Bearing a burden of guilt
Many years ago – many, many years ago – I took a class in modern American intellectual history from the brilliant Robert Sklar at U-M. I remember him discussing the Great Depression, not in its economic or political dimensions (as most scholars did) but in its psychological one. Sklar talked about how many ordinary Americans then suffered under a tremendous burden of guilt – guilt that they were personally responsible for the country’s doldrums.
I often think of that lecture in these post-recession days when another generation of Americans is burdened with the same self-blame. You could say both generations were victims of the American Dream – a dream that, as James Truslow Adams, who coined the term, put it, “each man and each woman shall be able to attain to the fullest stature which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.” Or put more prosaically: Work hard in America and you can achieve anything of which you are capable.
The problem, and the source of that personal agony, is that it increasingly isn’t true, which is something that endangers our economic well-being, our political well-being, and, perhaps above all, our psychological well-being. You can work very hard in America and not succeed at all.
And yet, there is a glimmer of hope, and it survives right here at our beloved University. The surest way to restore the dream and level the playing field in this country is to provide every deserving young man and woman the chance to get a first-rate higher education.
So one of the most profound questions facing this institution is: Can the University of Michigan save the American Dream?
Like so much else in American life, the dream was not a spontaneous eruption from the grass roots. Author/historian Adams introduced the term in his book The Epic of America, written, fittingly, in 1931 at the depths of the Great Depression when Americans needed to believe relief was at hand – in their own hands, if need be. In a way, the dream became a form of wishful sustenance – something Americans could hold onto, something that made them special.
Where Americans may be most exceptional, however, is not in the realization of the dream but in their belief in it. According to a Pew Research Center report, Americans believe more fervently in self-determination than the citizens of any other country. Only 36 percent of Americans agreed that success in life was determined by forces outside their control. So if they fail, they have no one to blame but themselves. By comparison, three-quarters of Germans believe that success is determined by outside factors.
This doesn’t speak to national differences in opportunity. It speaks to differences in perception. In actuality, as Pew concludes, Americans actually have less control over their success than the citizens of most other industrialized countries.
Our exceptionalism may be that we are exceptional dupes.
The dream in decline
But something nonetheless is happening to undermine that belief. Survey after survey has shown that Americans’ faith in the dream is declining as the economy has declined. A recent New York Times poll found that only 64 percent of Americans still believe in the American Dream, the lowest number in two decades and down eight percent from the worst of the last recession. A Bloomberg poll had almost identical results. By 64 percent to 33 percent, Americans felt the “U.S. no longer offers everyone an equal chance to get ahead,” and even 60 percent of those with annual incomes above $100,000 thought the economy “unfair.”
In a 2013 Gallup Poll, 43 percent said the average American isn’t likely to get ahead, while only eight percent expressed that sentiment in 1952. And 73 percent of respondents in a 2007 poll by Pew – before the recession – agreed with the statement: “Today it’s really true that the rich just get richer while the poor get poorer.”
All of this is relevant when you view the task that U-M and other great institutions of learning have ahead of them if they are to revive the dream. Basically, they have to reverse the last 30 years of American economic history.
Running down a dream
Of the many lenses through which to examine the state of the dream, the most basic may be to tote up the cost of what we generally think the dream constitutes in terms of our social and material welfare — things like owning a house and a car, being able to feed our family and cover its health costs, saving for our children’s education and our own retirement, and paying our taxes.
Last year USA Today added up the sticker price of the dream, using standards like a $275,000 home with a 10-percent down payment and a four-percent mortgage, and an SUV. The price tag came to $130,357, not adjusting for regional differences. This income would place a married couple in the top quartile in America where the median income last year was just over $50,000. So roughly three-quarters of American households, by this metric, could not afford the American Dream.
But pure cost is not what most people think of when they think of the dream. They think of social mobility – of the ability to rise above one’s social class by dint of hard work. On this metric there is some good news and some bad news. The good news is that, according to a recent study by economics professors Raj Chetty of Harvard and Emmanuel Saez of Berkeley, the rates of social mobility in America have remained remarkably stable over the last 20 years. This is to say that alarmists warning of falling mobility have been dead wrong. That’s the good news.
