The American Dream is dead

The American dream has been eroded by a growing wealth inequality which is a strong pillar of for the dream.   The wealth inequality has been informed by factors such as income inequality, unequal growth in wages and income which has lead to a few individuals controlling the larger portion of wealth. In addition, over 1 out of 5 Americans have experienced negative or zero net worth over the past decades.  The society has not provided an environment where citizens can have a fair playing filed while competing for economic rewards that lead to wealth creation. The greater the inequality in accessing the opportunities for improved wages and incomes leads to reduced economic mobility so that the society continues observes a widening gap between the rich and the poor.  The American dream involved an individual being able to access opportunities so that they are able to make more wealth than their parents did (Morton & Sawhill, 2007).  The dream is also being shattered by the slowing of economic growth over the recent decades, so that the growth of economic pie is much slow that in the past and this makes it difficult for every generation to surpass their predecessors.

Wealth refers to an individual’s net worth and it is a major determinant of the standard of livings of American households. It includes the liquid assets which enable households to deal with cash emergencies,   assets that are tangible provide opportunities to participate in community life, work and school. Wealth also comprises of assets such as retirement plans that facilitates business investments and education investments. Considering the importance of wealth, growing gap between the rich and the poor is more than increasing inequality in income and wages (Economic Policy Institute, n.d).  A good measure for the widening gap is income inequality.

A good measure that can determine the increasing wealth gap in America is the growing gap between the different economic classes of individuals.  This measure is based on financial inequality that has been rising, with the rising being observed across all economic classes.   The rich individuals have more wealth and a larger portion of their wealth is derived from various lucrative assets as the source. In fact, the top 1 percent of rich Americans own almost half of the wealth invested in mutual funds and stocks, while those at the bottom 90% have their wealth being derived from major principle residences (Economic Policy Institute, n.d).  The measure of the gap can be seen in the difference in growth of wealth shares, which are indicated to have grown much at top class in recent decades. Within 1974-2012 period , a calculation of part of  majority families shows that wealth has not doubled , with an increase of 12 percent  - 8- 22 % - while those at the  top has risen to 2.5 percent from11.2 percent (Institute for Policy Studies, n.d) . This measure can be extended to the indictor of wealth for Forbes’ list of 400 richest individuals. By 1982, the poorest of people to be listed first in the magazine were worth % 80 million with the average individual on that list being worth $ 230 M in net. As per 2015 list, rich Americans had to have $1.7 billion to enter the list and an average person was $5.8 billion in net worth which is more than 10 tomes average shown in 1982 (Institute for Policy Studies, n.d).

Trend in wealth accumulation

year	Net worth( billion)
1982	$ 2
1992	$ 6.3
1995	$ 15
2011	$ 59
2012	$ 66
2013	$ 72
2014	$ 81
2015	$ 76

 

These figures indicate that wealth inequality has been increasing even among the richest individuals in America, and it is logical to conclude that even the low income earners have experienced the same trend. The standards of living could be lower considering the effect of inflation.

A major cause for this trend is variation in level of income which affects the individual’s ability to accumulate wealth. The low and middle income households have not had better growth of income over the past decades due to economic policies that direct most of economic growth fruits to the America’s wealthiest and highest earners (Piketty, 2015). This means that the economy has rarely worked for the American households, so that part of the wealth of the median households has been erased over the last 3 decades.  Further causes include the lower wages for middle class Americans than previously, irregularities in wage and income which has increased sharply over the last 3 decades and poor economic policies (Piketty, 2015).

Wealth inequalities have also been observed across the racial divide and according to Forbes’ list of 400 richest people, their wealth is as much as the wealth of 5 million and 16 M African- American families (Institute for Policy Studies, n.d).  Furthermore, the rate of homeownership among the black families reduced by 44.9 % and is far much behind the rate among the whites at 73.8 %.  Since less than half black households have their own homes, median typical black households’ home equity is zero. These families also have no stock ownership meaning that they have not wealth derived from this asset class.  There is also extreme uneven distribution of wealth within each age group, with people below the age of 35 being the least wealth (Institute for Policy Studies, n.d).  This means that most wealth is concentrated in the hands of the older generation.

 In order to solve the issue of wealth inequalities, there is need for policy changes to be enacted relating to wealth tax. This includes increasing taxation brackets for the income of extremely wealthy individuals and using such funds to provide amenities that present opportunities for the poor. This will allow the government to distributed and smooth manually over this wealth gap. In addition, policy changes should focus on ownership of stock by employees and profit sharing in the corporate world.  These policies can open a level playing field for all people while preventing accumulation of too much wealth in the hands of few individuals.

An alternative argument to this is that wealth inequality has not eroded the American dream since despite such inequalities have not influenced economic mobility.  However, such an argument cannot be complete since such mobility is only available to a limited section of the population that is quite wealth. In the midst of slower economic growth, few individuals can benefit from any extra income generated.  Furthermore, the various economic recessions have lead to erosions of part of the wealth owned by low and middle income earners who hold less of the nation’s wealth while richest can recover easily from such effects.

References

Morton, J. E., & Sawhill, I. V. (2007). Economic Mobility: Is the American Dream Alive and Well?

 

Economic Policy Institute. The State of Working America. Retreived from: http://stateofworkingamerica.org/?s=wealth+inequality&x=0&y=0

Institute for Policy Studies, (n.d).Wealth Inequality. Retrieved from: gabriel-zucman.eu/files/SaezZucman2014.pdf

Piketty, T., (2015).The Economics of Inequality. Harvard University Press