CEPR policy portal, May 5, 2017: The fading American Dream: Trends in absolute income mobility since 1940
One of the defining features of the ‘American Dream’ is the ideal that children have a higher standard of living than their parents. This column examines rates of ‘absolute income mobility’ – the fraction of children who earn more than their parents – to assess whether the US is living up to this ideal. Rates of absolute mobility have fallen from approximately 90% for children born in 1940 to 50% for children born in the 1980s. Most of this decline is driven by the more unequal distribution of economic growth rather than the slowdown in aggregate growth rates.