Millennials will be the first generation of Americans since the 1940s to have less than a 50 percent chance of out-earning their parents. According to a new study based on decades of U.S. census and tax data, there has been a precipitous decline in generational earning ability since the Boomers were born with a 90 percent shot of climbing the economic ladder. This data, culled and parsed by Harvard and Stanford University researchers, suggests not only that the American reality has left behind the American Dream, but that the idea of generational progress may become damaging.
The story of income mobility between generations is a great deal more complicated than the classic narrative of struggle and economic reward. The reasons are multitudinous are hard to uncover. Thus the study of decades of de-identified tax data and adjusted for economic shifts in GDP. Researchers found that median income, adjusted for inflation, slipped $10,000 for generations born since the 1940s. The last generation to have a more than even shot at out-earning their parents were born in the 1970s.
The study authors suggest that the decline makes sense in light of America’s diminishing economic power. But they note that even a big shift in U.S. GDP would fail to stop the downward trend of income mobility. “In our view, faster growth is necessary but not sufficient to restore higher intergenerational income mobility,” they wrote. “Evidence suggests that, to increase income mobility, policymakers should focus on raising middle-class and lower income household incomes.”
The research add that leveling tactics could reverse the downward trend by as much as 70 percent.
For now, the trend remains downward and that’s not just a problem for the American bank account; it’s a problem for the American mind. That’s particularly true considering the staying-power of the myth that Americans can attain wealth if they just work hard enough (hard work is perhaps a necessary, but not sufficient condition). One study, published in the Journal of Personality and Social Psychology showed that aspiring for financial success rather than personal fulfillment can lead to lower productivity and behavioral issues. This is a particularly sticky issue in underserved communities, where, according to a 2015 Cornell University study, people more firmly believe in upward mobility based on fewer examples of it.
As evidence grows that Americans can no longer count on the economy to buoy their personal fortunes, both expectations and how expectations are communicated will need to change. It is easy to tell a child that hard work will be rewarded — likely true — but hard to explain that history isn’t a level playing field.