From high hopes to low wages: What happened to the American Dream?

Ideas about prosperity have become increasingly polarized over the past half-century — and we're paying the price

Published April 13, 2014 2:00PM (EDT)

Ronald Reagan, Dr. Martin Luther King, Jr.      (AP/Reed Saxon/Henry Burroughs)
Ronald Reagan, Dr. Martin Luther King, Jr. (AP/Reed Saxon/Henry Burroughs)

Excerpted from “Chasing the American Dream: Understanding What Shapes Our Fortunes.”

America has frequently been referred to as the land of opportunity. Horace Greeley’s famous advice, “Go West, young man” and seek your fortune, illustrates the dream of nearly unlimited opportunity. The availability of opportunities has been viewed historically as a key building block upon which individuals and families have been able to achieve the American Dream. The notion of streets paved with gold, with its obvious exaggerated implications, reflects this overall idea as does the image of climbing the ladder of opportunity.

In recent years there has been much discussion about how such opportunities may have changed over time. The early 1970s appear to have been a turning point with respect to the nature of jobs and the workplace. Evidence indicates that there has been an increase in lower paying jobs with less stability, often part-time, and providing few benefits. At the same time, some sectors of the economy have added well-paying jobs demanding high skills and education. Consequently, there is the notion that the labor market has become more polarized over the past few decades. One of the consequences of this is that for a growing number of Americans, there is an imbalance between those in need of a decent job that can support a family and the number of such jobs that exist.

The Game of Musical Chairs

In previous writings I have relied on the analogy of musical chairs to illustrate the mismatch between opportunities and the pool of individuals in search of such opportunities. The analogy plays out in the following way. Let us imagine a game of musical chairs in which there are ten players but only eight chairs. The players circle around the chairs until the music stops. Who is most likely to find a chair? If we focus simply on the characteristics of the individual winners and losers, those more likely to find a chair will be in a better position when the music stops, perhaps possessing more agility, greater quickness, and so on. All of these attributes help to explain who in particular is able to find a chair.

However, given that there are only eight chairs for ten people, these characteristics only explain who in particular wins or loses in the individual game, not why there are losers in the first place. That question can only be answered by understanding that the structure of the game ensures that two people will not be able to locate a chair. Even if everyone were to double their quickness and agility, two people would still lose out.

Similarly, while greater or lesser levels of skills and education help to determine who in particular may be more likely to find better opportunities, they cannot explain why there may be a shortage of such opportunities in the first place. In order to answer that question, we must look to the structure of the game.

In thinking about the overall availability of opportunities, they vary over time and place. In periods of robust economic growth, when plenty of good-quality jobs are being produced, the mismatch may be that there are nine chairs for every ten players competing in the game. On the other hand, during periods of economic downturn, such as the recent Great Recession, it may be that there are only six or seven chairs for every ten individuals looking for a decent opportunity.

Likewise, the size of one’s birth cohort can play a role in this mismatch. A larger birth cohort entering the labor market will be at a greater disadvantage than a smaller birth cohort. There can also be a spatial mismatch between opportunities and individuals. For those living in impoverished inner city or remote rural areas, there is clearly a mismatch between available job opportunities versus the pool of labor in need of such opportunities. The game itself is therefore fluid over time and place. But the bottom line is that in order for Americans to get ahead and achieve the American Dream, there must be enough good opportunities for all who are in need of them.

In his study of long-term unemployment, Thomas Cottle talked with one man who had worked for 25 years at the same company, only to be downsized. After two and a half years of searching, he eventually found a job at a much lower salary, but he felt fortunate to have such a job, nonetheless. He referred to his job search using the musical chairs analogy:

The musical chairs of work still have me in the game. The music plays, we run around, the music stops and I dive for a chair. Took me two and half years to find this last one, I don’t want the music to stop again. I’m only 52, but pretty soon they’ll take all the chairs away. Then what? That’s the part I don’t want to think about.

Or as one of our interviewees put it, there are a number of Americans who are thinking, “the music’s going to stop and they’re not going to have a chair. And they’re just probably living on the brink. One paycheck away, one car accident away, one unfortunate illness away” from joining those in poverty.

We argue that this analogy applies to what has been happening to the US economy. There has been a declining number of jobs that we might consider of good quality (livable wages, benefits, stability, good working conditions). Yet the pool of labor in search of such jobs is much larger than the number of available jobs, creating a significant mismatch.

