David Leonhardt: Data Indicate Chances of Making as Much as Your Parents is Diminishing!


Dear Commons Community,

As an example of the growing income inequality in our country, recent data indicate that the chance of an individual born in 1980 of making as much as her/his parents is about 50 percent and in decline.  An individual born in 1940 had a 92 percent chance.  In a piece in today’s New York Times, David Leonhardt provides data on a new index developed by economists at Stanford University that tracks income by families over time.  Using census data from the past 80 years, the data paints a sad picture of how our society is evolving in terms of achieving the American dream.  Here is an excerpt.

“The phrase “American dream” was invented during the Great Depression. It comes from a popular 1931 book by the historian James Truslow Adams, who defined it as “that dream of a land in which life should be better and richer and fuller for everyone.”

In the decades that followed, the dream became a reality. Thanks to rapid, widely shared economic growth, nearly all children grew up to achieve the most basic definition of a better life — earning more money and enjoying higher living standards than their parents had.

These days, people are arguably more worried about the American dream than at any point since the Depression. But there has been no real measure of it, despite all of the data available. No one has known how many Americans are more affluent than their parents were — and how the number has changed.

It’s a thorny research question, because it requires tracking individual families over time rather than (as most economic statistics do) taking one-time snapshots of the country.

The beginnings of a breakthrough came several years ago, when a team of economists led by Raj Chetty received access to millions of tax records that stretched over decades. The records were anonymous and came with strict privacy rules, but nonetheless allowed for the linking of generations.

The resulting research is among the most eye-opening economics work in recent years. You’ve probably heard some of the findings even if you don’t realize it. They have shown that the odds of escaping poverty vary widely by region, for instance, an insight that has influenced federal housing policy.

After the research began appearing, I mentioned to Chetty, a Stanford professor, and his colleagues that I thought they had a chance to do something no one yet had: create an index of the American dream. It took them months of work, using old Census data to estimate long-ago decades, but they have done it. They’ve constructed a data set that shows the percentage of American children who earn more money — and less money — than their parents earned at the same age.

The index is deeply alarming. It’s a portrait of an economy that disappoints a huge number of people who have heard that they live in a country where life gets better, only to experience something quite different.

Their frustration helps explain not only this year’s disturbing presidential campaign but also Americans’ growing distrust of nearly every major societal institution, including the federal government, corporate America, labor unions, the news media and organized religion.”

Leonhardt’s last comment that the economic situation regarding well-paying jobs and employment has gotten to the point where young people have come to distrust our major political and social institutions, is most telling.  It is a sad commentary as to what we the older generation have allowed to happen in our country.



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