The loss of upward mobility and the American dream.
This is nothing new. I’ve been reading articles since before high school letting me know that my generation would not be better off than my parents’. And those of us who grew up in the rust belt are well into the 2nd or 3rd generation of people not doing better than their parents.
I’m a lot older than @romanigypsyeyes and I would also say this is nothing new and have been hearing it since I was in college over 30 years ago. Of my 4 siblings and myself, we all live nice lives but only one of us has obtained the same or greater financial success as our parents, both of whom were first in their families to attend college.
I remember my FIL saying he worried about “kids” our age when we were in our 20s. DH and I haven’t done as well financially as either set of parents, even though we both have master’s degrees in engineering. Of course, our parents have two MDs and 1 PhD among them!
I worry about this. This younger generation is not doing as well as those of us born in the 50’s and 60’s. Yet they will be saddled with our Social Security and Medicare costs and the huge national debt that has been piling up for years and they will likely resent it.
I do think our kids’ generation, to their benefit, has realized that more stuff, more possessions isn’t the right way to live and therefore that will help a little. Some of it is watching parents accumulate too much and work too hard and not necessarily seeing an increase in happiness as a result, some of it is because of concerns for the planet, some of it is facing the reality of a changing world. I don’t think a lot of college students will be or want to live in McMansions. A lot of them don’t even want cars.
I am 55, my ex-h is 62, and neither of us is doing as well financially as our parents were at our ages (and as the ones still living are doing now, at ages 88 and 90). Neither of my (former) parents-in-law went to college and my former MIL never worked outside the home. Doesn’t matter; in comparison to what I’ll have at retirement, their retirement assets are huge, and it’s not because I spend a lot of money.
Pensions, a booming economy post WW2, HUGE appreciation in real estate = some of the reasons our parents’ generation has been able to succeed and accumulate wealth.
What is the cause? Globalization?
Tatin, couldn’t find a link to your article that I could read.
But here is a link to the “myth” of social mobility
http://www.newyorker.com/magazine/2014/03/03/the-mobility-myth
"…
there’s a catch: there wasn’t that much mobility to begin with. According to Chetty, “Social mobility is low and has been for at least thirty or forty years.”…
“… What made the U.S. economy so remarkable for most of the twentieth century was the fact that, even if working people never moved into a different class, over time they saw their standard of living rise sharply. Between the late nineteen-forties and the early nineteen-seventies, median household income in the U.S. doubled. That’s what has really changed in the past forty years. The economy is growing more slowly than it did in the postwar era, and average workers’ share of the pie has been shrinking…”
Prices will drop on everything enough so that people can buy the products being sold.
Lower housing prices, lower interest rates, etc.
When we bought our first house in the early 80’s the interest rate was 14 or 17%. Todays rate 4%.
It’ll all even out.
That much of the industrial world was rebuilding after WWII other than the US and pent up spending during the war and baby boom made for a fantastic US economy. That could not be sustained as the rest of the world caught up.
Also a factor (making the financial difference worse) is households in 50s/60s had one breadwinner.
But in general people are doing better in terms of technological improvements even of not so in pure financial terms.
It has turned out the exact opposite in our situation. I don’t know how things will shake out with our kids, but we hope to leave them sitting very well for their retirements, even if they don’t eclipse their parents economically.
H and I are definitely doing better than our parents. D2 and her H will be as well off as we are and D1 and her H will be close if she stays as the main breadwinner after having children. At 25 and 28 they have no student debt and work hard as they want the same lifestyle that we were able to provide. We are all savers.
@sax:
Mobility wasn’t a myth, in the sense that in my parents generation (really only after WWII) working class people, which many of us came from at some point, were able to live a middle class lifestyle. While it is true that some things were a lot more expensive back in those generations (TV’s based on real dollars are dirt cheap today, and have obviously capabilities undreamed of in the 1950’s, except for Ralph Kramden “Alice, I’ll buy a tv when they have 3D tv”).
The problem is everyone has been squeezed. The job track out of college was you got hired, and achieved relatively rapid mobility upward, that isn’t true any more. A lot of kids coming out of college are forced to take jobs that technically might not even require college, and a lot of entry level positions they may have gotten have disappeared, or have been quite frankly shipped overseas or been taken by H1 visa holders, especially in the tech area. Wage growth has been flat to nonexistent for many workers, and the problem isn’t GDP growth per se, it is the concentration of wealth, compared to the 50’s and 60’s the money the economy is generating is most heavily concentrated in a very small swath of the population, and as the economy grows, within that growth swath most of the income gains are going to a very, very tiny percent of people. 50,60 years ago corporate exectives compensation was based in cash salary and bonuses, basically the same as most working people (leaving out the bonuses, which many people did not get), today most compensation at the top is stock based but that is not broad based, few workers get that kind of compensation.
Obviously, not all kids face this, the article in the Times said that half of kids in their 30’s were doing better than their parents, but still, it is food for thought. One of the things I think politicians of all stripes don’t grasp is that that hope for a better future for their kids resonates strongly in people, and that if that hope dies, which I think it has in many people, there are consequences, anyone who has read any of the good social histories of the Great Depression can confirm that.
Some people think that rising economic inequality (and hence worse opportunities for those not at the top levels of SES or who were born into such, since greater inequality tends to come with less mobility) is inevitable except when catastrophic events like major wars or economic crashes occur.
If you believe that (and not everyone does, as discussed in the linked page), then perhaps it is not too surprising that so many people on these forums are obsessed with the highest prestige universities that are seen as the entry paths to the plutocratic professions in Wall Street and consulting.
Pretty much everything about the 50s era was an anomaly in history.
I believe as long as you choose your career path wisely, and are reasonably flexible, you should have plenty of opportunities to succeed in this economy. I am 31 and have already done better than my parents who are near the end of their careers. I have also made some sacrifices in my life, such as choosing to take jobs in places where other engineers don’t want to live (a desert in my case), and finding niche areas to work in that may not be as glamorous as some but offer more room to grow. I am very happy with where I’m at.
The problem I see with a lot of people my age, and younger, is that they feel they are entitled to a comfortable life right after college. They want the rock star jobs right away, rather than working themselves up to those positions… they want things handed to them. I feel these are the types of people who will be left behind.
If you are flexible, and willing to take the road less traveled, I believe you can do well in our economy.
Unless we win Powerball H & I will never be as well off as my parents.
My S is already earning at 23 what H was earning in his early 40’s, so I’m not worried about how he will fare ecomically. He has no college debt which is allowing him to put the max into his 401k, too, and save for other things.
@ucbalumnus Interesting observation. The tax benefit well know private universities get on their huge endowments may also play a role in their attractiveness. They may be funded better by tax payers through the tax breaks than what even the most prstigeous flagships get from tax payers.
Those who are well connected scions of wealth (plutocrat level) or power probably won’t be left behind if they have at least average ability and motivation. But someone from a more ordinary background needs a high level of ability and motivation to move upward.