Erosion of the American Dream

The “American Dream” - the ideal that children will have a higher standard of living than their parents - is fading away. According to research by Opportunity Insights, only 50 percent of US children born in the 1980s earn more than their parents. This is a dramatic decline from approximately 90 percent in 1940 and is a direct reflection of lower GDP growth rates and rising income inequality.

• Absolute income mobility in the United States has fallen across the entire income distribution, with the largest declines for families in the middle class. 
• The drop in absolute income mobility was reported in all 50 US states, with the largest declines concentrated in states in the industrial Midwest, such as Michigan and Illinois.
• These findings are unaffected by using alternative price indices to adjust for inflation, accounting for taxes and transfers, measuring income at later ages, and adjusting for changes in household size.

A question US presidential candidates will have to consider is whether shrinking opportunities to raise the standard of living could encourage Gen X (born from 1965 to 1980) and Gen Y (1981 to 1996) voters to cast their votes this fall in support of platforms that include larger income redistribution (through increasing taxes on corporations and wealthy households) and increases in government social spending. Traditionally, these are core tenants of the US Democratic platform.