Only 50% of Children Entering Labor Force Today Earn More Than
Their Parents

Report finds that prospects of achieving 'American Dream' are fading for young Americans

college graduates

For young individuals entering the labor market today, only about half of them are earning more than their parents, according to a report produced by economists from Stanford, Harvard, and the University of California.

These economists created a project called "The Equality of Opportunity," where they track upward mobility over decades, evaluating the ability of young individuals to move up the economic ladder and achieve the "American Dream."

The economists say that one of the defining measures of the "American Dream" is being able to achieve a higher standard of living than one's parents were able to achieve.

The report finds that the percentage of children who are able to achieve this definition of the "American Dream" has fallen from 90 percent for those who were born in 1940 to 50 percent for children who were born in the 1980s.

"Children's prospects of earning more than their parents have faded over the past half century in the U.S," the report states. "The fraction of children earning more than their parents fell from approximately 90 percent for children born in 1940 to around 50 percent for children entering the labor market today."

"Absolute income mobility has fallen across the entire income distribution, with the largest declines for families in the middle class," the economists state.

The economists believe that there are two main drivers that are leading to this trend—declining GDP growth and an increase in inequality in the distribution of growth.

"Growth is an important driver of absolute mobility, but high levels of absolute mobility require broad-based growth across the income distribution," the report states. "These results imply that reviving the "American Dream" of high rates of absolute mobility would require economic growth that is spread more broadly across the income distribution."

According to David Barnes, policy director at Generation Opportunity, government barriers such as occupational licensing laws have also hurt young adults in the job market.

"There's no denying that times are tough financially for many young adults facing a sluggish economy," he said. "As this research notes, many young people are struggling to find good-paying jobs. Others are settling for jobs with little growth opportunity and advancement."

"Young people starting their careers have always faced government obstacles, but things have gotten out of control," Barnes said. "For example, occupational licensing barriers grew from being a requirement for one in twenty occupations in 1950 to one in three today."