Federal Reserve Just Declared the American Dream is Dead for Most Americans
Long the stuff of sardonic quip, it’s finally official: the putative American Dream — an iconic, white picket-fenced, rise-to-the-top-from-nothing bastion of hope for citizens and foreigners, alike — is officially dead.
In no small irony, the study divining what the vast majority of cynical Americans already knew came from the St. Louis Federal Reserve.
Stanford economist Raj Chetty, author of the study, sought to measure “the probability that a child born to parents in the bottom fifth of the income distribution makes the leap all the way to the top fifth of the income distribution.”
For a person to go from ‘rags to riches,’ in other words, has become nearly impossible in America — upward mobility is now as quaint and anachronistic as a Norman Rockwell painting.
“In the United States,” Chetty found, “children born to parents in the bottom fifth of the income distribution have a 7.5 percent chance of reaching the top fifth. That compares to about 9.0 percent in the United Kingdom, 11.7 percent in Denmark, and 13.5 percent in Canada.”
While these percentages appear generally low, Chetty points out that, because you literally can’t have more than 20 percent of people in the top 20 percent, the otherwise slight differences in economic mobility between nations in actuality represent stark contrasts.
“One way to think about it is this: your chances of achieving the ‘American Dream’ are almost two times higher if you grow up in Canada relative to the United States,” he explains. Apparently the American Dream requires a name change.
For the study, Chetty and colleagues analyzed economic mobility by U.S. county — and the resulting mapped data evinces pronounced disparities not only by region, but in several places, by counties in the same metro area.
Americans in the Southeast have the least overall opportunity to rise from the bottom fifth in income to the top — at just 4.8 percent, the number is “lower than any other developed country” the researchers examined — while a swath through the Great Plains, south to Texas, and, to a lesser degree, the West, appear to offer the most optimistic chance for such an economic leap.
“Now, naturally the question of interest both to academics and policymakers is why does upward mobility differ so much across areas and, ultimately, what can we do about it?” the author queries.
“The first clues for us as researchers came from the fact that this spatial variation emerges at very early ages. In high mobility areas like Salt Lake City or San Jose, children from low-income families are more likely to attend college, and they’re less likely to have a teenage pregnancy. By the time they’re 16, 17, or 18 years old, a lot of these patterns have already emerged. The reason that’s important is that it points to factors that affect children not just once they’re in the labor market but before they start working. It suggests that childhood environment could be extremely important here.”
Low income, alone, does not predict an inability to move up the economic ladder — rather, several additional factors come into play which can cancel out the disadvantage of beginning in the bottom fifth of income.
“More mixed-income communities tend to produce better outcomes for kids from disadvantaged backgrounds,” and “areas with less income inequality tend to have higher rates of upward mobility,” the researchers found.
“We find that areas with more stable family structures — in particular, areas with fewer single parents — have substantially higher rates of upward mobility. Areas that are more socially cohesive, with large amounts of social capital, also have much higher rates of social mobility. Finally, as you might expect, areas with better public schools tend to have much higher rates of social mobility.”
Mitigating circumstances mean certain regions literally aren’t conducive to pulling oneself up by the bootstraps, as has often been criticized of the economically disadvantaged. That level of success — achieving income in the top quintile — cannot be achieved if all of the necessary conditions aren’t in place, as is the case in many areas of the U.S.
Incidentally, an additional finding speaks volumes on one wildcard factor tending to lend itself to the amassing of wealth — innovation. In preliminary findings from ongoing study, Chetty writes,
“We find that a child’s probability of becoming an inventor is strongly related to his or her parents’ income: children from rich families are 10 times as likely to become inventors as those from lower-income families. Further examination of these data suggests that a large portion of this innovation gap can, once again, be attributed to differences in childhood environment and exposure between low- and high-income families. These results imply that improving opportunities for social mobility could ultimately increase the rate of innovation in the economy and thereby benefit everyone, not just disadvantaged children. Hence, increasing mobility is of interest not just from the perspective of justice but also from the perspective of economic growth.”
From the time children first attend public school, indoctrination into the system includes surreptitious cheerleading of the American Dream — but what once seemed attainable for any starry-eyed dreamer is in reality every bit as elusive as a leprechaun’s pot of gold.
No matter one’s fortitude or dogged determination, if all the tools necessary for success aren’t available, that American dream remains a simple rumination.