If Americans’ hopes of getting ahead have dimmed, as the Wall Street Journal reports yet again, it could only be because the lid of the coffin in which the “American Dream” was long ago laid to rest has finally been sealed shut.

The promise that if you work hard and play by the rules, you will get ahead, or if you don’t, surely your children will, was broken long ago. And today’s economic hardships have left young adults distinctly worse off than their parents, and especially their grandparents.

This long decline has stripped away much of what there was of U.S. social mobility, which never did measure up to its mythic renderings. Let’s look closely at what the economic evidence, compiled in many meticulous studies, tells us about what passed for the American Dream, its demise, and what it would take to make its promised social mobility a reality.

For at least two decades now, the Wall Street Journal has reported the dimming prospects of Americans getting ahead, each time with apparent surprise. In 2005, David Wessell presented the mounting evidence that had punctured the myth that social mobility is what distinguishes the United States from other advanced capitalist societies. A study conducted by economist Miles Corak put the lie to that claim. Corak found that the United States and United Kingdom were “the least mobile” societies among the rich countries he studied. In those two countries, children’s income increased the least from that of their parents. By that measure, social mobility in Germany was 1.5 times greater than social mobility in the United States; Canadian social mobility was almost 2.5 times greater than U.S. social mobility; and in Denmark, social mobility was three times greater than in the United States.

That U.S. social mobility lagged far behind the myth of America as a land of opportunity was probably no surprise to those who populated the work-a-day world of the U.S. economy in 2005. Corrected for inflation, the weekly wages of nonsupervisory workers in 2006 stood at just 85% of what they had been in 1973, over three decades earlier. An unrelenting increase in inequality had plagued the U.S. economy since the late 1970s. A Brookings Institution study of economic mobility published in 2007 reported that from 1979 to 2004, corrected for inflation, the after-tax income of the richest 1% of households increased 176% and increased 69% for the top one-fifth of households—but just 9% for the poorest fifth of households.

The Economist also found this increasing inequality worrisome. But its 2006 article, “Inequality and the American Dream,” assured readers that while greater inequality lengthens the ladder that spans the distance from poor to rich, it was “fine” if it had “rungs.” That is, widening inequality can be tolerated as long as “everybody has an opportunity to climb up through the system.”
Definitive proof that increasing U.S. inequality had not provided the rungs necessary to sustain social mobility came a decade later.

In late 2016, economist Raj Chetty and his multiple coauthors published their study, “The Fading American Dream: Trends.” They documented a sharp decline in mobility in the U.S economy over nearly half a century. In 1970, the household income (corrected for inflation) of 92% of 30-year-olds (born in 1940) exceeded their parents’ income at the same age. By 1990, just three-fifths (60.1%) of 30-year-olds (born in 1960) lived in households with more income than their parents earned at age 30. By 2014, that figure had dropped to nearly one-half. Only 50.3% of children born in 1984 earned more than their parents at age 30. (The figure below depicts this unrelenting decline in social mobility. It shows the relationship between a cohort’s birth year, on the horizontal axis, and the share of the cohort whose income exceeded that of their parents at age 30.)

The study from Chetty and his co-authors also documented that the reported decline in social mobility was widespread. It had declined in all 50 states over the 44 years covered by the study. In addition, their finding of declining social mobility still held after accounting for the effect of taxes and government transfers (including cash payments and payments in kind) on household income. All in all, their study showed that, “Severe Inequality Is Incompatible With the American Dream,” to quote the title of an Atlantic magazine article published at the time. Since then, the Chetty group and others have continued their investigations of inequality and social mobility, which are available on the Opportunity Insights website (opportunityinsights.org).

The stunning results of the Chetty group’s study got the attention of the Wall Street Journal. The headline of Bob Davis’s December 2016 Journal article summed up their findings succinctly: “Barely Half of 30-Year-Olds Earn More Than Their Parents: As wages stagnate in the middle class, it becomes hard to reverse this trend.”

Davis was correct to point to the study’s emphasis on the difficulty of reversing the trend of declining mobility. The Chetty group was convinced “that increasing GDP [gross domestic product] growth rates alone” would not........

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