The bad news is that those unbudging rates are miniscule. Only eight percent of children born into the lowest income quintile rose into the highest quintile. Only 20 percent in the middle quintile achieve the same rise. By this metric, the American Dream hasn’t really been shattered. It never really was – at least not for the past 20 years, and, by earlier studies, perhaps 30 years before that.
This is what is known as relative mobility, meaning, as the Economic Mobility Project conducted by the Pew Research Center, puts it, that “boats are changing places but says nothing about the strength of the ride.” Pew’s survey corroborates Chetty’s and Saez’s that relative mobility in America is basically immobile.
Seventy percent of those born into the lowest income bracket have remained in that bracket, 26 percent rose to middle or upper-middle class, and only four percent climbed to the top bracket. Unless you assume that virtually all poor people are poor because they are lazy and shiftless – a Social Darwinist argument, by the way, that you frequently hear on the right – their hard work doesn’t count for very much.
And there’s more. For all those who bellow about American exceptionalism and this being the only country in the world where one can pull himself or herself up by his or her bootstraps, only two countries – Italy and Great Britain – have less relative mobility than the United States, according to a 2013 study by the Russell Sage Foundation. Indeed, Denmark has three times the relative mobility of the U.S. And here is one more sobering fact from the study: Pakistan has almost identical mobility to the United States. But you don’t hear anybody trumpeting the Pakistani Dream.
That is relative mobility. There is also absolute mobility, which, as Pew states it, “refers to a dynamic in which a rising tide is lifting all boats, but it does not capture the likelihood that boats are changing places in the harbor.” In other words: Are you materially better off than your parents were? Again, looking at the Economic Mobility Project, Pew answers no.
Using data over four generations of the incomes of men in their 30s and adjusting for inflation, Pew found that “absolute mobility is declining for a significant group of Americans.” And this is a recent phenomenon. Comparing men aged 30-39 in 1964 with a similar cohort in 1994, there was little difference in income – a five percent increase over the 30-year period. Comparing the same age cohort from 1974-2004 tells a different and sadder story. The younger group had 12 percent less income than their fathers’ generation. That wasn’t supposed to be the bargain.
Absolute mobility is related to relative mobility in this sense. According to Pew, the greater the economic inequality in a society, the greater the likelihood that children will not be able to rise above their economic birth quintile. Former Council of Economic Advisors head Alan Krueger has called it “The Gatsby Curve,” after Fitzgerald’s hero, meaning greater inequality leads inexorably to greater immobility. And that is where income inequality comes in.
The great unhinging
Income inequality is a hot topic today, and for good reason. The differential between the top earners and the rest of society is greater than it has been at any time since the 1920s. Between the late 1940s and the early 1970s, incomes rose at almost exactly the same level across all the quintiles – richest to poorest. All nearly doubled. And then came the great unhinging.
According to the Center on Budget and Policy Priorities, a left-wing think tank, the income gap began widening into a chasm. From 1979-2007 average after-tax income from the top one percent earners quadrupled while the bottom quintile increased 44 percent and the middle three quintiles 42 percent. Just to get that straight, that famous top “one percent” of Occupy fame earned 314 percent more while the lower 80 percent earned roughly 40 percent more. (For what it’s worth, by 2011, the recession had lopped 100 percent off the increase in the top one percent’s earnings since 1979, which was more than its effect on the bottom 80, though the gains were still five to one.)
Seen in another and even more terrifying way, in 2010, 23 percent of before-tax income belonged to the top one percent of earners and 17 percent to the top .5 percent. Yet another way to examine income disparity is to compare the income of CEOs to that of the average American worker. In 1965, the ratio of CEO income to worker income was 20:1. In 1978, that ratio had increased to nearly 30:1. By 2013, by one measure, it was nearly 300:1, and, lest anyone think this was economically justified, compensation was double stock market growth from 1978-2013. By comparison, the ratio of CEO income to worker income was 11:1 in Japan, 12:1 in Germany, 15:1 in France, and 20:1 in Canada.
Remember, that is for incomes. The picture is worse, 10 times worse, when one examines wealth – not how much one earns a year but how much one has accrued over the years. From the 1930s through the 1970s, thanks in part to unions and taxing policy, the vast differential in wealth that had previously existed between the richest and the rest of Americans gradually closed. By 1970, the richest .1 percent Americans owned seven percent of the country’s wealth. And then the gap opened again, widely, yawningly, until we were right back where we were in the 1920s. By 2012, they owned 22 percent.
