From The Fading American Dream: Trends in Absolute Income Mobility Since 1940, a sobering new analysis from economist at the University of California, Berkeley, and Stanford University, which concludes:
We find that rates of absolute mobility have fallen from approximately 90% for children born in 1940 to 50% for children born in the 1980s. The result that absolute mobility has fallen sharply over the past half century is robust to the choice of price deflator, the definition of income, and accounting for taxes and transfers. In counterfactual simulations, we find that increasing GDP growth rates alone cannot restore absolute mobility to the rates experienced by children born in the 1940s. In contrast, changing the distribution of growth across income groups to the more equal distribution experienced by the 1940 birth cohort would reverse more than 70% of the decline in mobility. These results imply that reviving the “American Dream” of high rates of absolute mobility would require economic growth that is spread more broadly across the income distribution.
More from United Press International:
A new study suggests the “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 study 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.