Is the American dream dead?
Let’s start with a little quiz. What do you think the chances are that a child born into the bottom quintile of income rises out of it? a.) 5-10% , b.)11- 20%, c.) 21-30%, d.) 31-40%, e.)41-50%, f.) over 50%. How high would those chances have to be for the American dream to be alive and well? Please make your best estimate before proceeding.
I have been asking these questions of Harvard undergraduates, graduate students and faculty for the last 8 years. There is an overwhelming consensus that the American dream is not what it used to be, that it is rare for those at the bottom to pull themselves out of the bottom. This decline in mobility is attributed to a rise in inequality. The general feeling is that between 5 and 15% of those born to bottom quintile earners succeed in pulling themselves out of that quintile and that if 30-40% of them did so that the American dream would be alive again. How does your best guess square with the estimates of these students and faculty?
As of 2007, the most comprehensive quantitative study of economic mobility In America was the Brookings/Pew Study. What did that study find?
In fact, close to 60% of children born into bottom quintile families end up doing better than their parents economically as measured by rising out of the bottom quintile of earners. Conversely, roughly 60% of those who were lucky enough to be born into the top quintile were destined to end in a lower quintile themselves.
When I read this report in 2011, my eyes popped out of my head and my jaw fell to the floor.The data were so at odds with my own assumptions. Where does the colossal gap between current perceptions of the American dream and the reality come from? Why such a discrepancy between perceptions and reality? A most remarkable thing is that the conclusions of the Brookings/Pew study were at odds with their own data if you assume the common sense view that a 60% figure is a remarkably high number indicating that the American dream is alive and well.
The authors conclusion however was that the American dream is a myth because if it were true 80% of the bottom quintile would rise out! This is the result that would be dictated by pure chance. It is the conclusion of the study not the data itself that got the press.
In 2014 an even more comprehensive quantitative study by Raj Chetty concluded that the American dream is as alive and well as ever and the fact that the rungs of the ladder of opportunity had gotten further and further apart had not made the ladder harder to climb. This part of his study got virtually no press.
Why? Confirmation bias. Partisan agendas – on the Left and the Right. Both parties tell the story that America is going to hell in a handbasket and that they are America’s only hope.