Study: American Dream Getting Harder for Men, Families

26 May Study: American Dream Getting Harder for Men, Families

Ever get the feeling it’s getting harder to achieve the American Dream? Sometimes you should go with your hunches.

A study by Isabel Sawhill for the Pew Charitable Trusts’ Economic Mobility Project this week explores how well men in each generation are doing compared to their fathers at similar ages. The report’s core finding: The most recent generation is earning less than their fathers and grandfathers at a similar age, when adjusted for inflation. As my father used to say, we are looking at the first American generation that won’t do better than their parents.

The decline in male median incomes has been evolving over the last decades. My generation, which was in its 30s in 1994 was still reporting better income levels from our father’s in 1964 (when they were in their 30s), after adjusting for inflation. The improvement was razor thin — 5% or $1,704 (that’s .2%/year improvement). But the very next cohort, men hitting their 30s in 2004, showed a real decline in median income versus their dad’s 1974 levels — a drop of 12%, $5,200 after inflation. (My .2% increase is looking good now!)

One probable cause of the decline of course is that more women entered the workforce beginning in the 1960-70s. The additional competition for income may well have gradually averaged-down male wages. And this is borne out by another portion of the EMP study. Median family incomes for my generation increased by 32% compared to my parents’ position in 1964. So even if male personal income was virtually stagnant versus my father’s, my family is likely to have about 1/3rd higher income, primarily because our wives work outside the home. Unfortunately for the 2004 generation, even this additional improvement is less dramatic — their family income is only 9% better than the median for their parents’ family income in 1974. (The comparisons will be less precise since more wives were likely to be wage earners in 1974 than 1964.)

Ironically, during the life spans of the American families being studied, American productivity — roughly, the economic value created from labor — has exploded. The American Dream teaches that hard work will be rewarded. And from 1947 to 1974, family incomes increased pretty much in lock-step with productivity growth. The harder America worked, the the more we earned. After 1974 that convergence of work and reward began to fall apart. Initially, the gap simply meant that incomes were not going up as rapidly as productivity so we had to work harder for the same wage. But beginning in 2001, the gap widens for the worse for American workers — while productivity increased its march upward, real incomes actually dropped, we were working harder for less money.

In other words, our children’s family must deploy more workers into the workforce, and those workers are working harder and longer to just barely edge out their parents’ income. And, as Professor Elizabeth Warren and Amelia Warren Tyagi have pointed out, the previous generation would have more “margin for error” if disaster struck. If a wife did not work outside the home and her husband lost his job, she could potentially go to work and keep the family afloat. Or if someone is ill and needs to be cared-for at home for a long period, a spouse was often available. Today, that “spare worker” safety net is probably already in use. The current generation has no safety net.

The EMP study focuses primarily on incomes. That’s depressing enough. It doesn’t address other factors in the American family’s financial health. For example, fewer businesses than ever provide employer-paid retirement plans. So, if families want to save for retirement they will have to do so from already declining income. And more employers are also now unable to afford to provide meaningful health insurance. So families must either “go naked” without insurance or, again, choose between current needs (food, housing, education), future needs (retirement security), and contingencies (health insurance).

If you begin to even think of the absolute, after-inflation rise in the cost of living between these generations –while food and clothing has dropped, housing, transportation, education, medical care and so on have increase far more dramatically, for example — will show that American families have had a real gap to fill in their budget just to get by. Having no more workers to deploy into the workforce, only so many hours in the day to work, and only so many expenses they can defer or avoid, American families have filled that gap in the only way left to them — they have borrowed the money.

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2018 I am also serving on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website: STLBankruptcy.com
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