The American Dream is mostly just a popular fantasy, according to a provocative study published late last month by the liberal Center for American Progress (CAP). The study found that very few poor and middle-income American children advance into the ranks of the super-rich when they become adults.
Specifically, the study looked at about 4,000 Americans who were children during 1968-72 and adults about 30 years later. It found that children in low-income families only had a 1 percent likelihood of being among the top 5 percent of income earners as adults, while children in rich families had a 22 percent likelihood. Children in the middle quintile had a 1.8 percent likelihood.
Study author Tom Hertz notes that the odds were better for poor children in Europe: "Intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark."
It was enough to make one think that solving the U.S. illegal immigration problem should be easy: Just offer all those May 1 protesters a ticket to France or Denmark, and everybody would be happy.
But another recent study shows why they may not want to accept such an offer, after all. It turns out that the Center for American Progress study only tells part of the story, leaving out the actual standards of living among various countries' income groups. In that race, a 2004 Swedish study shows that the United States outruns its Western European counterparts so much that it almost laps them.
Economists Fredrik Bergstrom and Robert Gidehag point out that if the 15 Western European nations in the European Union together became a U.S. state, it would rank ahead of only four other states in terms of per capita GDP-only slightly ahead of Arkansas but far behind states like Connecticut and Delaware. France and Finland, for instance, both rank below Alabama and Oklahoma. Tiny Luxembourg is the only EU nation that can compete with most U.S. states.
This means that living standards are much higher in the United States, with poor Americans by some measures better off materially than average Europeans. Poor U.S. households, for instance, have more square feet in their dwelling places (1,228, or 438.6 per person) than the average Western European household (976.5, or 395.7 per person).
By European standards, poor U.S. households also have astonishingly high rates of home ownership (45.9 percent), car ownership (72.8 percent), cable or satellite TV hookups (62.6 percent), VCR or DVD player ownership (78 percent), and microwave ownership (73.3 percent). In 1999, only 42 percent of Germans (overall, not just poor Germans) had a VCR and only 31 percent of all Danes had a microwave (see chart).
Money and possessions of themselves don't bring happiness, of course, and prosperity can bring its own set of problems. But if the discussion is about material well-being, the United States is difficult to match.
"Most Americans have a standard of living which the majority of Europeans will never come anywhere near," Messrs. Bergstrom and Gidehag write. "The really prosperous American regions have nearly twice the affluence of Europe." They document broad-based gains in U.S. incomes and living standards over the last several decades, with the U.S. poverty rate falling from 22 percent in 1959 to 12 percent in 1999.
The Center for American Progress study does make some important points, especially the persistence of race as a factor in holding back many poor people. And it is interesting to note that few at the very bottom make it to the very top.
But since it's a mathematical certainty that most of us won't get into the top 5 percent of income earners, surely the more important measure is standard of living across income groups. On that score, the United States has the rest of the world beat.