America in Decline? 8 Reasons the American Dream Is Dying

A tattered American flag signifies the broken American dream.

A tattered American flag signifies the broken American dream. | John Moore/Getty Images

The American dream means different things to different people. For some, it’s a tangible achievement, such as owning your own home. It’s paving your own way. For others, it’s more of a concept — you’re free to make your decisions and guide your life as you see fit. Some people think of it as an ongoing, intergenerational tradition. We inherit the world, do what good we can, and hand it off to our kids.

Hopefully, we’re leaving it in better shape than when we received it, making life easier for following generations. Looking at the current state of things, though, no one would blame you for thinking the American dream was dead — or at least on life support.

An analysis involving social mobility all but proves it. According to a paper from the National Bureau of Economic Research, mobility is on a steep decline — and the American dream with it. Per that report, only half of the children born in the year 1980 are better off than their parents. To put things in perspective, for those born in 1940, 90% did better than their parents.

Obviously, there are some big caveats here. Those born in 1940, for example, all had parents who lived through the Great Depression. So it wasn’t hard to top them. There are many other criticisms and details to go through, as well. But if you take a look at the state of the country it’s clear many people are struggling.

Why is that? What’s happening to put the American dream so far out of the grasp of so many? There isn’t an easy answer. But here are some reasons the tides have seemingly turned on so many Americans.

1. Productivity and wage growth have been decoupled

A worker handles a car door

Productivity has increased, but wages haven’t. | Bill Pugliano/Getty Images

Since the mid-1970s and early 1980s, productivity has continued to increase while wage growth has stagnated — or even reversed. Here’s a chart on the topic from the Economic Policy Institute.

What this tells us is we’re able to produce more with less. Our businesses are more efficient, and we can get more out of our workers and raw inputs. That’s good for business owners but not necessarily for workers, who are no longer needed in high quantities. That means fewer jobs and more competition for the jobs that remain, which drives down wages. So here we have a part of the problem — and one that seems to be more or less a natural product of our economic system.

Next: The economy

2. The basis of the economy has changed

The Uber app shown as cars drive by

The U.S. is now a service-based economy. | Andrew Caballero-Reynolds/AFP/Getty Images

We know businesses are more efficient, and that has led to structural economic changes. We’ve seen the results firsthand over the past several years, as we’ve evolved into a service-based economy, rather than a manufacturing-based economy. Automation and globalization are two of the main drivers. For example, an American factory may have employed 500 workers 50 years ago. Today, that same factory might only need 100 workers, maybe fewer, and it can produce more. As mentioned, this is due to more efficient technology.

A lot of the jobs that used to sustain a middle-class family simply don’t exist anymore. And that has forced workers into other fields, many of which require more than a high school diploma to gain entry.

Next: Education

3. Education costs are skyrocketing

Workers staff the front desk of the University of Michigan's Undergraduate Admissions office

Workers staff the front desk of the University of Michigan’s Undergraduate Admissions office. | Bill Pugliano/Getty Images

When more jobs require additional training or schooling, more people start signing up for it. A more educated workforce isn’t a bad thing. But as more people have started going to college, the cost has subsequently gone up significantly. This is why we’re seeing so many young people graduating with bachelor’s degrees and an average of $37,000 or so in debt.

Often a college degree doesn’t lead to gainful employment. That means there are many people out there drowning in debt, with little to show for it.

Next: Income inequality

4. Income inequality is increasing

Two toy soldiers fighting over dollar bills

Income inequality is killing the American dream. | iStock.com/gonzalo_harogonzalo_haro

What do all of the aforementioned factors lead up to? Increasing levels of income inequality. That’s what’s really killing the American dream. In fact, we haven’t seen this big of a rift between the rich and poor since 1928. And we all know what happened in 1929 — and the drastic measures necessary to recalibrate.

There are a ton of things at work that got us to this point. But economists are exploring the link between inequality and social mobility, which more or less explains what’s happening to the American dream.

Next: The government

5. The government impedes businesses

Business man showing his empty pockets

Regulations make it difficult to start a business. | iStock.com/jinga80

It’s not all the big, bad capitalists and rich people to blame. The government has played a role, as well. There are mountains of regulations that often stifle small businesses or prevent would-be entrepreneurs from taking a chance. Although most of these rules exist for justifiable reasons or are attempting to correct some societal ill — minimum wage increases, for example, attempt to keep workers out of poverty — they cause significant problems for small companies trying to push forward.

There are approximately 175,000 rules and regulations governing how business can be done in the U.S. Obviously, not all of them are enforced. But it’s hard to start a company or pursue an idea. Sometimes, by passing new rules, we make it harder for small companies to start up and grow. The newest crop of 1-percenters get there through innovation and entrepreneurship. If we loosened things up a bit, we might be able to incentivize more people to strike out and start their own companies, create jobs, and push the economy forward.

Next: Isolation

6. Isolationism changes the country’s image

Smiling people waving American flags and looking up in crowd

Anti-immigrant rhetoric could destroy the American dream. | Martin Barraud/Getty Images

Harvard Business School dean Nitin Nohria writes for the Financial Times that anti-immigrant rhetoric and isolationism are detrimental to the American dream. “People abroad view America as a place with unprecedented socioeconomic mobility, and this perception leads ambitious people to immigrate here,” Nohria says. “More than 50 percent of Silicon Valley start-ups have an immigrant co-founder, and it’s essential that we continue to attract these imaginative people.”

Without ambitious people to continue realizing the American dream, the U.S. would lose its competitive edge and status as a world leader. And the American dream would effectively cease to exist.

Next: Life expectancy

7. Life expectancy is rising

senior man with adult daughter

Living longer comes with some costs. | iStock.com/Highwaystarz-Photography

Medical advances are allowing people to live longer. And during those long lives, they rack up more expenses. Somebody has to foot the bill, especially for retirees, and often it falls to the children of aging parents to pay for some expenses. Funds that might have been used to start a new business or finance education are allocated toward health care and living costs. It’s yet another factor that might prevent Americans from making socioeconomic gains.

Next: Retirement

8. Retirement is out of reach

senior couple sitting on beach at sunset

Many people don’t have enough saved for retirement. | iStock.com/EpicStockMedia

At the end of the day, the American dream is all about achieving success and prosperity. And a successful career should lead to a prosperous retirement. But for many Americans, retirement is far out of reach.

According to a GOBankingRates survey, 1 in 3 Americans haven’t saved anything for retirement. So people are forced to keep their noses to the grindstone in their old age to make ends meet, unable to sail off into the sunset and fulfill their American dream.

Additional reporting by Mary Daly.

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