Parents often expect that their kids will have a good shot at making more money than they ever did.
But young people entering the workforce today are far less likely to earn more than their parents when compared to children born two generations before them, according to a new study by Stanford researchers.
The findings show that the fraction of kids earning more than their parents has fallen dramatically – from 90 percent for kids born in the 1940s to 50 percent for kids born in the 1980s. “It’s basically a coin flip as to whether you’ll do better than your parents,” said economics Professor Raj Chetty, a senior fellow at the Stanford Institute for Economic Policy Research and one of the study’s authors. One of the most comprehensive studies of intergenerational income mobility to date, the study used a combination of Census data and anonymized Internal Revenue Service records to measure the rate of “absolute income mobility” – or the percentage of children who earned more than their parents – for people born between 1940 and 1984. What emerged from the empirical analysis was an economic portrait of the fading American Dream, and growing inequality appeared to be the main cause for the steady decline. “One of the defining features of the American Dream is the ideal that children have a higher standard of living than their parents,” Chetty said. “We assessed whether the U.S. is living up to this ideal, and found a steep decline in absolute mobility that likely has a lot to do with the anxiety and frustration many people are feeling, as reflected in the election.”
The paper was co-authored by David Grusky, a SIEPR senior fellow, sociology professor and director of the Stanford Center on Poverty and Inequality; Maximilian Hell, a sociology doctoral student at Stanford; Professor Nathaniel Hendren and doctoral student Robert Manduca, both of Harvard; and Jimmy Narang, a former SIEPR predoctoral fellow who is currently a doctoral student at the University of California, Berkeley.
Research also featured in the New York Times