“What is the American Dream?” asked the public radio call-in show Maine Calling on a recent program. How has the idea of it evolved and what is the economic underpinning of it? Furthermore, is achieving that dream a goal that is increasingly out of reach for ordinary Americans?
Among those invited to consider these questions on the broadcast, which aired June 30, was Professor of Economics Erik Nelson, whose students have been exploring the data and statistics behind the concept of the American Dream.
What they have found, he said, is that people born in 1940 had a 90 percent chance of outearning their parents, which is traditionally considered the standard metric for measuring the achievement of the American Dream.
“More recent data though,” added Nelson, “has pointed out that people born in the early 1980s are only about 50 percent likely to outearn their parents.” This, we are told, is largely due to the sharp economic growth that occurred in the immediate post-World War II years, following a surge in manufacturing activity and government programs such as the GI Bill. This resulted in a steep rise in living standards for most Americans.
The curve has flattened out since those postwar years, said Nelson, and economists tend to now be more concerned with how people might achieve what he calls a “relative American dream,” rather than comparing their wealth to that of their parents: “Because if your parents made $500,000 and you make $450,000, you're still achieving the American dream even though you're not outearning your parents.”
The focus of current studies on the subject, he said, is to consider, for example, the probability that someone born in the bottom 20 percent of the nation’s income distribution can make it to the middle class, or even to the top 20 percent. “That likelihood,” explained Nelson, “has been diminishing over the last thirty, forty, fifty years, and there's a whole host of reasons.”
Listen to Maine Calling, featuring Bowdoin economist Erik Nelson.
