Is the American Dream Dead?
The American Dream is what everyone strives for when starting life in the United States. However, what defines this construct? The American Dream is to do one’s best for a happy family, professional success, and reaching a higher social class through hard work alone. Since the 1930s, it seemed possible for most Americans to achieve this dream, as it pushed people to take risks through entrepreneurship and innovation. However, over time people began to lose confidence in the American Dream and became convinced that it is unachievable or unrealistic, dropping off hastily post-Financial Crisis in 2008. This brings up the question; “Is the American Dream dead?”
Studies have shown that education is the best way to achieve high incomes, leading students to apply for college at record rates. The rapid increase in demand for a college degree as a requirement has led to shaping college from a luxury to a necessary step after high school in hopes of obtaining high income jobs. However, many students are crippled by the amount of tuition required to get through college, restricting their ability to take the necessary financial risks and to receive credit cards. Student loans and income inequality are just the beginning for making the dream unattainable with the reason being that some college graduates come out of college obtaining low income jobs leaving them to struggle to pay back the student loans. This then forces them to need credit cards to support them, but with little understanding on how to properly use these tools, creating a vicious cycle of constant debt.
In sum, we can say that the three largest threats to the American Dream are consumer debt, lack of financial literacy, and stagnant wage growth for the lower and middle class. The lack of financial literacy happens for multiple reasons, from the lack of high school courses to cover the topic, the need to focus on regurgitating students who will be successful in college, and the taboo of talking about money openly. Most people prefer not to let others know what they earn out of fear of judgment associated with their personal finances. However, if we do not talk about money more openly, or take the time to teach ourselves financial literacy, we start to run into trouble. Financial literacy affects financial decision-making; ignorance about basic financial concepts can be linked to the absence of retirement planning, lack of participation in the stock market, and poor borrowing behavior. The amount of poor financial decisions starts to build up over time, and leads to form a life where struggling financially is common for most people.
Consumer debt consists of debt that results from purchasing goods that do not appreciate or are consumable. Now, consumer debt can be easily handled by living below your means and not paying for unnecessary accessories. Like most things in life, it is easier said than done. One of the main parts of the American Dream is owning a home, since it is considered by most to be a status symbol. Almost 40 percent of Americans do not own homes, according to the U.S. Census Bureau. Ghosn says nearly 50 percent of millennials rent. How does the lack of home ownership and consumer debt fit together? Poor management of money is the answer. Today’s world is dominated by the need to live above your means rather than focusing on the necessities supporting the life-cycle hypothesis, an economic theory developed by Franco Modigliani and his student Richard Brumberg based on the spending and saving habits of people over a lifetime. What supports this consumer life cycle hypothesis is the belief that it is natural to make poor financial mistakes while young and they could always make money later in life to save. This form of thinking and inadequacy of financial literacy creates the belief that the American Dream is unattainable.
So, is the American Dream dead? Not necessarily. While it may be true that the concept is significantly more difficult to obtain, we, as a society, change over time. This means that our goals, dreams, and aspirations can change as well. With each new generation comes a new form of the American Dream, and many people are focusing on happiness and making a positive impact on the world, rather than bettering their social class.
Works Cited
Amadeo, Kimberly. “Did the Recession Kill the American Dream?” The Balance, The Balance, 30 May 2019, www.thebalance.com/the-end-of-the-american-dream-3306006.
Carter, Shawn. “Less than 20% of Americans Say They're Living the American Dream-Here's Why.” CNBC, CNBC, 19 Sept. 2017, www.cnbc.com/2017/09/19/less-than-20-percent-of-americans-say-theyre-living-the-american-dream.html.
Lusardi, Annamaria. FINANCIAL LITERACY: AN ESSENTIAL TOOL FOR INFORMED CONSUMER CHOICE?www.nber.org/papers/w14084.pdf.
