Losing the American Dream
Even though more and more people are working harder, some of whom are doing more than one job, the American Dream is increasingly becoming just, well, a dream that’s never within reach. The wealth gap is getting wider, a trend that has accelerated after the pandemic.
“There was a far more equitable distribution of wealth during the 1940s and the 1950s,” noted Austin Clemens, of the Washington Center for Equitable Growth, while speaking at a June 21 Ethnic Media News briefing.
He was among a panel of experts who looked at the many reasons behind this socio-economic phenomenon.
Intergenerational mobility
Intergenerational mobility is a huge factor. It’s progress in economic status from one generation to the next, when kids outearn their parents by the age of mid-30s (absolute intergenerational mobility) or when they can move into occupations that have a higher status (relative intergenerational mobility.)
Absolute intergenerational mobility, which is a key driver of wealth, has fallen rapidly. Clemens noted. Quoting a study by the economist, Raj Chetty, he said that kids born in the 1940s and the 1950s had about a 90 percent chance of earning more money than their parents. For kids born in the 1980s and 1990s, that number had dropped to just 50 percent.
For one, America’s economic growth has slowed since the mid-19th century. For another, the economic growth that has taken place since the Eighties and Nineties has been lopsided and it hasn’t translated into higher income levels for all. Those who were in high-wage white-collar occupations experienced a much greater jump in income than those in low-wage blue-collar occupations, with the outcome that that tepid economic growth didn’t contribute to intergenerational mobility in the way one would have expected.
The Wage Gap
Compounding that problem has been the wage gap, created when workers of equal ability are paid unequally based on either their gender or race or both.
Traditionally, two groups have been impacted by this wage gap (white and black), but they have been joined by Asians, Native Americans, and Pacific Islanders, among others.
Also, a woman makes less money than a man in the same job. Data from 2023 shows that for every dollar a man earns, a woman earns, on average, 84 cents.
A big reason that the gender wage gap exists is due to occupational segregation, which means that some groups are overrepresented in some occupations, where the pay is typically low, said Michelle Holder, professor of economics at the John Jay College of Criminal Justice, in New York. “Women are overrepresented in jobs, such as that of a secretary, a front desk staff, a call center agent, etc.”
The Gig Economy
Occupational segregation is also extant in the gig economy. But instead of women, it’s the recent immigrants, who are overrepresented in that sector.
Michael Reich, professor of Economics at the University of California, at Berkeley, said that six percent of all gig workers are drivers, who work for companies like Uber, Lyft, and DoorDash, either transporting passengers or dropping off meals at homes and offices.
“There are about 1.3 million drivers in California and some 10 million in the country,” Reich said. Who are they? They’re predominantly younger men. They’re recent immigrants. And they don’t have an education beyond high school.”
Anyone who has landed at New York’s J.F.K. airport and has taken a cab home would’ve observed that their cabbie doesn’t speak much English, which, influences their low wages. “It’s because they lack the skills and the connections to get into better jobs that they become a captive labor force,” Reich explained.
Gig worker pay
Even though companies may pay drivers $30 an hour, they end up making much less in monetary value. In states like California—where the minimum wage is $16 an hour—and Massachusetts—where the minimum wage is $15 an hour—they end up making only about $11 or $12 an hour. In lower-wage states, it’s even less.
Among the top reasons for that is that even though driving is the primary job for most of drivers, companies treat them as independent contractors and not employees, which doesn’t qualify them for benefits. Moreover, about 30 percent of the drivers’ time on the road is spent on waiting for a ride, eating, or taking a break to rest, for which they’re not paid. Not only do companies not reimburse them for the wear and tear on their cars, most drivers purchase a car, just to be able to drive for the companies, burdening them with payments on a lease.
Immigrant children upwardly mobile
There’s a flip side to this, though.
Though recent immigrants often tend to be trapped in low-wage jobs, their kids are more upwardly mobile than those of the native-born population, said Clemens.
After they migrate, immigrants are often placed in jobs that aren’t commensurate with their skills, which isn’t the case with their kids. So, it’s easier for the kids to eclipse them economically.
Sheer geography is also what propels intergenerational mobility among immigrants.
Location matters to immigrants
“Opportunity is extremely inequitably spread across the U.S. There are places where intergenerational mobility is very low and there are places where intergenerational mobility is quite high. Immigrants tend to pick the latter,” said Clemens.
They choose places where there are good jobs, and good prospects for education, and that has a very positive effect on second-generation immigrants.
When James Truslow Adams put forth the concept of the “American Dream” in his famous, “Epic of America,” America was in the throes of the Great Depression. It was 1931. He described it as “that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.” Originally, it connoted democracy, liberty, and equality for all, but over time, it has evolved into the question of material wealth and upward mobility.
