Monday, May 28, 2007

Is the American Dream Dead? Debunking the Pew Charitable Trusts' Economic Mobility Project

The recent Pew Charitable Trusts Economic Mobility Project’s claim that the American Dream "may well be shifting" (about sons not doing as well as their fathers) has been spreading through the mainstream media like a rash and Flexo at Consumerism Commentary asked me to explain my skepticism so here is my quick impression:

It is always a good idea to go to the original report and check the “methodology” section, often buried in the footnotes, to see how the report created the results.

We start with Pew’s own numbers:

Real Income of Men Age 30-39

1964 $31,097
1974 $40,210
1984 Missing
1994 $32,801
2004 $35,010

  • The “falling behind” media headlines highlight the 2004 v. 1974 comparison but comparing 2 isolated data points is notoriously dangerous and you can see even from the short chronology above that the long-term trend shows an increase while 1974 is an “outlier” (aberration that deviates from the trend). The 1994 figure is also lower than 1974 even though during the 1990s the media told us ad nauseum how the 1990s was the greatest economy in history. The 2004 figure is higher than the 1994 figure so why isn’t the current decade greater than the greatest?
  • The “falling behind” media headlines highlight the comparison to a 1974 baseline but 1970s baselines are frequently misleading. If you ever want to “prove” decline, the 1970s is a good place to shop because of a peculiar set of economic convergences at that time. The numbers often appear to show the 1970s as a worker’s paradise even though this was the Archie Bunker decade of stagflation, an energy crisis, price controls, gas rationing, and a high Misery Index.
  • The report calculates income oddly, considering the topic of economic progress. The report’s idea of “income” excludes non-cash employer-provided benefits such as health insurance and retirement benefits but it does count government welfare checks. In other words, if your dad collected a lot of welfare, the report counts that as doing well. In Pew’s world, being on the dole is better than having health insurance or a pension.
The report has much more to question (a 30-year generation instead of a 20-year generation, the international comparisons, etc.) so feel free to see for yourself and post comments.

1 comment:

Anonymous said...

This comment will probably get deleted but this was a poor analysis of a complex and emotional topic. I can't believe this made the pf carnival of best posts.