Research Position Paper

The American Dream:
Achievable or Legend?

Once upon a time the impressive sight of a shining, glimmering copper Statue of Liberty welcomed millions of immigrants seeking entry to the United States with the plaque containing a quote from Emma Lazarus’ poem “The New Colossus”: “Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me, I lift my lamp beside the golden door!” It should be made clear that these words alone do not promise a better life, despite what many may think. Rather it promises only the opportunity for a better life. Such a belief is the root of the American Dream, the idea that anyone can succeed by working hard enough. As such, America has prided itself on being the “land of opportunity,” the place where everyone can become successful by following their dreams and working hard. But is America really the land of opportunity? That is to say, how successful can you really be in the United States when you compare it to other countries?

The American Dream is a vast topic that differs from person to person, and it would be disingenuous to proceed without addressing the many different versions of the American Dream, A New York Times poll found that the three most agreed upon versions of the American Dream are freedom/opportunity at 27%, hard work leads to success at 18% and a secure job at 11%. To look at both opportunity and hard work translating to success, I will look at the US’ social mobility. Social mobility is a person’s ability to overcome their current economic class and move into a higher one. This kind of social mobility is called “relative social mobility.” It’s important to note that it is distinctly different from “absolute social mobility” which measures the wealth of the population as a whole. If a newer generation of a country has higher wages while adjusting for inflation, then that country has a positive absolute social mobility. Relative social mobility takes a look at the individual, absolute mobility looks at the country as a whole.

There is no doubt the USA has a great absolute social mobility. According to a Pew research study, 84% of Americans have higher wages than their parents. However, despite a high absolute mobility, the United States actually has a relatively low relative social mobility.

It is counterintuitive to think that the country that is heralded as “the land of opportunity” is not the country that best allows its citizens the ability to move up in social class nor is it the one that provides it’s citizens the most freedom. Regardless of whether or not the American Dream is dead, the belief in it is surely dying in newer generations. In a 2015 poll conducted by Harvard’s Institute of Politics, 49 percent of people 18-29 years old responded that the dream was indeed alive, while 48 percent that it was dead for them. This belief was split fairly evenly between whites (49 percent believed that the dream was alive,) African-Americans (44 percent believed that the dream was alive) and Hispanics (52 percent believed the dream was alive.) No information on Asian Americans was given. A CNN poll found that nearly 60 percent of Americans said the American Dream was unachievable.

The lack of faith in the so-called “American” is a mirror of the world as it is today. With a weak economy, it’s no surprise that Americans feel disillusioned with the belief that hard work can get a person into a higher social class. The director of the Economic Mobility Project at Pew Charitable Trusts, Erin Currier says that “The pessimism is reflective of the financial realities a lot of families are facing. They are treading water, but their income is not translating into solid financial security.” But while Americans are thinking one thing, the data shows something else entirely. Harvard economics professor Raj Chetty says that “We find that children entering the labor market today have the same chances of moving up in the income distribution as children born in the 1970s.” Moving up in this sense is relative to the parents of the children in question. This means social mobility hasn’t changed in at least 40 years. So why does it feel so hard to move up in the world in the eyes of many Americans?

The Equality of Opportunity Project ran a study that showed that 90 percent of Americans in 1940 were able to earn more than their parents, dropping to around 50 percent by 1980. The main reason for this they cite is income inequality. The poor remain poor while the rich get richer. By breaking up the US into sections, we see that it is the poorer, rural areas that provide less chance for more earnings. In the worst sections, particularly in the southern states between the Atlantic Ocean and the Mississippi, the chance of earning more than the previous generation is 4.8 percent or lower. The best chance of moving up in terms of income distribution is to move out of those rural areas. This is not always a feasible option however. Many families are stuck in low-income areas. Inside those low-income areas are poorer and therefore more ineffective schools, which leads to a lower average education level. The lower the average education level, the less potential there is for new earnings. Thus the cycle continues, and the poor remain in the same spot, if not becoming poorer.

