By Lori Lee
NDG Contributing Writer
What is the American dream? The concept has different meanings for different people. For immigrants, it may mean the land of opportunity, while others may dream of a life that is better for their children. And while many associate the dream with monetary attainment, others most certainly focus on more personalized definitions of success.
According to the Oxford English Dictionary, the American dream is for every citizen to have an equal opportunity to achieve success and prosperity through hard work, determination, and initiative. But is that the story of America? Does the dream apply to every American man or woman, Black or White?
In the midst of economic threats posed by inequality, artificial intelligence, and other threats, is the American dream still alive?
What we’ve seen for decades in America is a story of inequality, said Austin Clemens, senior fellow at the Washington Center for Equitable Growth. Though wage gaps have been discussed for decades, they persist between men and women and between the diversity of races in the great American melting pot. Despite some shrinkage in the racial wage gap over the last six years, the median Black worker still earns considerably less than his White counterparts, the New York Times reports. And though the gender gap has narrowed some since the movements of the 60s, recent data demonstrates little real improvement, reports the Economic Policy Institute.
2023 Department of Labor figures show men earn $62,500 annually compared to women at $52,000. That’s 84 centers for every dollar earned by a man.
The gap is even larger between Black and White workers, said Dr. Michelle Holder, associate professor of economics at City University of New York. Whites earn $59,000, while Blacks earn $48,000 on average. What is more, Black women, among the lowest paid in the country, make just $46,000, almost a third lower than White men at $63,700. That’s a “double gap” for Black women, said Holder.
Income inequality is also evident when racial groups show higher rates of unemployment, Holder adds. Though Black unemployment is at an all-time low, the current 6.3 percent is almost twice as high as the national average at 3.7, according to Department of Labor data.
Why do these gaps persist? Discrimination, said Holder. However, the racial gap can be partly explained by differences in education, White Americans achieving higher levels statistically than Black and Latinx workers.
Department of Labor data consistently shows the more education Americans have, the higher their wages. Yet, an education will only get you so far, warns Holder. Comparing those with equal educational attainment and experience, white men still earn more than both women and people of color.
American culture now encourages an education, even for females and for Black men and women, each group having been discouraged from achieving an education for decades. Yet, despite increasing education rates, women continue to be overrepresented in low-wage administrative jobs, earning less than White men, even when they have more experience.
One justification has been that women choose lower wage jobs to be flexible for their families. It is true, says Holder, that all over the world, women are the primary caregivers. Yet, the data can’t be denied, which shows that comparing equally educated and skilled workers, men continue to earn more than women for the same jobs.
A much talked about concept related to the American dream is absolute intergenerational mobility, explains Austin Clemens, senior fellow at the Washington Center for Equitable Growth. The measure compares adult incomes to their parents at the same age, gauging economic progress, while capturing aspirations for the next generation. If America is truly a land of opportunity, one might assume a child’s wellbeing should not be tied to their parents’ success.
One variable that affects the level of mobility is distribution, Clemens explains.
Intergenerational mobility was high during the 40s and 50s, when about 90% of children were earning more than their parents at the same age. During this time, economic growth flourished, generating new income and spreading wealth to the younger generations.
Such growth can be a key generator of mobility, said Clemens. In a strong economy with a strong labor market, like today’s, incomes rise and many people benefit.
On the other hand, when most of the wealth is concentrated in high wage earnings, such growth is fixed. Mobility declined dramatically to just 50%, for example, during the 80s, when economic growth was concentrated among high income earners. The pattern continued for several decades.
Amid the distribution of wages, race also affects mobility. Black men continue to suffer discrimination in education, income, and in the judicial system. In turn, Black males tend to experience lower mobility than other races, adds Clemens.
Mobility also varies geographically, he says. Place is an important variable. The current administration has been bringing high-quality manufacturing and construction jobs to various communities, for example. These measures will bring good job prospects to these areas, thus boosting intergenerational mobility, explains Clemens.
Immigrants have done well in the U.S. historically, he says, their data demonstrating more upward mobility than those who were born here, despite being undervalued relative to their skills when they first arrived. One reason is immigrants tend to migrate to locations where mobility is high.
Recently, many immigrants have found themselves working as contractors for app companies like Uber, Lyft and DoorDash. The number of gig delivery drivers has grown rapidly, especially since the pandemic, says Reich. Surveys tell us the gig economy is composed of young men from lower-income families, with lower levels of education, as well as immigrants.
Many immigrants lacking the skills or connections to get better jobs, find it easy to settle in as a gig worker. Yet, many get trapped in the low-benefit, high cost work. They’re kind of a captive labor force, says Reich, effectively earning around $11 or $12 an hour. This, considering gig drivers spend 30% of their shift waiting for work, while putting thousands of miles on their cars, requiring frequent replacement. The workers are not compensated for these costs, he said, nor do they have employee protections like unemployment or workers compensation.
Another threat believed to have the potential to hurt the labor force by killing wages and millions of jobs is artificial intelligence (A.I.). Yet, as Heidi Sheirholz, president of the Economic Policy Institute explains, new technology can change the mix of jobs without shrinking the workforce. Where in the past, it took many people with shovels to dig a ditch, it now takes one with some sort of hydraulic machine. And though this does mean fewer ditch diggers, it doesn’t mean overall jobs will decline. When employers adopt productivity enhancing technological change, they can create goods more cheaply, meaning people will have more money to spend on something else. The new purchases can then generate new jobs, which may churn labor markets but not necessarily reduce jobs overall.
Further, A.I. has the potential to detect and guard against employee abuses, she explains.
Also, policies can be put into place to protect the labor force. Adding new taxes on capital income might help redistribute income gains from A.I. more broadly, for example. Sheirholz warns still that such policy decisions may offer little buffer against the effects of A.I. on the millions of affected workplaces across the country.
Social democratic policies that protect unions and labor standards offer more hope for worker leverage and for holding employers accountable, while more general goals like maintaining protective social insurance and achieving tight labor markets can play an even bigger part.
Federal incentives put in place during the pandemic led to wealth building at the bottom of the distribution, adds Clemens. Other policies that have brought inflation mainly under control post pandemic are proof positive that we can change the wage gap and achieve a more equal distribution of wages.
Clemons suggests now might be a good time for the Federal Reserve to consider cutting interest rates to keep the job market running hot, so that lower wage earners might continue to see benefits.
Policies that reduce discrimination could also help distribute income more equitably, says Clemens.
Despite some progress that has shown up over the last several years, discrimination continues to operate at functional levels throughout the American labor market, adds Holder. She suggests that when women and people of color are in a position to negotiate, they should research pay scales, while adding five to ten percent on top of salary requests. This, despite that women often get backlash from employers after hard negotiations, according to the data, she adds.
As it stands, a certain number of people are able to get ahead, buy a house, take vacations, afford retirement, and send their children to decent schools, said Holder. It is up to policy makers to do the kinds of things that ensure a safety net while making more American dreams within the realm of possibility.