A straightforward way of seeing this is simply to look at data from the Bureau of Labor Statistics (2013). In an average month in 2012, the unemployment rate was 8.1 percent, which represented approximately 12.5 million Americans. An additional 8.1 million Americans were working part-time, but wanted full-time work. Another approximately 1 million Americans were categorized as discouraged workers, in that they desired to be working, but felt there were no jobs available and had stopped searching for work. Consequently, in a typical month in 2012, over 20 million Americans could not find a full-time job. And as we have seen in our life course research, if we were to look over longer periods of time, these numbers would be much higher in terms of Americans experiencing problems finding full-time work.

One woman from our focus group sessions commented,

We were talking about the American Dream and whether it’s alive and well, and most people said it wasn’t. But the kids that I work with really believe that if they buckle down and work hard, they’re going to get somewhere. And that’s what’s so heartbreaking to me, ‘cause it’s not true. It’s a lie and the reason that it’s a lie is because there simply aren’t enough good jobs for them to have. We can’t all do that. There’s gotta be people working at 7:15 at McDonald’s and Walmart.

Approximately one-third of all jobs in the United States are considered low paying, often lacking in benefits.

On the other hand, a few of the remaining chairs may have become more comfortable and spacious. That is, some of the jobs being created in the new economy pay very good wages with solid benefits. Many of these jobs can be found in the financial and technology sectors, as well as in several of the professional fields.

The Changing Economic Landscape

One of the economic trends over the past 40 years has been the declining percentage of good jobs that can adequately support a family. When we speak of good jobs, one is generally referring to jobs that pay a livable wage, have benefits, are relatively stable, and possess good working conditions. They are the backbone of the American Dream of economic security. Yet such jobs have been harder to come by in more recent times.

Volumes of research have been written about this and why it has occurred. A number of factors have been suggested to account for the loss of such jobs, including globalization and outsourcing, increased international competition, technological change that benefits highly educated workers, corporate restructuring, the decline of unions and worker power, expansion of the service sector, and the weakening of government intervention in the labor market.

The result has been a proliferation of lower quality jobs during the past few decades. This can be measured in several ways. First, it is estimated that approximately one-third of all jobs today are low paying. Indicative of this has been the fact that male median full-time wages between

1973 and 2012 have actually declined in real dollars. In 1973 the median wage was $51,670, and by 2012 it was $49,398. In other words, the typical male worker in the United States has actually lost ground over the past four decades in terms of his wages. Low-wage jobs are also frequently lacking in benefits. In particular, decent and affordable health care, pensions, sick leave, vacation time, and other benefits are increasingly absent from low wage work.

Second, there has been a tendency toward the creation of a greater number of part-time jobs, rather than full-time. Again, many of these part-time jobs offer no benefits whatsoever. In an average month in 2012, there were over 8 million Americans working part-time, either because their hours had been cut back, or because they were unable to find full-time work.

Third, the numbers of unemployed and the length of time that individuals remain unemployed have been rising over the past four decades. In the 1960s the notion of “full employment” was considered an unemployment rate of 3 to 4 percent, whereas today, 5 to 6 percent is considered the norm. In addition, the percentage of workers out of a job for a prolonged period of time has been rising steadily over the past 40 years. Over the last few years, approximately 40 percent of the unemployed have been out of work for 27 weeks or more, which is an all-time high.

Fourth, work in general has become much more unstable and precarious. Individuals are at a greater risk today of being laid off or released from their job than in the past. This includes both low- and high-quality jobs.

Fifth, there have been limited sectors of the economy that have seen the creation of good-quality jobs over the last few decades. In particular, the financial and technology sectors of the labor market have produced a number of jobs with good wages and benefits.

Finally, as a result of these trends, there appears to be an increasing level of polarization in the labor market. A number of the new jobs that have been created are of low quality, while a smaller number of jobs are of fairly high quality. The gap between the haves and have nots has widened, while the middle ground has been hollowing out. Taken together, these changes in the labor market and economy suggest that the landscape of opportunity has become more tilted over time.

In illustrating these changes in working conditions, we could point to any number of our interviewees as examples. However, for purposes of space, we focus on three individuals. One is employed at a big box retail store. The second is a skilled professional, but finds himself in a declining industry. And the third is an entrepreneur who has used his creative and technical skills to his advantage in the new economy.

