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The American dream has always held that each generation will enjoy a higher standard of living than the previous one, and that is still true, as measured by household income. But the generational gains are slowing.
msnbc.com staff and news service reports
updated 5/27/2007 12:25:04 PM ET 2007-05-27T16:25:04

The American dream has always held that each generation will enjoy a higher standard of living than the previous one, and that is still true, as measured by household income.

But the generational gains are slowing, and the increased participation of women in the work force is the only thing keeping the dream alive, according to an analysis of Census data released Friday.

A generation ago, American men in their thirties had median annual incomes of about $40,000 compared with men of the same age who now make about $35,000 a year, adjusted for inflation. That’s a 12.5 percent drop between 1974 and 2004, according to the report from the Pew Charitable Trusts’ Economic Mobility Project.

To be sure, household incomes rose during the same period, but only because there are more full-time working women, the report said.

"This suggests the up-escalator that has historically ensured that each generation would do better than the last may not be working very well," said the report by Isabel Sawhill, senior fellow at The Brookings Institution, and John Morton, director of the Economic Mobility Project.

The report also found that many countries, including Denmark, Norway, Finland and Canada, offer far more economic mobility than in the United States when measuring by the income differences between generations.

While income is not the only measure of economic mobility, the findings challenge the historical presumption that each successive generation will be wealthier, said Morton.

“Today’s data suggest that during a 30-year period of economic expansion, a rising tide did not lift all boats,” Morton said in a release accompanying the report, “Economic Mobility: Is the American Dream Alive and Well?”

Of course, the men who run American companies don’t have too much to complain about. CEO pay increased to 262 times the average worker’s pay in 2005 from 35 times in 1978, according to the report’s analysis of Congressional Budget Office statistics.

The pay gap between executives and the average worker continues to fuel outrage on Capitol Hill and among corporate shareholders nationwide. Many shareholder proposals to tie executive pay to a company’s operating or market performance are introduced at corporate annual meetings every year.

Most Democrats favor giving shareholders at public corporations a voice in executive pay packages, while the White House and many Republicans favor a laissez-faire approach that includes regulators ensuring executive pay is transparent to workers and investors.

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U.S. inflation-adjusted household incomes rose only 9 percent from 1974 to 2004 — a severe slowdown when compared with the 32 percent increase from 1964 to 1994.

Going back to 1820, per capita gross domestic product in the United States has grown an average of 52 percent for each 30-year generation, according to the report. But since 1973, median family income has grown only 0.6 percent per year, a rate that produces just a 17 percent increase over a generation.

"Thus, unless the rate of economic growth increases, the next generation will experience an improvement in its standard of living that is only one-third as large as the historical average for earlier generations," the report said.

Over the next 18 months, the Pew project, which started in February, will continue to unveil analyses of data about the status of U.S. economic mobility.

Planned releases include a fact book containing mobility comparisons by race, gender, immigration and other measures, and an analysis of the impact of shifting federal investments in education and other domestic policies.

The Associated Press contributed to this report.

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