Study: ‘American Dream’ fades by 42 percent since 1940s due to income inequality

The "American Dream" -- if defined as children earning more than their parents -- is fading, according to a new study released by researchers at Stanford University, Harvard University and the University of California-Berkeley. The study shows 50 percent of people born in the 1980s make more income than their parents, compared to 92 percent of children who were born in the 1940s. File Photo by TBIT/Pixabay

WASHINGTON, Dec. 9 (UPI) — A new study suggests the “American Dream” is fading, citing research that shows 50 percent of people born in the 1980s make more income than their parents, compared to 92 percent of children who were born in the 1940s.

That is, if you consider the definition of “American Dream” to be a person making more than his or her parents made.

In The Fading American Dream: Trends in Absolute Income Mobility Since 1940┬ástudy conducted by Stanford University, Harvard University and the University of California-Berkeley, researchers said absolute income mobility, a rate used to determine the number of children who earn more income than their parents, has “fallen sharply over the past half century.”

The study said income inequality is the primary reason younger people have been left behind despite a growing gross domestic product, the secondary factor being a slower rate of economic growth when compared to that seen after the generation born in the 1940s.

“Absolute income mobility has fallen across the entire income distribution, with the largest declines for families in the middle class,” researchers wrote. “Most of the decline in absolute mobility is driven by the more unequal distribution of economic growth in recent decades rather than the slowdown in GDP growth rates.”

Researchers found that upward income mobility diminished the most in the industrial Midwest states, such as Michigan and Illinois, where high-paying industrial jobs have declined to the point the region is referred to as the “Rust Belt.”

But in Washington, D.C., those born since 1980 have a 62.2 percent chance to earn more than their parents — the highest rate nationally by 7 percent.

If income distribution remained at the same level seen during the generation born in the 1940s, then 80 percent of today’s young adults would be earning more than their parents, the study said.

“With the current distribution of income, higher GDP growth rates alone are insufficient to restore absolute mobility to the levels experienced by children in the 1940s and 1950s,” researchers wrote. “If one wants to revive the ‘American Dream’ of high rates of absolute mobility, then one must have an interest in growth that is spread more broadly across the income distribution.”

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