American dream obscures larger truth
By Susan Pugh on Nov. 08, 2007
Do you remember the first time someone explained the economic American Dream?
I do. My sophomore civics teacher laid it out for my class, mostly middle-income kids but a few poor enough for subsidized lunches.
Anyone who works hard can grow up to be rich, he said, even those born into poverty.
This sounded pretty fair. The high school caste system is decidedly unfair and many of us, especially the marginally geeky like me, longed to graduate to a truly meritocratic social order.
Here’s what my teacher didn’t tell us about the American Dream: While technically true — we all know stories of people who emerged from poverty to run a Fortune 500 company — its power and pervasiveness obscures a larger truth about this country.
The most important predictor of how much people will earn in their lifetime is how much their parents made, income studies show. If your parents were poor, you are far more likely than not to be poor. If they were rich, you will almost certainly be rich. Ditto for middle-income.
Look around. Our society is a product of these statistics. Yet we ignore them. We have convinced ourselves that they do not apply to any one person in particular, that each person rises and falls on his or her merits.
It’s a little bit like the lottery. Someone will win. Statistically speaking, it will never be you. But millions of people play every week because they delude themselves into thinking they exist outside the rules of probability.
Recent income studies show that upward income mobility the term economists use to describe movement from poverty to wealth has declined over the last few decades.
The fact that our primary cliché to describe this phenomenon — pulling himself up by his bootstraps — employs a term that has not been used in any other context since 1920 hints that the entire concept is becoming a historical relic.
Recent studies of income mobility have found that over the last 30 years, it has become much harder for children of poor parents to move up the income ladder and for children of wealthy parents to move down.
That might explain why the only people I hear raving about the American Dream anymore are people older than my parents.
The idea of moving up the ladder with hard work has always been considered a uniquely American concept. Yet in many developed countries Denmark, Finland, Germany and Canada, to name a few the advantages and disadvantages kids start with have far less impact on adult earnings, according to a 2004 analysis by researcher Miles Corak. It’s easier there to start out poor and become rich and vice versa.
Perhaps we should start calling it the Canadian Dream?
Not to get all John “Two Americas” Edwards on you, but the stats show that despite all that American Dream talk, we’re rapidly becoming a less equal society, in terms of income.
New IRS stats released last month showed that the wealthiest 1 percent took in 21 percent of income in 2005, the largest proportion in recent history. The top 50 percent of earners accounted for nine out of 10 dollars in income, another record.
The growing income gap and dwindling income mobility are problematic, for reasons beyond basic fairness. The belief that one could get rich through hard work convinced people to work hard (duh), which helped our economy grow over the last half-century.
What happens when people wise up? If current trends continue, we’ll probably find out pretty soon.
—For more info on helping mom and dad plan for retirement, visit the First Steps blog, firststeps.mgblogs.com. Have a question about money? Contact Mussenden at smussenden@ media
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