Christel Marie San Diego came to the United States from the Philippines four years ago with her own American Dream. After graduating from college and reading books like “Think and Grow Rich” and “The Power of Habit,” she plans to own a business — and perhaps outearn her parents.
“My parents were businesspeople in the Philippines,” said the 22-year-old San Diego, who works as a coordinator for a Las Vegas marketing agency and has an associate degree from the College of Southern Nevada. “For a while, my dad drove a tour bus. Now he drives for Uber. My mom is a housewife. My parents’ mindset has always been as long as they’re able to pay the bills, they’re satisfied with that. But I really have a vision for myself. I just know I’m going to get somewhere over what they’ve accomplished.”
A study issued this month suggests outearning her parents may be difficult, especially in Nevada. Researchers at Stanford and Harvard universities and the University of California, Berkeley, found millennials’ odds of outearning their parents has shrunk by about half nationwide over 40 years, and has shrunk the most in Nevada among all states.
The study, “The Fading American Dream: Trends in Absolute Income Mobility,” shows that in Nevada, 89.1 percent of children born in 1940 outearned their parents by the time the children reached their 30s. But this outearning ability, dubbed absolute social mobility, drops decade by decade, to 69.5 percent for children born in 1950, 51.9 percent for children born in 1960, 49.2 percent for children born in 1970 and 39.5 percent for children born in 1980. Only Alaska (37.9 percent) had a bleaker social mobility outlook for the 1980 cohort, millennials.
Overall, Nevada had a 49.7 percent drop in social mobility over the study period, leading the nation. Alaska (49.4 percent drop), Michigan (47.6 percent drop), Washington state (46.1 percent drop), Indiana (45.9 percent drop), Illinois (45.5 percent drop), Idaho (45.3 percent drop) and North Dakota (45.2 percent drop) followed.
Robert Fluegge, a study co-author, said the data don’t specifically explain Nevada’s result; he said the state followed the national trend.
“It’s really difficult for us to say what going on in any one particular state,” he said. “Given the way the study is structured, we can’t point to one event or one trend driving all the results we see.”
Fluegge speculated that jobs that had existed in Nevada in the 1940s, perhaps in mining, had waned over the decades, worsening social mobility. He added that population transience, famous in Las Vegas, might also have contributed. People who once had steady, relatively lucrative jobs might have lost them and moved away, he said.
University of Nevada, Las Vegas history professor Michael Green suggested people may have come to Nevada expecting an economic reversal, failed to achieve it, and left.
“Las Vegas and Nevada have had a reputation as a place people go to get rich — that’s part of gambling — and Americans are not noted for being the most patient people on the planet,” Green said. “I can imagine people coming in, wagering money, losing money and saying, ‘I tried it, it didn’t work out. I’m out of here.’”
UNLV professor Stephen Miller speculated that perhaps younger generations’ earnings potential would be hampered by a lack of college degrees (U.S. Census data show that 23 percent of Nevadans had a degree in 2015) and by relatively low-paying jobs. But he countered that the arrival of the Faraday Future electric car plant may add good-paying manufacturing jobs.
Fluegge said changes in technology, which sapped good-paying manufacturing jobs in particular, probably contributed to shrinking social mobility nationwide. Nationally, 92 percent of children born in 1940 had a chance to outearn their parents at the same age, but just 50 percent of children born in 1980 could expect the same. Absolute social mobility fell in all 50 states over the five decade cohorts studied.
Results were adjusted for inflation and derive from Census data and anonymized Internal Revenue Service records. The researchers said a widening gap between rich and poor, more than the slowdown in national Gross Domestic Product growth, sparked the decline.
A separate study also released this month, by economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman, illustrates how income inequality has widened.
The study found that stagnant wages reduced the share of income collected by the bottom half of America’s wage earners, about 117 million people, from 20 percent in 1980 to 12.5 percent in 2014. Meanwhile, the share of income going to the top 1 percent of the income distribution went from 12 percent to 20 percent.
In their study, Fluegge and his co-authors concluded that if GDP were rising at 1940 rates, children’s ability to outearn their parents would rise to 62 percent nationally from 50 percent.
Furthermore, they found, if economic growth were shared more broadly, as it was in 1940, today’s early 30-somethings would have an 80 percent chance of outearning their parents.
“With the current distribution of income, higher GDP growth rates alone are insufficient to restore absolute mobility to the levels experienced by children in the 1940s and 1950s,” the study said. “If one wants to revive the ‘American Dream’ of high rates of absolute mobility, then one must have an interest in growth that is spread more broadly across the income distribution.”
MANY YOUNG PEOPLE UNFAZED
Fluegge said the researchers were neutral on how best to restore income equality. Having more jobs that paid more could help; so could changes in government polices, he said.
“It’s not clear whether the solution would come from redistribution or wage growth,” he said.
Local young people in Generation Y, the cohort following the millennials, seemed generally unfazed by the study’s bleak forecast.
Adwoa Fosu, a 22-year-old who graduated from UNLV on Saturday with a nursing degree, will take nursing licensing exams and hopes to enter a doctor of nursing practice degree program.
Fosu said she hopes to one day outearn her mom, also a nurse, who has an associate degree. Education and support from her mom and her dad, an entrepreneur, encouraged her.
“I don’t feel like, ‘Here we go, back to my 40-hour workweek,’” Fosu said. “I’ll get to pursue my ambitions.”
Dria Thiel, a 23-year-old kinesiology major at UNLV, works full time on a testing company’s support desk making $10 an hour, a job she landed in February. She said her father is dead and her mother works part time on the Strip. She said she’s optimistic she’ll finish her bachelor’s degree, land work, optimally as a home health care director, and outearn her mother.
“The idea of going to college, getting a salaried job, and buying a house is not too far out of reach,” she said. “I know I have to work harder, longer, and smarter than previous generations may have had to, to obtain those necessities.”