“It’s called the ‘American Dream’ because you have to be asleep to believe it.” — George Carlin
This is the final post (for now) in a mini post series on the theme of money. You can see the previous posts here:
- What is Geographic Arbitrage & 7 Interesting Ideas to Get Started
- Money Showdown: Average American Spending vs Sloww’s Household Expenses (& How we Cut our Spending 30% in a Year!)
- How Much Income is Enough Money for Well-Being, According to Research?
- The 80/20 Rule for Money: The 3 Ways Americans Spend Most of Their Money (& How You Can Save More)
A couple weeks ago, an opinion piece in The New York Times stated:
I am pleased to report that the American dream is alive and well for an overwhelming majority of Americans. — Dr. Samuel Abrams, Political Scientist¹
Yet, this is the reality described in an article published by The Washington Post the same week:
400 Americans (the top 0.00025 percent of the population) own more of the country’s riches than the 150 million adults in the bottom 60 percent of the wealth distribution. — Christopher Ingraham²
Or, maybe it’s somewhere in between?
More and more evidence from social scientists suggests that American society is much ‘stickier’ than most Americans assume. — The Economist³
These discrepancies piqued my interest, so naturally, I wanted to find out the truth. This post curates the highlights from various research studies on the American Dream and socioeconomic mobility.
Defining the American Dream & Mobility
“For many in both the working class and the middle class, upward mobility has served as the heart and soul of the American Dream, the prospect of ‘betterment’ and to ‘improve one’s lot’ for oneself and one’s children much of what this country is all about. ‘Work hard, save a little, send the kids to college so they can do better than you did, and retire happily to a warmer climate’ has been the script we have all been handed.” — Lawrence Samuel4
The American Dream is much more than keeping up with the Joneses. Definitions of the American Dream are wide-ranging and ever-evolving (emphasis added in bold below)—a quick search reveals that it can include everything from financial independence to happiness to retirement to education to ensuring your children have a better life than you do.
What is the American Dream?
- “The American Dream is a national ethos of the United States, the set of ideals (democracy, rights, liberty, opportunity and equality) in which freedom includes the opportunity for prosperity and success, as well as an upward social mobility for the family and children, achieved through hard work in a society with few barriers.” — Wikipedia4
- “The American Dream is the belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society where upward mobility is possible for everyone. The American Dream is achieved through sacrifice, risk-taking and hard work, not by chance.” — Investopedia5
- “A happy way of living that is thought of by many Americans as something that can be achieved by anyone in the U.S. especially by working hard and becoming successful.” — Merriam-Webster6
- “The American Dream theoretically protects every American’s right to achieve their potential.” — The Balance7
What is Mobility?
- Socioeconomic Mobility (Relative Mobility): “the upward or downward movement of Americans from one social class or economic level to another, through job changes, inheritance, marriage, connections, tax changes, innovation, illegal activities, hard work, lobbying, luck, health changes or other factors.”8
- Social Mobility: “the movement of individuals, families, households, or other categories of people within or between social strata in a society. It is a change in social status relative to one’s current social location within a given society.”9
- Economic Mobility: “the ability of an individual, family or some other group to improve (or lower) their economic status—usually measured in income.”10
- Intergenerational Mobility: “change in socioeconomic status between parents and children”8
- Intragenerational Mobility: “(change in socioeconomic status) over the course of a lifetime”8
A (Very) Brief History of the American Dream
“Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.” ― Ronald Wright paraphrasing John Steinbeck
Instead of diving into a long dissertation on the evolution of the American Dream, I think these quotes sum things up succinctly:
