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A headline in the Dec. 8 Wall Street Journal was ominous: "Barely Half of 30-year-olds Earn More Than their Parents."
What?
Can this be true? Is the American Dream, indeed, dying?
As a father of two sons, ages 15 and 10, I thought: "Will our boys be able to pay their bills? Buy a house? Start families?"
The Journal report spotlighted a new study that says American prosperity has stalled. In the 1970s, the article says, most young adults in America did better financially than their parents, after their earnings were adjusted for age and inflation. In fact, about 92 percent of American 30-year-olds during the Nixon Administration earned more, in real terms, than their parents did when they were 30.
By 2014, the percent of 30-year-olds besting their parents had withered to just 52 percent. Today, "upward mobility" has become a coin flip.
The worst pockets of income stagnation are in the industrial Midwest, which has suffered in the new global economy. But the Sun Belt is not immune. Tennessee and Georgia both saw the percentage of young adults doing better than their parents drop about 43 percent from 1970 through 2010, according to the report.
For young men, the numbers are dire, according to Raj Chetty, a Stanford University economist who co-authored the study written about in the Journal. In 2014, only 41 percent of 30-year-old American men made as much as their parents at a similar age.
If the trend continues, future American children will almost certainly be less prosperous than their parents and suffer all the lifestyle regression that flows from falling real incomes.
The ramifications for families are crushing.
For example, today's children may become complacent if the economic system appears stacked against them. We may already see this trend in the high percentage of adult children living at home. Already, 35 percent of American men ages 18 to 34 live with their parents. Meanwhile, nearly half of all 25-year-olds still live at home, according to U.S. government statistics. In Tennessee, it's about 44 percent.
Maybe recent income declines can be attributed to millennials stumbling out of the gates career-wise during the Great Recession, but this trend was going strong even before the dawn of the 21st century.
The researchers who track these trends say decline in income expectations has many causes, including the concentration of wealth and the breakdown of two-parent families, trends that bridge both conservative and liberal talking points.
So how do we parents use our common sense to help our children negotiate an uncertain future?
Here are a few ideas:
- We should resist the impulse to always give our children "more than we had as kids." There's a very real possibility that they might not be able to follow suit with our grandchildren.
- Most Americans over age 30 have used debt for everything from homes to education to consumer goods. Most debt is predicated on earning more tomorrow than we do today. Instead, maybe we should model thrift and pay-as-you-go consumerism to our children.
- For much of American history, multi-generational households were considered a good thing. Why not embrace that model again? It gives young adults cheap housing and may pay dividends for parents who will someday lean on their children for elderly care.
- Finally, maybe we should redefine the American Dream as more than financial progress. Instead of comparing bank accounts from generation to generation, we should celebrate the ideals that make us Americans: freedom of expression and religion, self-reliance, diversity.
For 240 years, the American Dream has proved durable through financial shocks, world wars and decades of political drift. While America may indeed need a tune-up, that does not - and can not - mean the engine is shot.
Contact Mark Kennedy at mkennedy@timesfreepress.com or 423-757-6645.