The American Dream
"Sadly, the American dream is dead." (Donald Trump, 2015.)
If you want to pick on someone for misstating the facts, Donald Trump is an easy target. Nationally representative surveys show that more than half of Americans consider the American Dream personally attainable, if they haven't achieved it already.
At the same time, Trump's remark might be considered merely an exaggeration if taken as a statement about our actual chances of attaining the Dream. Viewed this way, the Dream may not be dead, but it doesn't seem to be in great health either.
In this newsletter I'll discuss recent studies on the topic, including two published last month. As you'll see, statistics play an essential role in diagnosing the current state of the Dream, though the stats are sometimes incomplete or misinterpreted.
The American Dream
What exactly is the "American Dream"?
Well, it's a shopping mall. If you google "American Dream", the first hit is a retail and entertainment complex in East Rutherford New Jersey. Last Saturday, more than two thousand people camped out there overnight for the grand opening of MrBeast Burgers. (Two thousand mall campers....there's a statistic to ponder.)
The "American Dream" is also a phrase coined in 1931 by James Truslow Adams, who described it as a "vision of a better, deeper, richer life for every individual, regardless of [their] position in society". Although people differ in what they would consider better, deeper, and richer, the common theme is the assumption that in America, you can improve your life, in ways you value, through personal initiative and effort. Viewed in this broad way, some form of the American Dream has been part of America's identity since our founding as nation, and Adams is merely the one who gave the ideal a name.
Notice, by the way, that the American Dream is a sort of vision or expectation of self-improvement. When scholars and journalists refer to the Dream as "fading" (or "declining", or "dying", or whatever) they don't mean that the vision itself is fading, but rather that it's becoming less attainable. The Dream itself is alive, according to the survey data I mentioned. What seems to be diminishing is a person's chance that it will come true.
The American Dream as upward income mobility
A simple, relatively narrow definition of the American Dream is that it's the hope that you can earn more money than your parents. This is a definition that equates the Dream with upward income mobility.
Of course we dream about other things besides earnings, but upward income mobility is a useful focus, because it's extensively researched and the data are revealing.
Generational differences
One way to evalute the current state of the American Dream is to look back at how different generations of Americans have fared. The most commonly cited finding, reported by Harvard economist Raj Chetty, is that whereas 92% of people born in 1940 earned more than their parents by age 30, that figure drops to about 50% for people born after 1980. (All income statistics I provide in this newsletter are adjusted for inflation.)
Think of that: If you were born near the outset of World War II, you'd almost surely end up earning more than your parents. But for millennials, and for younger people, the chances of that outcome have declined to about 50-50. This trend has led some to conclude that the American Dream is dead or dying.
That 50% figure only tells part of the story. As detractors point out, Chetty only examined earnings through age 30, rather than telling us how how people are doing later in life (e.g., in their 50s, when earnings tend to peak). And, stepping back for a moment, we might ask how bad 50% is in the first place. It's not ideal, of course. In the ideal world, everyone's standard of living improves, and 100% of us earn more in inflation-adjusted dollars than our parents did. But how badly does a 50% rate of upward income mobility fall short of that ideal?
Cross-national differences in the Dream
One way to provide some context for the state of the American Dream is to compare upward income mobility in the U.S. to that of other countries. A good example can be found in a working paper by sociologist Robert Manduca at University of Michigan. Manduca and colleagues compared upward income mobility in the U.S., Canada, and six European countries for people born between 1960 and 1987. In brief, the U.S. did not perform well in this comparison. Among 30-year-olds, the percentages of people out-earning their parents were higher than the U.S. in five countries (Norway, Sweden, Netherlands, Finland, and the UK – all above 65%). Canada performed comparably to the U.S., while only Denmark was lower. And, among 40-year-olds, the U.S. ranked lowest.
My takeaway is that if roughly half of Americans are earning less than their parents did, this isn't simply a reflection of how economically developed countries operate. Some of these countries enjoy more upward mobility than we do. As for why this is the case, Manduca and colleagues present evidence that more successful countries have more egalitarian income distributions – in other words, our GDP may have grown in recent decades, but so has the extent of inequity between more versus less affluent Americans. Put crudely, when the rich get richer, upward income mobility is less likely for the poor.
Disaggregation and the Dream
So far I've talked a little about the American Dream from the perspective of all Americans. Chetty and others have also identified important geographic and demographic differences in upward income mobility. These studies show that the health of the American Dream depends in part on where you live and who you are. To take just one of many examples, Black Americans experience less upward income mobility than their white peers do, a difference that's mainly attributable to differences in wages and employment rates for males. In short, the American Dream is less likely to be fulfilled for some than for others.
Social networks and the Dream
Two new big-data studies conducted by Chetty and colleagues show that differences in the attainability of the Dream also stem from the influence of social networks.
The first of these studies, published August 1 in the prominent journal Nature, looked at 72.2 million Facebook users between the ages of 25 and 44. The focus was on upward income mobility among people from low-SES backgrounds. (SES, or socioeconomic status, was derived from numerous variables, including proxies for income and educational level.) Roughly speaking, the main finding was that more Facebook friendships between low- and high-SES children were predictive of greater upward income mobility among poorer children, and that these "cross-class" friendships impacted mobility more strongly than variables like family structure and educational outcomes. (Quality of friendships wasn't considered.)