In the 1950s and 1960s, General Motors was the largest private employer in the country. Today it is Walmart. When we met Edgar Williams, he had just arrived home from work, still wearing his dark blue janitor uniform. Edgar, who is in his late fifties and African American, worked at Walmart for several years and is currently employed at Sam’s Club (which is also owned and operated by Walmart). His working conditions epitomize the changes that we have discussed at the lower wage level. Sitting in his living room, Edgar talked about these conditions.

What they’re trying to do now is kill all full-time work like Walmart did and make it part-time so they don’t have to pay benefits. So that’s their goal.

You don’t know when they’re going to let you go. Because they want to replace you with part-time people. They gonna hire two part-timers for one full-time. I only make $11.60 an hour, and I’ve been there all this time. Then they’ve got a ceiling where some of the people that have been there 20, 22 years, they’ve gone as far as they can go, they can’t go no further in salary. They cap the salary.

They used to be a good company to work for. They used to give merit raises. Now, if you get a 60 cent raise a year, you’re doing good. If they give you 40 cents, you’re doing alright, and a lot people don’t get none. And it’s bad. It’s bad. But the public don’t know it [chuckle].

And this is the thing, the worst part, they make you have open availability. Where they can schedule you any kind of way, so that don’t give you no room for another job. You know, because you don’t have a set schedule.

Sometimes I get really, really irritated. And I don’t curse or nothing, but I tell them how I feel. They get up in the morning and they do their little Sam’s cheer. And one time they asked me, “How come you don’t cheer?” I said, “I will when ya’ll stop lying. When you said, members are number one, because that’s not true.”

You remember that commercial that used to come on years ago when the man got stuck in the revolving door [laughter]. That’s the way you feel. You’re just going around and around and around. It’s cruel. It’s cruel. We supposed to be the richest country in the world, and you want to help somebody, but in this country, you want to cut out everything for the lower income people.

The working conditions that Edgar describes at Sam’s and Walmart are typical of the job conditions in much of the low-wage service sector of the economy. These are jobs that are extremely difficult to survive and support a family on.

For Greg Owens, his American Dream was to land a job as a reporter with a major newspaper. He started his journalism career at several small papers, but eventually worked his way up to the city’s long-established and well-respected newspaper, first as a part-timer and then full-time. As Greg says, “Obviously I was excited when I got the job. It took almost 6 months, but I did, and I’m still there today.”

Yet Greg has seen the dramatic cutbacks and volatility that have been occurring in the print media industry across the country in recent years. He discussed at length the insecurity facing his colleagues at the paper.

The dark periods were probably two or three years ago when they just started laying people off. And you’re sitting there, and you see someone sitting in the chair one minute, they’re called into an office, and then they’re gone. After 30 years at this paper. And they don’t have a chance to say goodbye. They don’t have a chance to have a farewell party or anything.

Their choices are you can go back to your desk and gather your belongings while someone’s standing over your shoulder. Or you can walk out, and we’ll just pack it up and bring it to your house later. So you’re stripped of . . . you know, for some people, this is their identity. Their chief identity is they’re an editor. They’re a reporter. They have some sort of status in the community, and now they’re unemployed. So that was really hard to watch.

The point is that you’re working in this environment where the sense of security is completely gone. It’s sort of like a game of survivor. I mean you come in every day, and it’s like who’s going to be gone? And really, what are you winning at the end of the day? You’re not winning a million dollars, you’re just winning the right to a paycheck.

The newspaper had been sold a few years after Greg started his reporting, and the new owners were seeking concessions and salary cutbacks from the workers.

In the midst of all of this was a Union contract that had to be negotiated. And we all had to agree to a 5 percent pay cut, which actually ended up being almost 7 percent.

So in the midst of layoffs, and then to get your salary cut on top of that, I went into this like funk because now I’m in my early forties at the time. And you usually think you’re sort of just in this trajectory. Slow but steady your income continues to rise, which it had, but now it’s like, what’s going to happen? I’m never going to be at that point again.

It does affect your morale. You sort of feel like, have I plateaued? Is this as good as it gets? I mean you want to keep working hard and making more money obviously. And I’m not in a position to do that. So then you sort of think about what does 7 percent of my life represent because it’s 7 percent of my salary.

It’s sort of a punch in the gut. Everybody at work is that way. It was kind of numb for a lot of people because we basically voted to cut ourselves, our pay. And it’s sort of like cutting off your arm to like . . .

To save your body?

It’s like that movie ["127 Hours"]. Okay, so I’m still alive, but I don’t have an arm.

