Kerby Anderson

Yesterday I discussed a Wall Street Journal article about a poll that revealed that most voters see the American dream slipping away. Only a third (36%) of voters said the American Dream holds true.

My focus yesterday was on the mindset that prevents young people from being successful. Why work hard if you are convinced the system is rigged against you? Perhaps the better way to look at it is to focus on the economic reality since the 1970s.

Go to a search engine and type the words “disconnect between productivity and work compensation.” You will see more than a dozen charts that show that productivity and wages were correlated and then sharply diverged in the 1970s. You can find other graphs that show that wages never increased when adjusted for inflation.

The reasons for this divergence are many: going off the gold standard in 1971, wage and price controls, dual incomes to qualify for home ownership, etc. You can debate some of the reasons, but you can’t argue with the result.

The builder generation (born before the end of WWII) generally was able to support a family with Dad working while Mom stayed home. They bought a house and were able to pay for their expenses. The boomer generation had a more difficult time making ends meet but still were able to own a home, sometimes by having a dual income.

Fast forward to families today where both parents are working and having a difficult time paying bills. As one couple in the Wall Street Journal article put it, “I’d be lying if I didn’t say that money is tight.” He then added “I feel we are a couple of paychecks away from being on the street.”

Over the last fifty years, the value of the dollar declined and the prices of everything went up. Wages didn’t keep up, and that’s another reason why people no longer believe in the American Dream.