It has become nearly impossible for the majority of young Americans to expect to earn more than their parents did. This is an unprecedented, historic decline of opportunity in this country. And yet the American Dream remains the same. Most people continue to believe they might carve out a place in life better than the one they grew up in. This is tantamount to living in denial. Essentially, the American Dream has died for most members of our younger demographic. Their working plan has been degraded into the modest hope for a rewarding job, or a tiny raise, not a second or third bathroom, or—the unimaginable luxury of a cottage on a lake.
All of this has been borne out through research for the “index of the American Dream” created by Raj Chetty, a Stanford professor, who assembled a team to gather the data needed to determine the state of opportunity and economic hope in America today. He got access to millions of tax records stretching over decades, with the names of individuals withheld, enabling him to compare incomes over generations within particular families. His findings are disheartening, if not grim. As David Leonhardt wrote in a recent New York Times column:
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. (For those born in 1940) achieving the American dream was a virtual guarantee, regardless of whether people went to college, got divorced or suffered a layoff--because they spent their prime working years in an economy with two wonderful features. It was growing rapidly, and the bounty from its growth flowed to the rich, the middle class and the poor alike.
As a result, these early Baby Boomers who entered the workforce in the 60s had a lock on the American Dream. Later Boomers had a slight disadvantage. They came out of college during the recession and energy crisis of the 70s, and yet three-quarters of this segment “would ultimately make more than their parents.” With each succeeding decade, this generational mobility—the chance of moving up the income ladder with each new generation—has gotten more and more restricted to wealthier families. Anyone born in 1980, for example, has only a 50 percent chance of having a better quality of life than his or her parents. And the closer you get to the present, the worse the percentages get.
Many might wonder how this can be the case in an economy that appears to be thriving, if Wall Street and the GDP are reliable indicators. They aren’t. They simply reflect the reality that we’ve crossed a threshold in which technology and foreign labor overseas are permanently eliminating domestic jobs and stagnating wages. Through our ingenuity, we’ve created a world where the few can extract increasing profits from enterprises that hand out smaller and smaller rewards to the people who work for them, or used to work for them. Productivity races upward, while the standard of living steadily declines.
We’re in the middle stages of an historic shift for the human race in which the profit motive must humanize itself, because we simply have no choice. Technology will eliminate more and more jobs with each passing year, and as human labor becomes our greatest surplus resource, it’s price will naturally fall—the less you need a worker, the less you will likely pay him or her.
This is true if your only motive is shareholder value and higher profit. If we wake up to the actual economic reality surrounding us and moderate these pursuits—if we recognize that a thriving middle class is the taproot of free market capitalism—then the private sector can step back and reconsider the path it’s been on for four decades. When the American Dream was alive and well prior to the 1980s, we were not on this path: business and industry recognized that the welfare of the average worker was a central imperative. We need a paradigm shift back to that vision. We need to advocate what might have seemed blasphemous in board rooms only a few years ago: offer higher wages when lower ones would be enough to keep workers on the payroll; question whether or not it’s worthwhile for our entire system to replace workers with technology; implement employee stock ownership; use technology and creativity to develop jobs for human beings instead of replacing them. In other words, rebalance our business goals so that we build a sustainable economy, not one in which shareholders extract profit at the expense of our future integrity as a nation. Ironically, by rebuilding the middle class, paying employees fairly, and investing more in our businesses, will soon enough result in even higher returns to shareholders while seeing our society thrive as well. The private sector can do this, voluntarily. All it requires is for capitalists to wake up and make it happen.
Peter Georgescu is the author of The Constant Choice. He can be found at Good Reads.