So domestically we know that the United States hasn’t really had that big of a difference in the percent of people who move on to a higher social class, but how does the US compare internationally? Compared to other rich nations, the US lags behind other countries, specifically European countries. Several different studies show that the US has a .47 intergenerational social elasticity. Very simply, this means that the average person in the US has a 47 percent chance to earn the same amount of money their parents did. The closest countries to the US while having a higher social elasticity are the UK and Italy both at an elasticity of .50. After that, it’s Chile at .52 and Slovenia at .54. Directly below the US is Pakistan at a social elasticity of .45 and France at .42. To recap, that means the average person in Pakistan has a 1 percent higher chance of making more money than their parents did compared to the average US citizen. Other major countries include Japan with a .34, Canada at .19 and Denmark at an astoundingly low elasticity of .15. The other Scandinavian countries, Norway and Finland are close to Denmark at .17 and .18 respectively.

While the US hasn’t changed in terms of social mobility in the past 40 years, it’s altogether no too surprising that it hasn’t. Most rich countries have retained their relative mobility in recent history. An exception to this rule is Canada where elasticity rates, according to University of Ottawa professor Miles Corak, went from a .29 elasticity rate in 2006 to a .25 in 2011 and as low as .19 today. Corak’s data also shows that countries with higher income inequality have lower social elasticities.

The truest American Dream story is one of getting to the highest social class- moving up in social class is nice, but nothing quite beats a “rags-to-riches” story. However, the US seems to lag behind other countries even there. Julia Isaacs at The Brookings Institute compared the poorest fifth of a country’s population and measured their progress. Progress was measured by observing children and what situation they were in, and then finding out what they are in now after becoming full adults. In the US 42 percent of children in the poorest fifth of the population stayed in the lowest fifth into adulthood. 50 percent were able to climb to the earnings of people in the second, third or fourth fifth of the population. That leaves a final 8 percent of the lowest income earners who were able to climb all the way up to the wealthiest fifth of the population.

Looking at the Scandinavian countries that showed the lowest intergenerational social elasticity, we find that their poor have a much higher chance of succeeding. Those countries showed that a child had a 61-63 percent chance of getting out of their parent’s bracket at the lowest fifth by one to three brackets. The amount of people who went from the lowest to the highest bracket was as high as 14 percent (Denmark) with the lowest of the Scandinavian countries (Finland and Sweden) scoring a still impressive 11 percent. Even the United Kingdom, which had a lower intergenerational social elasticity, showed more hopeful rates for their poorest people, with only 30 percent of them staying as the poorest. The UK actually ties with Norway at 12 percent of people who climbed from the lowest to the highest. It’s important to remember that “intergenerational social elasticity” only means that a person makes more money than their parents and is not representative of their social class. A person can make more money than their parents while still retaining the social class of their parents.

Now obviously, the mobility of the lower classes obviously causes others to go down into the poorest 20 percent. The amount of people who remained in the top fifth from childhood to adulthood showed generally a 2 percent spread. With the exception of the UK, the countries mentioned in the last paragraph all had 35-37 percent of their wealthiest people stay as the wealthiest. Only 30 percent of people in the UK retained their status. That is where the similarities end, however, for the US is the only country in which 10 percent of people born into the top fifth dropped into the lowest fifth. The UK trails slightly behind at 11 percent, and the Scandinavian countries all have 15 percent with the exception of Sweden at 16 percent. This is a testament to the income inequality in America. The other countries, much more socialistic than the US, all have a better wealth distribution, which makes going in and out of brackets much easier.
It can be argued that the definition of the American Dream isn’t exactly related to the relative social mobility. It is a fair assessment to say that as again, the topic of the American Dream is broad and varies from person to person. But even if we alter the meaning of the American Dream to mean a stable lifestyle, a house, a car and a disposable income for luxury items. A study taking these variables was done by a group of Canadian researchers with TheRedPin. According to them, no country in the world could support their hypothetical American Dream scenario. Interestingly enough, the two closest countries to achieving this goal were Oman and Saudi Arabia. This is based off the costs of living, buying the items mentioned above, as well as taking the average income earned by a worker in these countries.

