The Erosion Of The American Dream

If the American Dream means attaining a higher standard of living than your parents, than that dream is in trouble.

Consider Josh Shartzer, a 38-year-old who works in manufacturing in Indianapolis, who was profiled recently on CBS. Shartzer makes less than half what his dad made, and says the possibility of ever doing better than his parents is virtually impossible.

He said, "I think it’s a dream. And I think it’s going to be a very hard dream to make a reality. It’s a lot more harder to reach that reality than it was 20, 30, 40 years ago.”

Shartzer is right about that, according to new research from economists at Harvard and Stanford universities. They took a look at tax records going back decades, and discovered this startling fact: In 1940, a child born into an average American household had a 92 percent chance of making more money than his parents. Today, only about half of Americans can expect to out-earn their parents.

Nathaniel Hendren, co-author of the new paper "The Fading American Dream: Trends in Absolute Income Mobility Since 1940," faculty research fellow at the National Bureau of Economic Research and assistant professor of economics at Harvard University, which tweets @harvardecon.