than 200 cities in over 40 states to improve outcomes for lower income families and children. He's just completed a major new study on what it really takes to create high opportunity neighborhoods. Raj, thanks so much for joining Three Takeaways today.
Thanks for having me, Lynn.
It is my pleasure. Let's start big. When people talk about the American dream today, what's actually happening to economic opportunity in America?
The way I think about the American dream is I think a cornerstone aspiration of our country that through hard work, any child should have the chance to move up in the income distribution relative to their parents. And so if we ask in the data, how likely is that to actually happen in practice? Turns out that for kids born in the middle of the last century, say back in 1940 or 1950, More than 90% of those kids went on to earn more than their parents did. But if you look at what has happened over time, you see that there's been a dramatic fading of the American dream, such that for children born in the 1980s or 1990s who are becoming adults now and entering the labor market, it's basically become a 50-50 shot, a coin flip as to whether you're going to do better than your parents.
So in that sense, Lynn, the American dream is less accessible than it used to be in the past.
Is part of that because economic growth in the 40s and 50s was so much more rapid than economic growth today?
Part of the reason for the fading of the American dream is indeed a decline in economic growth. About one third of it is caused by lower growth rates in recent years. But actually, two thirds of it is caused by a different phenomenon, a change in how that growth is distributed. In the 40s and 50s, everyone kind of got ahead together. Everyone's incomes went up. In more recent years, growth has been skewed primarily to people at the very top of the income distribution. And so the growth that we have is benefiting a large part of the population, much less, and wages are stagnating for people at the bottom of the income distribution. I think that underlies a lot of the frustration that people around the U.S.
feel that this is no longer a country where it's easy to get ahead.
You're talking about the American dream and opportunity from work as opposed to income from government payments and subsidies.
That's correct. Here we're talking about how much you are earning and whether that's more or less than what your parents earned, separate from what's happening with government subsidies. Although, of course, government subsidies may affect how well children end up doing. They may affect how much people choose to work and so on.
For families starting at the bottom, kids born into the lowest income households, how difficult is it for them to actually move up?
The answer to that question, Lynn, actually varies greatly across different parts of America for different subgroups. In general, we think of the U.S. as the land of opportunity. But actually, if you're born to a low-income family in the U.S., on average, your odds of rising up look lower than they do in other developed countries like in Scandinavia, for example, or Canada.
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