Freedom and is the last bit of the American Dream that has not been touched yet. Freedom is the pride and joy of this country, celebrated and heralded by every state, every district and every person. What would America be without freedom? With the freedoms granted by the law, the US ranks 23rd on the Human Freedom Index, and index published by a non-partisan think tank known as The Cato Institute, who collaborated with the Fraser Institute in Canada, and the Liberales Institut at the Friedrich Naumann Foundation for Freedom in Germany.
“Human freedom is a social concept that recognizes the dignity of the individual,” says Ian Vazquez, who headed the creation of the index. “The declining performance of the United States, once considered the bastion of liberty, is worrisome,” In 2008 the HFI ranked the US as the 16th freest country in the world. Five years later, they were in 19th. According to Vazquez, “We should all be concerned with the impact on liberty of the war on terror, the war on drugs, and the decline in the rule of law and economic liberty in the United States.” These were the main reasons the US is on the decline in the HFI. At the top of the index we have Hong Kong as the freest country, Switzerland at number two, New Zealand in third, Ireland in fourth, Denmark at fifth and Canada, the UK and Australia tied for sixth. It’s important to note that with the exception of the UK all these other countries have a higher social elasticity and higher social mobility than the United States.

With all of this evidence, it is safe to say that the American Dream is no longer uniquely American. Nothing about the American Dream belongs only to America, and in fact, it seems that the idea of the American Dream is an idea survived only by its fame. Younger generations have less and less faith in the American Dream. They do not believe in it. This doubt in something so quintessential to the American way of life is not unnatural given the world economy, but even in better years, the US is not the best country in terms of economic growth. In better years, the US was not even the freest country, and in the current economic situation, it’s hard for people to afford the houses they want. Research has shown that more progressive countries are doing better than the US in terms of economic mobility, owning a house and even in the freedom of its citizens.

The United States does have a course of action, however. To increase social mobility, they need to invest properly in the poorest areas of the country by investing in education. The government needs to take more conclusive steps to fixing the economy so that people can start making more as a whole, providing them with the jobs that pay out enough for their mortgages. The wars on drugs and terror need to be looked at and reviewed closely. If the US cannot do those things, then it truly doesn’t deserve to be known for its freedom. If that should ever happen, the American Dream will be truly just a legend.

Works Cited

Chetty, Raj, and Nathaniel Hendren. “The Equality of Opportunity Project.” The Equality of Opportunity Project. The Equality of Opportunity Project, 1 Aug. 2016. Web. 07 Dec. 2016.

Corak, Miles. “Social Mobility and Social Institutions in Comparison Australia, Canada, the United Kingdom, the United States.” Economics for Public Policy. Cato Institute, 21 May 2012. Web. 07 Dec. 2016. .

Gass, Bick. “Poll: Half of Millennials Say the American Dream Is Dead.” POLITICO. POLITICO, 12 Oct. 2015. Web. 13 Dec. 2016. .

Hargreaves, Sean. “America’s Economic Mobility Myth.” CNNMoney. Cable News Network, 9 Dec. 2013. Web. 13 Dec. 2016. .

Isaacs, Julia B. “INTERNATIONAL COMPARISONS OF ECONOMIC MOBILITY.” The Brookings Institute. The Brookings Institute, 28 July 2016. Web. 08 Dec. 2016. .

Luhby, Tami. “The American Dream Is out of Reach.” CNNMoney. Cable News Network, 4 June 2014. Web. 07 Dec. 2016. .

Perez, Esten. “The Institute of Politics at Harvard University.” Harvard IOP Fall 2015 Poll | The Institute of Politics at Harvard University. Harvard Institute of Politics, 10 Nov. 2015. Web. 08 Dec. 2016. .

Seelye, Katharine Q. “What Happens to the American Dream in a Recession?” The New York Times. The New York Times, 07 May 2009. Web. 10 Dec. 2016. .

Vasquez, Ian, and Tanja Porcnik. “The Human Freedom Index.” Cato Institute. Cato Institute, 4 Feb. 2016. Web. 07 Dec. 2016. .

Venator, Joanna, and Richard V. Reeves. “Mobility: What Are You Talking About?” Brookings. The Brookings Institute, 28 July 2016. Web. 9 Dec. 2016. .

Winship, Scott. “Does the U.S. Have Lower Economic Mobility than Other Countries?” National Review. National Review, 06 July 2015. Web. 10 Dec. 2016. .

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