On Sunday, while visiting New York for a friendâ€™s wedding, I stopped into the Greenwich Village branch of Citarella, a purveyor of delicious but ridiculously overpriced food, to buy some baked goods for breakfast. Pondering a mouth-watering array of muffins, scones and croissants, I asked a friendly man behind the bakery counter how he stayed so slim in the midst of such delicacies. They donâ€™t let us eat the food, he told me, matter of factly. Not at all, I asked? â€œNo,â€ he said, â€œwe go out and buy food somewhere else.â€ He didnâ€™t have to explain that the baguette traditionelle for $2.49 or a small containers of pineapple chunks for $3.49, priced at retail, were beyond his means.
I canâ€™t imagine why the owner of a grocery store would not want to provide some food, either for free or at a discount price, to the people who interact with their customers all day. How must it feel for those workers to serve gourmet food all day and not get a chance to taste it?
This niggardly spirit, Iâ€™m sorry to say, explains in some small way why the American dream is in trouble. The American dream — the time-honored idea that individuals can better themselves by dint of their hard work, brains, skills and creativity — is on my mind because of an event I attended last week organized by the Pew Charitable Trusts and its Economic Mobility Project. Pew has brought together four Washington think tanks from across the political spectrumâ€”the American Enterprise Institute, the Brookings Institution, the Heritage Foundation and the Urban Instituteâ€”to take a close look at the health of the American dream. Is America still a land of opportunity? Or have we become less of a meritocracy, and more of a place where the rich get richer and the poor place their hopes on winning the lottery.
The first report from the Economic Mobility Project (PDF available for download at the site) isn’t encouraging. It argues that the ability of people to climb up the economic ladder in America today is not as great as it was a generation ago. Whatâ€™s more, opportunities for the poor or middle class to better themselves appear to be greater in other placesâ€”among them Germany, Canada and Denmark.
â€œParental income in the U.S. is a much better predictor of a childâ€™s economic well-being than it is in most other nations,â€ said John Morton, a Wharton MBA who is coordinating the project for Pew and co-authored the study. Pew held an event last week in D.C.with all the think tanks to discuss the findings.
A couple of data points:
Men in their 30s today are not doing as well as their fathers did when they were at that age. After adjusting for inflation, men aged 30-39 in 2004 earn about $35,000, down 12% from the $40,000 that men in their 30s earned in 1974.
Meanwhile, there is a growing gap between U.S. productivity and median household income that challenges the idea that a rising tide lifts all boats. Since 1973, median family income has grown only 0.6 percent a yearâ€”behind increases in GDP and productivity.
â€œThe up escalator that used to insure that every generation would do better than the last appears to have slowed,â€ said Isabel Sawhill of Brookings, another co-author.
Naturally, when you put four economists on a panel to discuss anything,, you get disagreement. This first report, produced by Pew and Brookings, drew dissents from the more conservative folk at Heritage and AEI, over both the data and the interpretation. The report did not, for example, take into account employer-funded health care and pension contributions. And it measured the income of men during a period when many more women entered the workforce, lifting family incomes. So families with men in their 30s have more income than their parents generation did, but only because more women are working. You can read a commentary from Heritage here.
Virtually all of the evidence, however, indicates that the rich in American are getting richer while the middle class and working class struggle. Between 1979 and 2004, the real after-tax income of the poorest one-fifth of Americans rose by 9%, that of the richest one-fifth rose by 69% and that of the top 1% rose by 176%. Some inequality in society is necessary and even desirable, to motivate people to work harder, but something’s wrong when so much wealth is concentrated among the super-rich.
There are a lot of big reasons for this widening inequalityâ€”the shift of the U.S. from a manufacturing to a service economy, globalization which exerts a downward pressure on wages, the premium pay available to highly-educated and highly-skilled works, the decline of unions, mediocre (or worse) public schools, which have traditionally been drivers of mobility.
But the attitudes of the well-to-do also come into play.
Bloated CEO pay is an example. Like the owner of Citarella who wonâ€™t feed his staff, CEOs who grab whatever pay and perks they can, with scant regard for the well-being of their employees or their shareholders (many of them institutions, investing on behalf of the middle class), grab more than their share of the wealth created by successful companies. They make it harder for others to achieve the American dream. And, with the assistance of compliant boards of directors, they breed cynicism about business.
Why work hard when your wages aren’t going anywhere and the CEO gets richer and richer?
Why try to sell more muffins when the store owner won’t treat you with dignity?
No one wants to work for crumbs.