In a sign of the fading American Dream, 92 percent of children born in 1940 earned more than their parents, but only half of those born in 1984 can say the same, researchers said Monday. Greater inequality in the distribution of growth is largely to blame, said the findings in the US journal Science. "Children's prospects of earning more than their parents have faded over the past half century in the United States," said the study, led by Raj Chetty of Stanford University. "Absolute income mobility has fallen across the entire income distribution, with the largest declines for families in the middle class."
Since little data exists linking children to their parents in terms of economic performance, researchers combined US census data with tax records, adjusting for inflation and other confounding variables. They found the sharpest declines in income in the industrial Midwest, including states like Indiana and Illinois. "The smallest declines occurred in states such as Massachusetts, New York and Montana," said the study.
(Score: 4, Interesting) by AthanasiusKircher on Wednesday April 26 2017, @04:20PM (7 children)
I will be the first to point out that income inequality in the U.S. has been increasing, and lower classes have not shared in the gains of the top 1% (or 0.1% or 0.01% or whatever, where wealth is increasingly concentrated).
But I do have to wonder a bit about the metrics used in this study. The implication is that kids will be "worse off" than their parents. But what does "worse off" mean? When you say salary is "less," how is that calculated? From TFA:
Since little data exists linking children to their parents in terms of economic performance, researchers combined US census data with tax records, adjusting for inflation and other confounding variables.
But "adjusting for inflation" carries a lot of assumptions and depends on what metric you use to calculate inflation or "purchasing power" of the dollar.
And what constitutes the expectations of "middle class life" today is radically different from those born in 1940.
According to the Bureau of Labor Statistics, in 1950 [bls.gov] households spent 68.4% of their income on food, clothing, and housing. Prior to the 1950s, few households had any significant "discretionary" spending, instead putting it mostly into necessities. They spent 29.7% on food alone, and the vast majority of that was eaten at home.
For comparison, in 2015 [npr.org] Americans spent less than 10% on food in their budgets on average, and only 6.6% on food eaten at home, the lowest percentage [usda.gov] out of a list of comparison countries.
BLS stats for today [bls.gov] have seen the percentage of income spent on food, clothing, and housing drop from ~70% to ~50%. The main reason it hasn't dropped further is due to the rise in housing costs, but those have accompanied a general increase in what people expect from houses. Compare houses built in the early 20th century to those built today. Rooms were small. Closets were small (or non-existent in some rooms). A typical 3-bedroom house would generally only have one bathroom.
Today, the average American house is about 2.5 times [npr.org] the size it was in 1950. Living space per person has doubled since the 1970s. So, yes, we're paying a lot higher percentage of budget for housing, but we're paying for bigger and bigger houses.
Meanwhile, amount of discretionary/non-essential income in the average budget has grown significantly over the decades. To have a middle-class life in 1950, you didn't have the expectations of cable TV and internet, cell phones, etc. 70 years ago few worried about planning for extended retirement; Social Security was originally designed with the assumption that 65 was the mean lifespan. It was essentially "insurance" against living longer than average. Now people still expect to retire at 65, but need to plan for 20 or even 30 years of expenditures -- so percentages of income going toward "retirement accounts" have gone up significantly for the lower classes.
All of this is to say that the "American dream" is a moving target. If middle-class folks expected the same stuff Americans expected in 1950 -- small houses with few modern labor-saving devices and random gadgets, a decent percentage of income on food and clothing and other necessities, and dying at around age 65 so "retirement" savings was unnecessary -- the percentage of people achieving the "American dream" these days has likely skyrocketed by those standards.
But our standards of living have risen significantly and our expectations have changed. Obviously our expectations SHOULD go up, and the lower classes should get a "bigger piece of the pie" given the profits the 1% are making.
Nevertheless, let's be clear about what's buried in the "adjusted for inflation" and "adjusted for other confounding variables" means. It means that we've changed the goalposts significantly over the past 75 years. Again, I absolutely agree that we should do so -- but making this sound like people today are going to be "worse off" than their parents makes a LOT of assumptions about what "worse off" means as "good" changes its meaning over time.
(Score: 2) by kaszz on Wednesday April 26 2017, @04:53PM
I think many find it hard to establish a steady work income to at least have a 1960s level of material standard. The shifting job market makes it hard to establish a stable economy.
(Score: 2) by julian on Wednesday April 26 2017, @05:03PM
Elizabeth Warren gave an interesting lecture [youtube.com] on this subject. The middle class's gains have been eaten up by 3 expenses that have risen faster than their income: health care, housing, education. Also, the increases in real wages slowed or even stopped a couple decades ago, driving a massive increase in consumer debt.
(Score: 1) by i286NiNJA on Wednesday April 26 2017, @05:19PM (3 children)
Why did it take you a college freshman size essay to say you're not sure.
(Score: 2, Touché) by lcall on Wednesday April 26 2017, @05:21PM
I don't think that is at all what he said. Rather, that the meaning of "good" has changed over time, and direct comparisons are hard to do non-deceptively.
(Score: 0) by Anonymous Coward on Wednesday April 26 2017, @05:30PM
"And there was a time in this country, a long time ago, when reading wasn't just for fags and neither was writing. People wrote books and movies, movies that had stories so you cared whose ass it was and why it was farting, and I believe that time can come again!"
- Not Sure
(Score: 3, Touché) by AthanasiusKircher on Wednesday April 26 2017, @11:04PM
I didn't say I wasn't sure -- I'm pretty sure about the trends I noted. The question of whether people are "better off" at a future date is complex. And my post was longer because if I just said "People spent money differently back then so this study's claims need qualification" without any links, no one would believe me or understand why this is issue isn't so simple.
(Score: 2) by darkfeline on Thursday April 27 2017, @03:12AM
Uh, no. No no no. No.
That graph there shows that the lowest 20% spent 36% of their income on food. That "less than 10%" only applies to the top 20%. We're not pulling biased statistics out of our ass, are we?
What about healthcare? One doctor's visit easily costs one month's paycheck for many families.
Oh, goody. I don't suppose that metric includes the house sizes of all of the homeless? Might bring it down a few orders of magnitude.
Averaged how? I can see how the multibillion dollar increase in discretionary income of the 1% has increased the average over the decades, but I don't think the bottom 50% living paycheck to paycheck have any non-negative discretionary income to speak of.
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