- “‘The American Dream’ has always been about the prospect of success, but 100 years ago, the phrase meant the opposite of what it does now. The original ‘American Dream’ was not a dream of individual wealth; it was a dream of equality, justice and democracy for the nation. The phrase was repurposed by each generation, until the Cold War, when it became an argument for a consumer capitalist version of democracy. Our ideas about the ‘American Dream’ froze in the 1950s. Today, it doesn’t occur to anybody that it could mean anything else.” — Sarah Churchwell, Historian & Author11
- “Many Americans in this new middle class (1950s) embraced a belief in seemingly perpetual upward mobility. They believed that if they worked hard enough, life would continue to get better and better for them and for their offspring. To be sure, some social critics saw that dream as overly materialistic, spiritually empty, intellectually stifling and destructive.” — Patrick Kiger, How Stuff Works12
And, who can forget this insightful synopsis from Kurt Vonnegut:
- “America is the wealthiest nation on Earth, but its people are mainly poor, and poor Americans are urged to hate themselves…It is in fact a crime for an American to be poor, even though America is a nation of poor. Every other nation has folk traditions of men who were poor but extremely wise and virtuous, and therefore more estimable than anyone with power and gold. No such tales are told by the American poor. They mock themselves and glorify their betters…Americans, like human beings everywhere, believe many things that are obviously untrue. Their most destructive untruth is that it is very easy for any American to make money.” — Kurt Vonnegut
The American Dream Belief Research
“Don’t forget that most men with nothing would rather protect the possibility of becoming rich than face the reality of being poor.” — John Dickinson
Belief in the American Dream is very strong in America:
- “Americans of all demographic groups believe being free to live your life and having a rewarding family life are more essential to the American dream than owning a home, becoming wealthy, or even having a better life than their parents. About eight in 10 Americans believe they are living the dream or are on their way to achieving it.” — A New AEI Survey on Communities, Neighborliness, Loneliness, and the American Dream13
- “85 percent indicated that ‘to have freedom of choice in how to live’ was essential to achieving the American dream.” — The New York Times¹
But, as countless research has shown before in other fields, there can often be a wide gap between belief and reality. Time for the moment of truth…
The American Dream Reality Research on Socioeconomic Mobility
“The notion of the American Dream—that, unlike old Europe, we are a land of opportunity—is part of our essence. Yet the numbers say otherwise. The life prospects of a young American depend more on the income and education of his or her parents than in almost any other advanced country. When poor-boy-makes-good anecdotes get passed around in the media, that is precisely because such stories are so rare.” — Joseph Stiglitz17
As it turns out, not only does the reality of the dream not match the beliefs and expectations in America, but America actually falls behind many other countries in terms of actual mobility:
- “We conclude that absolute mobility has declined sharply in America over the past half-century primarily because of the growth in inequality. If one wants to revive the ‘American Dream’ of high rates of absolute mobility, one must have an interest in growth that is shared more broadly across the income distribution.” — The Fading American Dream: Trends in Absolute Income Mobility Since 194014
- “Americans described their country as the land of opportunity throughout the 20th century. Scholars long doubted it. This research adds evidence of inequality. Socioeconomic outcomes reflect socioeconomic origins to an extent that is difficult to reconcile with talk of opportunity.” — Americans’ Occupational Status Reflects the Status of Both of Their Parents15
- “A lot of Americans think the U.S. has more social mobility than other western industrialized countries. This makes it abundantly clear that we have less…Your circumstances at birth—specifically, what your parents do for a living—are an even bigger factor in how far you get in life than we had previously realized. Generations of Americans considered the United States to be a land of opportunity. This research raises some sobering questions about that image.” — Michael Hout, Professor of Sociology at New York University16
What about American mobility compared to other developed countries?
