Is the American Dream dead or did it just move to Canada?

[Dave in Phoenix]

I note to my Canadian friends, the report ignores that Canada is part of "America." Often articles assume only the U.S. is "America." Sorry for such ignorance down here.

In 1970, 92% of all 30 year-old Americans were earning more money than their parents had earned at that age (adjusted for inflation). Today, that number has dropped to around 50%. That sizable decrease encapsulates why many people today have concluded that the American Dream is dead. Those pessimists include about 50% of all millennials. Still, while the unvarnished economics of the American Dream is deeply concerning, there is a silver lining. It’s called Canada.


The long podcast quoting from various research studies includes data on the percentage of kids born in the 1980's into low-income families made it to the top fifth of income distribution in various countries. In Canada it was 13%. That is still low but about twice as many as in the U.S.


Why better in Canada?
Less inequality - less distance between the 20th percentile and the 80th percentile in Canada, relative to America.


The article goes into great detail on studies in the U.S. of factors why there are huge regional and local differences in the U.S. and how different programs have tried to help upward mobility. These include: Move to opportunity, equitable distribution, family, and social capital factors.


A reader comments:
Missing from this discussion is the fact that it is easier to get into the top 20% in Canada because the bar is much lower. To get into the top 10% USA puts you at about $113,000 USD/yr but in Canada to get to the top 10% only takes $68,130 USD/yr ($89,200 CAD). It is hard to find stats on the top 20% but I imagine the correlation still exists. A more accurate assesment would be if it is easier to reach the top 10% in Canada compared to the top 20% in USA, which are much closer in real dollars earned.


Much more at Is the American Dream Really Dead? - Freakonomics Freakonomics which includes a transcript of the podcast.

 

[LarryB]

A little info for you all.

While Canada has undergone important economic, social and technological changes since the 1970s, the minimum wage and the average hourly wage are essentially unchanged.

After adjusting the minimum wage and average hourly earnings for inflation, fluctuations in the minimum wage almost mimic fluctuations in employees' average hourly earnings. Taking inflation into account, the minimum wage peaked in 1976 at just over $11 an hour in Canada. The following year—1977—average hourly earnings peaked at close to $24.

Although these indicators have fluctuated since then, the minimum wage in 2014—after adjusting for inflation—had an average value of $10.39 per hour, and average earnings were between $22.70 and $24.51 per hour, depending on the data source used. These values were comparable to those observed in the late 1970s.

Wages
In 1970, minimum wage was $1.60 an hour. Today, it’s $7.25 an hour. That’s a 353% increase over that period of time, which seems like a fair amount… until you actually start looking at how prices have increased.

What about average wages? I couldn’t find a document that laid out full details on average wages per year, but , laying out some average wage information, shows that average household income has roughly kept pace with consumer prices.

Consumer Prices
In January 1970, the Consumer Price Index was 37.8. In January 2011, it was 220.223. That’s a 482% increase over the period we’re looking at.

In other words, for every dollar increase in the minimum wage since 1970, the price of an average item has gone up $1.36. Even adjusting for inflation, a dollar today buys less than it once did for low income earners.

So, for a person freshly out of school, the initial income outlook is worsethan a fresh graduate in 1970, but after some career advancement, their salaries end up being comparable given inflation.

Education
In 1970, a year of tuition at a public university cost $1,207. In the most recent year of data available, 2007, a year of tuition at a public university cost $11,034. That represents an annual average increase of 6.2%, which, if you applied it to the 2007 price, gives you an estimated 2010 cost of a year of education as being $13,216. That’s a 994% increase in the cost of a four year degree.

So, let’s say you’re earning minimum wage and trying to make it through college.

In 1970, you could work 755 hours at a minimum wage job over the course of a year to earn enough to pay for a year of schooling at a public institution – about 14 hours per week.

In 2010, you would have to work 1,823 hours at a minimum wage job over the course of a year to earn enough money to pay for a year of schooling at a public institution – about 35 hours per week.

In other words, in 1970, you could work a part time job as a cashier or something to that effect and easily pay for college, enabling you to work and attend college without going into debt. In 2010, you have to work a full time job to pay for college, meaning you essentially have to choose between debt and an education or some other difficult plan.

Not only that, a college education is becoming much more of a requirement than it was in 1970. In 1973, the earlierst year that I could find firm data, 72% of jobs available for workers in the United States had only a high school diploma or had dropped out of school. In 2007, that number had dropped to 41%, and future projections show it only going lower.

The jobs remaining that do not require a college education are primarily service jobs that do not pay a high wage.
In other words, in 1970, the choice to enter the workforce immediately after high school or work a minimum wage job while going to college was a real choice. Today, it’s not a real choice unless you want to agree to low income for life. You have to enter the costly bargain of secondary education.

Housing
The median price of a home sold in the United States in January 1970 was . The median price of a home sold in the United States in January 2011 was . That’s an increase of 917%, one on par with the jump in education prices.
In other words, even after the housing collapse, a home today costs approximately three times as much as a home in 1970 compared to the average wage that a person earns.

The Full Picture
The minimum wage in the United States has gone up 353% since 1970, and average incomes have gone up approximately 500%. In that same span, however, the cost of basic household goods has gone up 482%, the cost of a four year education has gone up 994%, and the cost of an average home has gone up 917%.

In other words, in the eyes of an average worker from 1970 compered to today, the prices at the grocery store have remained largely unchanged, but the cost of an education has roughly doubled (and it’s now required if you want to earn significant money, where it wasn’t in 1970) and the cost of a home has roughly doubled as well.

If you look at it through the eyes of a minimum wage earner from 1970 compared to today, the prices at the grocery store have gone up about 30%, the cost of education has roughly tripled, and the cost of a home has roughly tripled.

Is There A Solution?
Like it or not, students of today, you’re likely not going to be able to follow the path of your parents – and especially not the path of your grandparents. If you want to have a financially healthy life, you’re going to need to keep an eye on every dollar much more than they had to. The ability to sensibly manage your money and make smart buying choices is much more of a requirement than ever before.
Parents and grandparents of today, give those kids a break.

They’ve got a much worse financial reality than you did when you walked out of school. They’re facing bigger housing costs, bigger education costs, and a bigger requirement to have that education than you ever did. Don’t compare the path they’re following to the one you’re following. It’s an unfair comparison all around.

 

[Remerdon]

:-Cool/"

 

[Boing]

It moved to India.

 

[Antihero]

The American dream ended once Trump became president.

 

[MEAT]

The American dream ended once Trump became president.

American voters for their own nightmare.

 

[demien3k5]

 

[Robintheboywonder]

Money rules and wins again. Demien sure knows that not being a good looking stud is irrelevant.

 

[demien3k5]

Money rules and wins again. Demien sure knows that not being a good looking stud is irrelevant.

You're damn right!....Hey! Wait a minute...............!!! :Monkey: