Here’s More Proof the American Dream Is Dying

A new study reveals that the United States is less economically mobile than was previously estimated.

(Photo: Roberto Machado Noa/Getty Images)

Jul 24, 2015· 2 MIN READ
James F. Kelly is a writer who has worked for NBC News and The Nation. He lives in metropolitan New York.

Recent surveys show that more Americans than ever are convinced that the national ethos—“Work hard and get rich”—is a myth, and new research suggests just that. According to an analysis released Thursday by Pew Charitable Trusts’ Economic Mobility Project, the relationship between class and family background is even stronger than was previously estimated.

The connection between social mobility and background may seem like an obvious one, but prior data limitations precluded an accurate estimation of the strength. “Our very simple, just-the-facts goal is to reduce that uncertainty, says David Grusky, director of Stanford University’s Center on Poverty and Inequality and a coauthor of Pew’s study.

The report, Economic Mobility in the United States, written by Grusky and his Stanford colleague Pablo Mitnik, calculates that approximately half of all parental income advantages in the United States are passed on to children. That means most Americans are likely to remain in the same social class they were born into, be it rich, poor, or middle income.

Grusky and Mitnik use a measure called intergenerational income elasticity, or IGE, to determine the extent to which economic advantage is passed from parents to their children. IGE ranges between 0 and 1. In a society with an IGE of zero, opportunity is equally distributed—rich and poor children have the same expected income as adults. But, when IGE reaches 1, inequality is perfectly reproduced, and children inherit all the advantages and disadvantages of their parents. Prior studies have measured IGE in the U.S. at as low as 0.34, but Grusky and Mitnik’s findings indicate that the country is more immobile than we thought.

(Data: Pew Research)

The persistence of economic advantage increases as you move higher along the income scale. Between the 50th and 90th percentiles, parents pass on roughly two-thirds of their advantage to their kids. Opportunity is distributed unequally, and children born on the opposite edges of society can expect different futures: A child raised by rich parents can expect a salary 200 percent larger than that of a child raised by low-income parents. “Children who are born into the bottom of the parental income distribution are not getting full access to opportunities,” Grusky says. “That means we’re wasting their talents. That means that our economy is not exploiting all that it should exploit in terms of the potential human capital that’s available to it.”

Social mobility also differs between men and women, with men more likely to inherit economic advantage than women. But rich women who married high-earning men were found to secure their economic standing.

The study reveals how out of reach the American dream has become. While labor has become more efficient and profitable, workers aren’t sharing in the wealth. In the three decades after World War II, for example, worker productivity and hourly wages rose in tandem. But from 1973 to 2013, worker pay rose just 9 percent, even though productivity increased by about 74 percent. “The suppression of wages is the most salient variable limiting or even reversing economic mobility,” says Michael J. Thompson, a political scientist at William Paterson University and author of The Politics of Inequality. The decline of unions is partly responsible for this shift. “When people can no longer bargain for their wages and their work conditions, they will be at the mercy of owners,” Thompson says.

Meanwhile, Republicans in Washington are trying to make it easier for America’s wealthiest 0.2 percent to maintain their fortunes. Last April, in a symbolic gesture on tax day, the Republican-led House voted to eliminate the tax on property transferred from the deceased to their heirs. The tax only applies to estates worth $5.4 million or more, and if eliminated, it would add $270 billion to the deficit over the next 10 years, leaving fewer funds to invest in education and health care, which would enhance economic mobility.

A day after the vote, in an article for USA Today, House Majority Whip Steve Scalise, a Republican from Louisiana, opined that the estate tax—or the “death tax,” as he put it—“is an immoral tax and an attack on the American dream.” Well, if winning the birth lottery, inheriting mass sums of money, and keeping it is the American dream, Scalise may be right.