It’s often taken at face value that it’s harder to get ahead today than in the past. And you don’t have to look far to find statistics to confirm your priors. Doom drives online clicks and academic paper publishing. The reality is cheerier.
When asked about others, the vast majority of Americans think things are heading in the wrong direction. But ask them about their own lives, and they are surprisingly content. A long-running Gallup poll shows that Americans’ satisfaction with their personal life is relatively stable and higher today than when the survey started in 1979.
Americans are much more reliable narrators of their own well-being than of others, and the data confirms it. Scott Winship shows that, properly measured, absolute economic mobility has not declined significantly in recent history. Between two-thirds and 80 percent of today’s 40-year-olds outearn their parents. For Americans who grew up poor, the chance they are better off than their parents is roughly 90 percent.
Between two-thirds and 80 percent of today’s 40-year-olds outran their parents. For Americans who grew up poor, the chance they are better off than their parents is roughly 90 percent.
The economy-wide data tell a similarly cheery story. Since 1963, poverty has fallen by more than 80 percent, from 19.6 percent to 3.7 percent in 2023, and the Black-white earnings gap shrank 30 percent in recent decades. Entrepreneurship is surging too: in 2022, Americans filed 1.7 million applications to start likely-to-employ businesses, the second highest on record and 28 percent above the pre-pandemic trend.
Income inequality is also falling. Wages are growing faster for the lowest-income Americans than those at the top. Over the last decade, a worker at the 10th percentile saw their real wages climb by 21 percent, while someone at the 90th percentile saw their real wages climb by 13 percent. Everyone is getting richer. But the poorest Americans are getting richer fastest.
In absolute terms, Americans are doing well. In relative terms, even better. Standardized measures of consumption show that Americans consume roughly 70 percent more than the average European.
The top of the income distribution isn’t stagnant either. Most American wealth is built, not inherited. Only 13 of the original 1982 Forbes 400 names remain on the list. Those who replaced them show American success in the extreme.
Jensen Huang washed dishes at a Denny’s in Portland as a teenager and now runs Nvidia, the most valuable company in the world. Hamdi Ulukaya arrived from Turkey in 1994 with limited English, bought a defunct yogurt plant in 2005, and built Chobani into a multi-billion-dollar company. Immigrant and first-generation founders are evidence that the American system rewards drive, regardless of where you started.
The economy-wide data tell a similarly cheery story. Since 1963, poverty has fallen by more than 80 percent, from 19.6 percent to 3.7 percent in 2023, and the Black-white earnings gap shrank 30 percent in recent decades.
Things could still be better. The binding constraint isn’t the economic system. It’s the government sitting on top of it. Economists calculated that one in ten working-age Americans face lifetime marginal tax rates above 70 percent, “effectively locking them out of the labor force and into poverty.” For these Americans, earning another dollar means they could lose seventy cents to taxes and reduced benefits. The welfare state traps too many Americans.
On top of that, costly regulations and minimum wage laws price low-skilled workers out of legal work, and occupational licensing requirements make ordinary trades unattainable without hundreds of hours of training.
Loosen some of these government-imposed barriers to opportunity, and the American system could outperform its already good track record.
The future is bright. AI is already lowering the barriers to skilled work, and letting start-up firms reach more customers with new products in record time. Despite the doomerism, technology has historically been a net job creator. It makes workers more productive and opens opportunities faster than it closes them.
The American Dream isn’t fading. It’s being lived right now, at roughly the same rate as prior generations. The odds it continues are good.
Adam Michel is director of tax policy studies at the Cato Institute and author of the Substack, Liberty Taxed.