S tre et R oots • August 25-31, 2017
Commentary
P age 11
Our fading American Dream and what we can do about it
BY MARTIN HART-LANDSBERG
C O N T R IB U T IN G C O L U M N IS T
recent study published in Science
Magazine, “The fading American
dream: Trends in absolute income
mobility since 1940,” makes clear that the
workings of the contemporary U .S .
economy have largely undermined one of
the core tenets of the
so-called American Dream
- that children can expect
to enjoy a higher standard
of living than their parents.
In particular, the six
authors, all economists and sociologists,
found that the percentage of children that
earn more than their parents - what they
call the rate of “absolute income
mobility”- has “fallen from approximately
90 percent for children born in 1940 to 50
percent for children born in the 1980s.”
A
Martin Hart-
Landsberg is a
Professor of
Economics Emeritus
at Lewis and Clark
College. Street Smart
Economics is a
periodic series written
by professors emeriti
in economics for
Street Roots.
confirmed. And, given the general stagnation
in earnings over the last twenty years, it is a
good bet that the percentage of children
earning more than their parents has now
fallen below 50 percent.
The study and its results
The authors used data from a variety of
government sources to calculate the
percentage of children with earnings
greater than those of their parents at a
comparable age. As a first step, they
defined the income of the child as the sum
of the pre-tax incomes of the child and
their spouse when the child was age 30,
and the income of the parents as the sum
of the spouses’ pre-tax incomes when the
highest earner was between ages 25 and
35.
The take-away
Unfortunately, the authors left unexamined
the causes of the growth in inequality. But
really there is nothing very mysterious about
these causes. In brief, they can be found in
the workings of the contemporary U .S.
economy or more specifically, the core
strategies embraced by corporations in their
pursuit of profit: weaken unions and
restructure work, globalize economic activity,
promote privatization, and embrace
financialization.
For example, corporate-directed attacks on
unionization and the intensification and
fragmentation of work has left workers with
little power to defend their rights in the
workplace or capture a fair share of the
income they produce with their labor.
Globalization has enabled corporations to
produce using lower cost third world labor
and win concessions from workers in this
country who fear losing their jobs.
Privatization has turned public goods like
education into new tax-supported profit
centers for large corporations, and almost
always with the replacement of unionized
public sector workers by lower paid non-union
workers.
Financialization, by privileging mergers and
acquisitions, stock buybacks, and higher
dividend payouts over real job-creating
Financialization
is often
described as
the process by
which financial
institutions,
markets, etc.,
increase in size
and influence.
in v e s tm e n ts in p la n t an d e q u ip m e n t, re w a rd s
“Brother can you spare a dime, ” by Albert Potter,
Woodcut, 1933/36.
More specifically, 92 percent of children
born in 1940 grew up to earn more than their
parents. In sharp contrast, only 50 percent of
children born in 1984 grew up to earn more
than their parents. The downward trend was
especially steep for children born between
1940 and 1964. There was a pause in the
decline in absolute mobility over the next 10
years, thanks in large part to the economic
boom of the late 1990s. However, the percent
of children earning more than their parents
resumed its decline in the mid-1970s, hitting
50 percent for children born in 1980 and
Explanations
If we are going to reverse this decline we
have to understand its cause. The authors
examined two different possible explanations.
The first was that the decline was caused by
slowing rates of economic growth. The
second was that it was caused by growing
income inequality.
Ultimately, the message of the study is
clear: The decline in absolute mobility is
primarily due to the rise in inequality, not the
slowdown in growth. Therefore, efforts to
speed up growth, even if successful, are
unlikely to do much to boost the relative well
being of future birth cohorts. If we want to
substantially improve things we need to
reverse the rise in inequality.
1984.
The authors tested the reliability of their
work in a number of ways. In each case, the
authors’ initial conclusion, that the percent of
children earning more than their parents has
fallen substantially since 1940, was
top managers and stockholders while
weakening the overall health of the economy.
These strategies in combination have
successfully pushed up corporate profits and
the incomes of the very rich at the expense
of average worker earnings. The outcome:
growing inequality and a decline in absolute
mobility.
It is important that we understand this,
that the generational decline in well-being is
largely caused by growing inequality that is
driven by corporate strategies that are all too
often supported by government policies. It
means that the steady decline in generational
fortunes is not the result of some “natural,”
unalterable modernization process.
Hopefully we are seeing the birth of a new,
powerful social movement that is willing and
able to challenge and change those strategies
and policies.
A Clarion Call
by Edmundo Cardenas
,
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enemy and it is us!”
PYnenditures to get more professionals to serve God’s “little ones.” Don’t avert your eyes or put
We must care even if it mean
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