The acid test of the American Dream is whether people can rise beyond the circumstances of their birth.
With Occupy Wall Street doing for income inequality what the tea party did for debt, the state of the American Dream is more and more central to the political debate.
Are we divided between the top 1 percent and a vast wasteland of the dispossessed, as many of the Occupy Wall Street protesters have it?
Or are we still the land of opportunity, as top House Republican Paul Ryan insisted in a recent speech at the Heritage Foundation?
The answer is that we are still a mobile society, although not as much of one as we might wish. If the nihilistic despair of the Occupy Wall Street crowd is detached from reality, neither is self-congratulation in order.
If Paul Ryan is right to say “class is not a fixed designation in this country,” it is much too fixed at the bottom of the income scale. The American Dream is alive, but ragged around the edges.
Are we better off than our parents? Yes. According to Scott Winship of the Brookings Institution, data from the Pew Economic Mobility Project show that two-thirds of 40-year-old Americans are in households with greater incomes than their parents when they were 40. Adjusting for the size of the households — they are smaller than previously — four-fifths of Americans have surpassed their parents. Nearly everyone has been on an up escalator.
Then there’s the question of how Americans are faring relative to everyone else. If they are born in the bottom fifth of the income distribution, do they get out? Winship notes that if it were a matter of random chance, 20 percent of people would remain in the bottom fifth. Instead, about 40 percent stay in the bottom.
That means 60 percent make it out (the good news), but most don’t make it far (the bad news). Only a third make it into the top three-fifths. “Picking the right parents,” as Winship puts it, has an enormous impact. A child born to parents in the bottom fifth has about a 17 percent chance of making it to the top two-fifths, while a child born to parents already in the top two-fifths has a 60 percent chance of staying there.
It is humbling that we seem — although comparisons get very complicated — to lag behind other advanced countries in mobility. If he were writing today, Horatio Alger might set his stories in Finland.
“Research shows,” Winship writes, “that most Western European and English-speaking nations have higher rates of mobility than does the United States.” When considering how much of an effect parental earnings have on the eventual earnings of their children, Winship reports, “we are definitely worse off than Canada, Australia, and the Nordic countries, and probably worse off than Italy, France, Germany, and the United Kingdom.”
We are particularly bad at getting people, and especially males, out of the bottom. One study Winship cites showed that 23 percent to 30 percent of sons and daughters of fathers in the bottom fifth of Nordic countries and the United Kingdom remained there as adults; in the United States, 42 percent of sons stayed there.
This stagnation is less a statement about the structure of America’s economy than about its culture. As Ronald Haskins, also of the Brookings Institution, wrote in an essay for the publication National Affairs, “economic mobility is constrained above all by personal choices and behaviors.” He argues that society’s leaders “should herald the ‘success sequence’: finish schooling, get a job, get married, have babies.” If Americans finished high school, worked full time at a job that matched their skills and married at the rate they did in the 1970s, the poverty rate would be cut 70 percent.
These old-fashioned bourgeois virtues, and particularly marriage, rarely figure in the public debate. Everyone is more comfortable talking about taxes or the banks, as the American Dream frays.