The children of the ’80s — aka millennials — are worse off than their parents were at the same age, according to new findings from California and Harvard researchers. The Fading American Dream: Trends in Absolute Income Mobility Since 1940 compares those born in the ’80s with those born in the 1940s and ’50s. The conclusion: Only 50 percent of today's 30-year-olds out-earn folks at the same age from earlier generations. For the Golden State, the outlook is worse. Less than half (48.8 percent) of 1980s-born Californians earn more than their parents at the same age, the study says.
Back in 1940, a whopping 92 percent of 30-year-olds across the nation earned more than their parents did at age 30, the researchers from UC Berkeley, the Stanford Institute for Economic Policy Research and Harvard found.
“Nearly all men born in 1940 were better off than their fathers, but for those born in 1984, that rate dropped to 41 percent,” according to a statement. “For daughters, the rate went from 43 percent to 26 percent for the same period.”
The culprit isn't the slow pace economic growth; that actually trends upward over the long term. The problem is that most of the nation's gross domestic product growth has benefited a small slice of society — the very rich.
That wasn't necessarily the case in the war years and the decade to follow, but today “a large fraction of GDP goes to a small fraction of high-income households,” according to an executive summary of the research. “Higher GDP growth does not substantially increase the number of children who earn more than their parents.”
Raj Chetty, a senior fellow at the Stanford Institute for Economic Policy Research, said in a statement that the 50 percent of millennials who do better economically than their parents is the equivalent of the “coin flip” of life.
“One of the defining features of the American Dream is the ideal that children have a higher standard of living than their parents,” he said. “We assessed whether the U.S. is living up to this ideal and found a steep decline in absolute mobility that likely has a lot to do with the anxiety and frustration many people are feeling, as reflected in the election.”
Indeed, while this downward-mobility trend applied to all 50 states and nearly all socioeconomic classes save for the ultra-rich, it was particularly acute in the rustbelt Midwest, including states like Michigan, which narrowly favored President-elect Donald Trump, and Illinois, which went big for Hillary Clinton.
The conclusion for these researchers is that the country needs to take action to more evenly distribute America's bounty. “The finding of this study implies that if we want to revive the American Dream of increasing living standards across generations, then we’ll need policies that foster more broadly shared growth,” Chetty said.