Is It Time For A New American Dream?

In March of this year Congress passed the CARE act, which among other measures to assist Americans during the COVID pandemic, approved a $600 weekly unemployment benefit to supplement state unemployment benefits. This unemployment benefit, along with other parts of the act, is set to expire on July 31st, leaving over 20 million people with an income shortage (1). The act was passed presumably with the expectation that the pandemic and it’s devastating impact on the economy would have somewhat subsided by now, but as we’re all aware, the trend of disaster has not exactly been downward. So far the virus has claimed almost 150,000 lives and infected 4 million in the U.S (2). While other countries are reopening as cases drop with some nations even down to zero, some US states are having to backtrack and reinstate the shutdown of businesses following rapid spikes in cases after reopening in May. Despite the unrelentingly dire situation, lawmakers aren’t in agreement about extending unemployment assistance, and there may be a lapse as they agree on a new package.

I was in a convenience store a few weeks ago and overheard a conversation between the cashier and customer at the register next to me. They were discussing the unemployment benefit, and both agreed that there was no need for an extension or additional stimulus package. The cashier said she believed the initial unemployment benefit should have lasted only 3 weeks, as that was an ample amount of time for those who were out of work to secure another job. I know people who in a normal, even thriving economy, were unemployed and actively seeking work for over 3 months. How and why does anyone believe that 3 weeks is a realistic timeline to find and commence a new job in the midst of a recession and global pandemic? While I found the conversation surprising, the sentiment is not unfamiliar. Many people hold the belief that those who use government benefits such as unemployment, welfare, and other low income subsidies, are lazy. Buried in the vision many have of the American dream, is the underlying belief that if you’re poor, it is somehow your fault. The “pick yourself up by your bootstraps” mentality is a powerful one that blames even people who were born into poverty, for not making their way up the ladder. After all, if other people could do it, then why not you?

The U.S is a country with a strong (if not the strongest) culture of individualism, which emphasizes the individual and their unique abilities, expression and interests, with less emphasis on the community or group as a whole and what role the individual plays in it (collectivism). The individualistic culture extols self-reliance and uniqueness from others (3). This way of thinking certainly encourages creativity, entrepreneurship and the ideal that anyone can “make it” no matter their background, and is indeed what makes the USA a promised land of sorts for many immigrants and citizens alike; however at the extreme of this idealism is a naive belief in capitalism and blindness to societal factors which hinder progress for some while giving advantages to others.

The conversation about raising taxes on the wealthiest Americans is one that is revived predictably during each cycle of presidential elections, and has been given more attention recently by candidates such as Bernie Sanders and Elizabeth Warren who believe that unchecked capitalism has led to the extreme wealth inequality that exists today. Traditionally Republican lawmakers and candidates are opposed to the idea of increasing taxes even on the nation’s wealthiest, but many average Americans also share this opposition, despite the fact that they themselves are nowhere near as wealthy as the target group, and probably never will be. There are similar opinions around the conversation of raising the minimum wage, again revived in recent years. While many states have raised their minimum wage, the federal rate has remained at $7.25/hour since 2009, despite the fact that inflation and housing costs have continued to rise since. According to a 2020 study on housing affordability in the U.S., “In no state, metropolitan area, or county in the U.S. can a worker earning the federal or prevailing state or local minimum wage afford a modest two-bedroom rental home at fair market rent by working a standard 40-hour work week.” (5)

It’s an interesting observation that middle class and even low income people would be against taxing the wealthy, and some have suggested that it’s because they subscribe to the possibility that they too could one day be in the top 1%. Studies show though, that this is unlikely. As much as Americans love a rags to riches story, it is the exception and not the norm.

Data from the World Bank shows that upward mobility — that is, the potential for children to out-earn their parents — has been declining in the United States for decades (6). For a person coming from a low income family, the most likely path for upward mobility to the middle and upper middle class is with a college degree (7). Incomes of college graduates are influenced by the tier of college attended, with ivy league graduates earning more on average than public college graduates. Access to ivy league schools however is not equal, and students whose parents are wealthy are much more likely to attend ivy league schools compared to low and middle income students (4). While a college degree may provide a means of upward mobility into the upper middle class, education and hard work alone is not likely to get one into the 1%, or the “rich.” For this, the most likely path is quite simple: have rich parents, or marry a rich spouse (7).

This is not to say that it is impossible; we all know people maybe personally but definitely in popular media who have made it from nothing to the “top”, and as much as we all find their journeys inspiring we should remember that they are outliers. Also, many of the success stories we are familiar with have more to them than meets the eye. Jeff Bezos founded Amazon “out of his garage”, and today (with the help of his ex-wife and former business partner), he has made Amazon into the largest online retailer in the world, and he the wealthiest man in the world. He also had parents who could afford to invest $250,000 in his startup (8). I mention this not to downplay his business acumen or hard work, but to say that had he not the privilege of having well-off parents, perhaps Amazon would have died like so many other potential world-changing businesses have.

The year 2020 has upended life as we knew it in so many ways, (and to think we’ve only made it halfway through the year) and also forced American society to take an uncomfortable look in the mirror. While the global pandemic has been a shared stressful experience, the year has hit some harder than others, to say the least. Since the pandemic began, over 40 million people filed for unemployment benefits, as of June. In the same month, Jeff Bezos beat his own record of world’s richest person with a net worth of $172 billion. Good for Mr. Bezos, but maybe the question we should ask is: can a society that allows for him and others like him to thrive, also allow “essential” workers to earn a living wage on a 40 hour work week? Can the same society also allow for their unemployed citizens to get an additional $600 a week for more than 3 months in the midst of a global pandemic without being labelled leeches on the system? I would like to think so, but maybe in true capitalism those things are not compatible. Perhaps the “American dream” needs to be re-envisioned.

References

Washington Post “McConnell Says Stimulus Deal Could Take “A Few Weeks” Putting Millions With Expiring Jobless Aid In Limbo”. July 24, 2020. https://www.washingtonpost.com/business/2020/07/24/unemployment-benefits-congress-coronavirus/?outputType=amp
Data reported by New York Times and Wikipedia as of July 24, 2020.
Bianchi, Emily. “American Individualism Rises and Falls With The Economy: Cross-Temporal Evidence That Individualism Declines When The Economy Falters” Journal of Personality and Social Psychology 2016, Vol 111.
Chetty, Raj et al. “Mobility Report Cards: The Role of Colleges in Intergenerational Mobility.” July 2017.
Out of Reach 2020: The High Cost of Housing

https://reports.nlihc.org/sites/default/files/oor/OOR_BOOK_2020.pdf