“You’re twice as likely to realize the American Dream if you’re growing up in Canada rather than the U.S.” — Raj Chetty
Turns out the “Canadian Dream” or “Scandinavian Dream” are more accurate:
- “The U.S. is one of only four high income economies amongst 50 economies with the lowest rates of relative upward mobility.” — Aparna Mathur, Forbes18
- “The United States appears to be less income mobile than are most high-income economies.” — Fair Progress? Economic Mobility across Generations around the World19
- “Research published in 2013 shows that the US provides, alongside the United Kingdom and Spain, the least economic mobility of any of 13 rich, democratic countries in the Organisation for Economic Co-operation and Development (OECD)…Intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Research in 2006 found that among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States…Several public figures and commentators, from David Frum to Richard G. Wilkinson, have noted that the American dream is better realized in Denmark, which is ranked as having the highest social mobility in the OECD. In 2015, economist Joseph Stiglitz stated, ‘Maybe we should be calling the American Dream the Scandinavian Dream.’” — Wikipedia4
- “In a study for which the results were first published in 2009, Wilkinson and Pickett conduct an exhaustive analysis of social mobility in developed countries. In addition to other correlations with negative social outcomes for societies having high inequality, they found a relationship between high social inequality and low social mobility. Of the eight countries studied—Canada, Denmark, Finland, Sweden, Norway, Germany, the UK and the US, the US had both the highest economic inequality and lowest economic mobility. In this and other studies, in fact, the USA has very low mobility at the lowest rungs of the socioeconomic ladder, with mobility increasing slightly as one goes up the ladder. At the top rung of the ladder, however, mobility again decreases.” — Wikipedia9
Is the belief in the American Dream related to the trend of busyness as a status symbol?
As I outlined in a previous research summary of “Conspicuous Consumption of Time: When Busyness and Lack of Leisure Time Become a Status Symbol”:
- “In the United States earned status has a larger influence on overall status perceptions. Americans believe that they live in a mobile society, where individual effort can move people up and down the status ladder, while Europeans believe that they live in less mobile societies, where people are ‘stuck’ in their native social strata. Based on these varying beliefs in social mobility, Americans view work as a priority and idealize busyness and long hours of work, whereas Europeans feel their leisure time is as important as, or even more important than, work time.“
So, not only does the belief of the American Dream not match reality, but we are trading our leisure time for more work in pursuit of the myth:
- “Finally, we were curious about how this might vary between cultures. In one study, we purposely recruited an international sample of participants drawn from Italy and the U.S. We again found that busyness at work is associated with higher status among Americans, but saw that the effect was reversed for Italians. The Italians in our study were still more aligned with Veblen’s theory that leisure is a mark of higher status. On one hand, this could imply that Italians have a somewhat healthy attitude toward work-life balance. On the other, it could reflect that Italians may not feel that they live in a socially mobile society. Indeed, this is consistent with other findings about national assumptions about social mobility. Americans are more likely to perceive that they live in a mobile society, where individual effort can move people up and down the status ladder, while the Italians are more likely to believe that they live in less mobile societies.” — Harvard Business Review20
- “In general, we found that the busy person is perceived as high status, and interestingly, these status attributions are heavily influenced by our own beliefs about social mobility. In other words, the more we believe that one has the opportunity for success based on hard work, the more we tend to think that people who skip leisure and work all the time are of higher standing.” — Harvard Business Review20
- “In our rush to make more money and to have the American Dream as it’s been defined to us, we ended up crowding out our opportunity to have more time. Any social system wants to maintain itself—whether it’s a religion or an economic system—and under corporate capitalism, we’re required to maintain certain beliefs. It’s important to work hard, to demonstrate success, to make money. Not only is there a lack of laws that support vacation and family leave, but there’s a continual message encouraging people to work hard and spend more. We internalize those messages, and busyness becomes a badge of honor.” — Johns Hopkins21
Final Thoughts on the American Dream
The intent of this post is simply to curate and summarize the available research—and perhaps reset expectations to close the gap between beliefs and reality:
The American Dream has been credited with helping to build a cohesive American experience, but has also been blamed for inflated expectations. — Wikipedia4
That being said, if you do want to to pursue the American Dream (which is what I’m attempting to do while now keeping my expectations in check), you ironically must believe it to achieve it:
Perhaps not surprisingly, believing in the dream of upward mobility is critical to achieving it. — Aparna Mathur, Forbes18
Whether you believe you can do a thing or not, you are right. — Henry Ford
And, if you do achieve it, remember to enjoy it!
Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy. — John Maynard Keynes, Economic Possibilities for our Grandchildren