Great Graphic: Another Look at the Reproduction Problem

David Leonhardt of the New York Times reminds us that the phrase “American Dream” was born during the Depression.  A popular book in 1931 that introduced the concept  defined it as “that dream of a land in which life should be better and richer and fuller for everyone.”

Yesterday’s column by Leonhardt cites interesting work by Stanford economists. They have created an index of the American Dream. The Great Graphic below illustrates their finding. Essentially, they show a person’s earnings relative to their parents. Nearly every child (92%)  born in 1940 had a higher pretax income at the age of 30 than their parents at the same age. Leonhardt attributes it to tow things–strong economic growth and an more equitable sharing of that growing pie. For Americans born in 1960, it had fallen to 62%, and for those born in 1980, 50%.

Interestingly, the economists tried to see what would happen if growth was the same, but not the disparity of income post-1970s. They found that the share of 1980 cohort would out-earn their parents by 80% rather than 50%. If growth had returned to its former levels, but the income disparity, remained only 62% of those born in 1980 would earn more than their parents.

Change of making more money than your parents if you were

- Click to enlarge