In a study by the aforesaid economist Saez and Gabriel Zucman, the wealthiest 160,000 families in America own as much as the 145 million poorest families. By one measure, the Walton family, which owns WalMart, alone possesses as much wealth as the poorest 41.5 percent of American families. Just think of that: the six richest Waltons have as much wealth as the poorest 41.5 percent of American families.
Fall into the gap
But as the Harvard political scientist, Robert Putnam, told Der Spiegel magazine, the real basis of the dream isn’t the income or wealth differentials we wind up with. It is the opportunity we begin with.
“The fundamental bargain, the core of America,” he said, “has always been that we can live with big gaps between rich and poor so long as there is also equality of opportunity.”
So the real question for the American Dream is: Do poor and middle-class Americans have the chance to better their circumstances?
First, you have to get poor young people into the classroom. As New York Times columnist Nicholas Kristof reported, today there are more young American men who have less education than their parents (29 percent) than there are young American men who have more (20 percent), and only five percent of those whose parents failed to get a high school diploma finish college.
Moreover, a recent study by Penn and the Pell Institute for the Study of Opportunity in Higher Learning found that 77 percent of those students from families in the top quartile received a degree by age 24, while in the bottom quartile the number was only nine percent. So even if you can get a student to the classroom, you can’t make him graduate.
According to the Organization for Economic Cooperation and Development (OECD), the U.S. upper secondary graduation rate is below the OECD average – which is to say below the rates of virtually every industrialized country. And among 25-34-year-olds, America ranks 12th among the percentage of the population with a college degree.
Degrees of separation
There is only a 10-percent chance that a poor college grad will end up in the top income quintile, which is only two percent better than those who didn’t go to college. The comparable number for those born in the top quintile who get a college degree is 51 percent.
In large part, this is because poor students typically do not get to go to the best and most selective schools, like U-M, which are the most likely routes to graduation, much less high incomes and wealth. Only 34 percent of high-achieving, low-income students, as measured by grades and test scores, according to a 2013 study by economists Caroline M. Hoxby of Stanford and Christopher Avery of Harvard, attend one of the 238 most selective colleges in America compared to 78 percent of high-achieving, high-income students.
By one, albeit hotly disputed study of higher education in California, college actually resulted in a net transfer from low-income families to high-income ones. As Nicholas Kristof recently put it, “In effect, the United States has become 19th-century Britain: We provide superb education for the elites, but we falter at mass education.”
Dream a little dream
U-M, like many universities, is certainly aware of this, and the administration is trying to do something about it. Our own President Mark Schlissel has talked about exploring linking tuition to family income, promising to broaden outreach to poorer schools, and pursuing ways of providing sufficient financial aid to needy students. Many top-ranked schools are now doing the last of these, affording poor students a virtually free college education. But as important as it is, that may not be enough to attract students, many of whom lack knowledge of these programs and the self-confidence to apply to them. And it may not be enough to make any more than a dent in the inequalities that deny the dream to most Americans, especially when some studies indicate the demand for college-educated workers could actually be declining.
This isn’t likely to pay any rapid dividends; the pace of mind-changing is usually glacial. But it is important nonetheless in removing self-blame. Only when hard-working Americans begin to question why their wages are stagnant and their children are stuck in the same economic rut as they are, will they begin to campaign for policies that may lead to greater equalization and mobility, including education.
This is why it is important that the University engages in helping to frame a national debate about the dream on which this country is predicated: Transforming economic failure into personal failure is a pernicious, life-sapping idea, a rich person’s idea, and it is factually wrong as well.
The truth is that just as people seldom succeed on their own, people seldom fail on their own. Each of us lives within circumstances larger than ourselves – most obviously the economic status of our parents. Even if you question the statistics about mobility, we all know people who work very hard, some two or three jobs, and still can’t make ends meet — much less achieve the dream with its $130,000 price tag. In fact, one could make a good case that the people who work the hardest in America are the ones rewarded the least.
So even as the University leverages mobility for poor students through education, it should also educate the larger public as scholars and intellectuals once did. We had a dream. It is gone. But we can regain if we understand how we lost it. In part, that is our University’s job.