Research
1:00 am
Wed July 18, 2012

Five facts about achieving the American Dream

Our State of Opportunity team is looking into ways disadvantaged children in Michigan can get ahead, and we're planning on bringing you many personal stories of families that are working to do just that. But for the next two weeks, we want to take a look at what research can tell us about getting ahead in America. Today, we have a list of five facts about the American Dream.

Before we get to our list of facts, I want to tell you about a dark and dingy room in the basement of the Institute for Social Research building at the University of Michigan.

I went there not too long ago with a U of M researcher named Fabian Pfeffer. He unlocked a creaky metal gate, and rolled open a set of shelves full of of brown file folders.

"So, this is the collected history of a family in the US," he says, pointing to a row of folders. "It starts in 1969 and then you see all these dusty and yellowy questionnaires."

The questionnaires are part of the Panel Study of Income Dynamics at the U of M. The PSID is one of the best data sources in the world for measuring something called “intergenerational economic mobility.” It’s a measure of how a person’s economic standing compares to their parents’ - better, worse or the same. In short, it measures the American Dream.

Researchers who’ve used the PSID have come up with some surprising findings.

For example, Pfeffer tells me that when researchers take PSID data and compare it to similar studies in other countries, they can actually rank nations based on economic mobility.

"Where does the US rank in those rankings?" he asks. "When we talk about income mobility, the US ranks pretty much at the bottom."

So, now we are ready to begin our list of facts:

Fact #1: If you want to achieve the American Dream, America is actually not a very good place to try to do it. At least when it’s compared to other industrialized nations. If you start out poor and you want to get ahead, you’ve got a better shot in Finland or Norway than in the United States. You even have a better shot in Canada.

But the news isn’t all bad.

Fact #2: Most Americans do make more money than their parents, even when you adjust for inflation.

Last week, the Pew Economic Mobility Project released a study on the American Dream - the study, by the way, used data from the PSID.

One of the key findings is that a pretty big majority - 84 percent of Americans - earn more money than their parents.

Erin Currier is the director of Pew’s Economic Mobility Project. She says this fact gives tangible evidence for people that the American Dream is alive.

"I think that’s something Americans can feel and can see in their real lives," she says. "Maybe it’s that they have a slightly bigger home. Or they’re more likely to be able to send their children to college."

But, looking at earnings this way is not the only way to look at economic mobility and the American Dream. Because, if everyone is moving ahead, you can make more money than your parents, and still be stuck relative to everyone else around you.

So, imagine income levels as rungs on a ladder. As the economy has grown, the rungs have gotten farther apart. This brings us to ...

Fact #3: If your parents are on the bottom rung of the economic ladder, there’s a good chance you’ll end up there too.

The Pew study looked at a ladder with five rungs. Forty-three percent of the people whose parents were on that bottom rung stayed there as adults. It turns out, Currier says people were also more likely to end up where their parents were if they started at the top.

"We call that stickiness at the ends," she says. "And it really belies this notion of equality of opportunity that Americans hold so dear."

Here’s another fact that belies that notion, and it’s a big one:

Fact #4: If you want to achieve the American Dream, the color of your skin matters.

If we go back to the Pew study with the rungs on the ladder, African Americans were more likely to be on the bottom rung. And those who were there were less likely to climb out of it. Half of all black children who start on the bottom rung never make it out. This leads to one more simple and overwhelming fact ...

Fact #5 Not everyone has the same chance of achieving the American Dream.  

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