Given that these "cross-class" friendships benefit low-SES children, the second study, also published in Nature, focused on why we don't see more social connections between people from low- and high-SES backgrounds. The two reasons for this, of approximately equal importance, are lack of contact between these groups (e.g., in schools and other organizations) and what Chetty calls "friending bias" – a tendency for people to befriend those they perceive as similar to them in various ways, including SES.
This is powerful stuff – simply being friends with more affluent people increases the chances of upward income mobility among poor children, but institutional as well interpersonal obstacles hinder those relationships. The media have already latched onto these studies as showing that social networks are essential to the revival of the American Dream. (Chetty would say that what's essential are social networks, and parenting, and other variables, but right now a lot of attention is being paid to the new studies. His findings make headlines so frequently they're referred to as "Chetty-bombs".)
I would view these findings cautiously. In fact, I'd say that in a small but potentially important way, they're misrepresented. Chetty and colleagues did not study upward mobility among individuals. To measure variables like income, they looked at county- and zip code-level data and made complex inferences about individual participants. A person is not a zip code. So, roughly speaking, here's one difference between what Chetty and colleagues claim to have shown, and what they actually did show with respect to low-income participants:
Chetty et al's summary of the finding: The more high-income friends you have, the more likely you'll earn more than your parents by age 30.
The actual finding: The more friendships there are between low- and high-income people in your zip code, the more likely you'll earn more than your parents by age 30.
My point is not that these two readings of the data are necessarily inconsistent. I'm only saying that they might be. (If you're a stats person, you may recognize here a type of ecological fallacy, where inferences about individuals are misleadingly derived from aggregate data.)
Some boundaries
We will continue to learn a lot about the American Dream through studies on upward income mobility as well as other versions of the Dream. (For example, other research suggests that upward mobility in occupational status has also declined to roughly 50% for millennials.) At the same time, I think it's also worth commenting on the boundaries of what we know.
For one thing, the studies I've been discussing aim for economic truths rather than psychological ones. I doubt that the majority of people compare their earnings to their parents' each year after adjusting for inflation, much less factor in differences from their parents in debt, health care costs, and so on. And, as you know, not everyone's American Dream places the same emphasis on earnings. This is illustrated by a 2017 Pew Research Center survey that asked adults whether certain outcomes are "essential", "important [but] not essential", or "not important" to their view of the American Dream. The winner was "freedom of choice in how to live" (77% of respondents considered it essential, while another 22% considered it important but not essential). Second on the list was having a good family life (70% considered it essential, while 28% considered it important but not essential). At the end of the list was becoming wealthy (11% considered it essential, while 49% considered it important but not essential, leaving 40% who considered it unimportant.)
Another boundary
In her 2001 classic "Nickle and Dimed", Barbara Ehrenreich points out that she could've sat at home with a calculator and figured out what her finances would be like if she took a low-wage job. Instead, she went out and actually worked as a waitress, a house cleaner, a nursing home aide, etc. – which is to say that she chose lived experience over statistics as the means of understanding American poverty.
In books like "Nickel and Dimed" and "Bait and Switch", Dr. Ehrenreich, who died on September 1, reminds us that statistics aren't the only way to depict the harsh realities confronting the American Dream. This is partly because you can't reduce people to numbers and statistical trends, and partly because what you do learn from statistics won't necessarily reflect the specific challenges people face that would, among other things, alter the meaning of the statistical data.
Here's an example of what I have in mind: If you carry more debt than your parents did, you might earn more than they did but have less available income, because you spend more each month paying down your debts. In other words, the stats might say you've attained the American Dream, even though your available income is actually less than what your parents had.
I emailed Dr. Manduca to ask how debt might be handled in studies on income mobility. In his reply, he pointed out how tricky it would be to take debt into account, since you'd have to decide, for example "when to count it as something that subtracts from a person's standard of living versus something that enables them to access (perhaps temporarily) a higher standard of living than they'd otherwise have access to." This comment indicates some of the complexities that would arise if debt were included in current statistical models. The reference to "temporary improvements" reminds us that, like income, debt burden changes over time. The reference to "standard of living" reminds us that income isn't the only way to think about economic success. And, of course, debt isn't the only financial burden that impacts standard of living.
Conclusion
So, what is the current state of the American Dream?
1. The Dream is alive, in the sense that more than half of adults consider it personally attainable, if not already attained. The specific content of the Dream varies from person to person. Sadly, anywhere from 10% to over 30% of people across surveys seem convinced that it's unattainable for them.
2. Defined as upward income mobility, the Dream is in bad health, in the sense that the chances of attaining it have declined among recent generations. The extent of decline doesn't seem to be inevitable in developed, industrial countries. However, your chances of attaining the Dream are influenced by host of variables, including the county in which you live, your race/ethnicity, and the composition of your social networks. To the extent that we can trust the data, there are grounds for hope, particularly if social relationships turn out to be as influential as Chetty's new work suggests.
Thanks for reading!