Finally, Scott Ryan represents someone who has done quite well in this changing economy. As mentioned earlier, while many have suffered, others have prospered in the new economy. Certain sectors of the labor market have performed well, including the technology and financial sectors.

Scott grew up in Silicon Valley, with his father working in the area of consumer electronics. When we interviewed Scott, he had recently started his own company in advertising and branding after partnering with one of the most creative firms in the city for over 10 years. His ideas and work are extremely innovative and groundbreaking. Part of that may be in his genes, as he explains:

The other thing I’d say is some of the decisions I’ve made about my career and how my sort of definition of self comes a lot from also the fact that my grandfather on my mom’s side was a bit of an inventor and in the creative business. So I’ve always felt a sense of confidence that that’s in my DNA somehow. He had done some interesting things. He and other members of his family had done some really interesting things in the world, and they come from a place of creativity and inventiveness. So I just always felt that had an impact on me and gave me a sense that I could do that.

We talked about controlling his own destiny through his work.

You know, I’m an owner of this company, and I was a partner in my last company, and although I wasn’t involved at the very first day of starting that last company, I very much shared the responsibility of helping grow it and so forth. This (new company) was all about destiny. It was all about I don’t want to be that guy when I’m 60 that somebody goes, you’re irrelevant because of your age [chuckle].

But why start your own company rather than work for another firm?

Destiny, you know, control. It comes back to the sense of being able to have some greater influence over the decisions that were being made about the company, about my career, about my value. I wanted to have greater control over steering the ship. I felt like I’d learned a number of things so far, still had a lot to learn, and I was looking for the next challenge, and this has been every bit of that challenge, to learn new things about how to do this.

So we’re building the bike as we ride it a little bit, but I know we’ll be successful if we’re creating jobs. . . . It means that great work begets great work. So if we’re doing great work, it’s going to beget great work. And with great work is going to come more assignments and larger assignments. When that happens, then we’re going to be needing people, and as we need people, then that means we obviously have the resources to get those people. I’d love to be able to say we’re one of the fastest growing creative firms in the region. That would be fabulous.

Scott has been extremely successful both from a financial and professional point of view. He has been able to creatively fulfill a need that companies and organizations are looking for in which they can distinguish and brand themselves from their competition. Scott has been successful in meeting that need. He has also been able to shape a career in which he is able to use his creativity and technological expertise to its fullest extent and to control his work environment as he sees fit.

All three of these examples illustrate various elements of the changes occurring to the economy and labor market over the past four decades. Edgar Williams has encountered working in the growing low wage job sector of the economy with little benefits, respect, and security. Greg Owens’s experience with a major newspaper has been to witness the paper and industry deteriorate over time, resulting in significant cutbacks in both salary and staff. For these two individuals, it has undoubtedly become more difficult to achieve the American Dream of economic security within the new economy. Working conditions for both Edgar and Greg have grown more unstable and less supportive. Nevertheless, they are still at their jobs and surviving.

On the other hand, there are also rewards to be found in certain sectors of the economy. The experiences of Scott Ryan illustrate this. Scott has been able to carve out a niche in the advertising world, and through his creativity and skills, he has been able to develop a very successful career, one that is both personally and financially fulfilling.

Excerpted from “Chasing the American Dream: Understanding What Shapes Our Fortunes” by Mark Robert Rank, PhD, Thomas A. Hirschl, PhD, and Kirk A. Foster, PhD. Copyright © 2014 by Mark Robert Rank, PhD, Thomas A. Hirschl, PhD, and Kirk A. Foster, PhD. Reprinted by arrangement with Oxford University Press, a division of Oxford University. All rights reserved.

By Mark Robert Rank

Mark Robert Rank is co-author of "Poorly Understood: What Americans Get Wrong About Poverty," out now from Oxford University Press. He is currently the Herbert S. Hadley Professor of Social Welfare in the George Warren Brown School of Social Work at Washington University in St. Louis, and is widely recognized as one of the foremost experts on issues of poverty, inequality, and social justice. He has been the recipient of many awards, and his research has been reported in a wide range of media outlets including The New York Times, The Washington Post, The Wall Street Journal, The Los Angeles Times, USA Today, and National Public Radio.

MORE FROM Mark Robert Rank

By Thomas A. Hirschl

MORE FROM Thomas A. Hirschl

By Kirk A. Foster

MORE FROM Kirk A. Foster

Related Topics ------------------------------------------

Books Income Inequality The American Dream