The American Dream: Challenged But Not Defeated

America’s rich are getting richer, its middle class is treading water, and the poor aren’t climbing the income ladder as rapidly as they did in years gone by. Meanwhile corporate profits are breaking records, GM, Ford and Intel are laying off thousands, and executive compensation is on the rise. Is that reason to believe that the famous American dream has not turned into a nightmare? Perhaps, but only perhaps.

One thing is sure: income distribution is becoming a matter of concern, and a political issue, in America, a country in which calls to man the barricades of the class struggle have historically fallen on deaf ears. 

Two problems have reared their heads.

The first is the growing sense that the rich are getting richer, something that never bothered anyone, so long as the poor were also getting richer. Now it seems they aren’t. Or, at least they haven’t thus far in a period of economic expansion.

The second problem relates to the core of the American Dream -- social mobility, the ability of all to rise according to their ability and their willingness to work hard and take risks. Recent studies suggest that America’s opportunity society might not be as flexible as it once was. Economics professor Jacques Mistral, a senior fellow at Harvard’s Kennedy School of Government, summarises those studies as follows, “…The situation of a son is more than ever likely to be dictated by his father’s social position than by his own merits. … If your parents are rich, the likelihood of your being rich is as high as the probability of your being tall if your parents are tall….”

So what is going on in America? One thing is massive immigration by poor, unskilled workers. As they enter the work force, taking on menial jobs at wages too low to attract American workers, but a king’s ransom by the standards of the clapped-out Mexican economy, they pull average wages down. Some of these workers and their children eventually move up the income ladder. But many never do, partly because they return home after accumulating enough money to buy a home or farm or business in their native land.

Another fundamental force at work is globalisation. In recent years over one billion unskilled, low-paid workers have entered the international work force. Meanwhile, globalisation has opened an international market for talented managers, driving up the demand for such executives. Result: downward pressure on wages of the unskilled, upward pressure on executive compensation, and a widening income gap.

All is not lost, however. Hourly earnings have recently begun growing, and will continue to do so. Equally important, one-million more Americans are now enrolled in institutions offering two-year programmes of advanced education and training than was the case a decade ago. To borrow from the title of a popular sitcom about the rising black middle class, they will soon be “Movin’ on Up.”