Reconsidering The American Dream: A Statistical Analysis

Abstract

The United States has observed appreciable GDP growth since the 1940’s, both in aggregate and per-capita terms. Accompanying advancements in technology, productivity, and social justice, one might expect a promising future for the next generation. After all, upward social mobility is the national ethos of the U.S., better known as the American Dream. At a time when wage stagnation and income inequality are becoming forefront concerns for young Americans, this paper seeks to determine if the American Dream is a living promise or a naive ideal. Specifically, this study uses statistical methods and historical data to estimate the effect of childhood socioeconomic status on future wages, conditional on a set of controls. Indeed, we find that parental income is a statistically significant predictor, with a p-value of 0.033 for the full sample and 0.007 for the low socioeconomic status (SES) sample. Our findings suggest that income inequality will continue to increase in the future, raising concerns about sustained GDP growth.