For much of the past decade, The Pew Charitable Trusts has been studying the health and status of the American Dream, defined as the ability of families to move up the economic ladder over a lifetime and across generations. Economic mobility has long played a central role in our national discourse, and improving the ability of all Americans to move up the ladder has been one of the rare issues with the potential to unite the political parties.
As recently as 2009, nearly 4 in 10 Americans felt that it was common for someone to start poor, work hard, and become rich. But by 2014, only 23 percent of Americans said that hard work alone is enough to achieve success, and an overwhelming 92 percent said they value financial stability over economic mobility, an increase of 7 percentage points since 2011. These results indicate that American attitudes appear to be shifting: The American Dream is becoming less about mobility and more about keeping one’s head above water.
In late February, Pew released findings from a nationally representative survey that collected data from more than 7,000 American households on family balance sheets as well as families’ perceptions of their own financial security. This research combined quantitative and qualitative information to begin to explain the changing definition of the American Dream. The survey revealed that although Americans are starting to feel more optimistic about the economy and their own finances, most still worry about money.
Fifty-six percent rated their financial situations favorably, but the same proportion (57 percent) said they are unprepared for a financial emergency, and only half reported feeling financially secure. Many people’s descriptions of their financial lives suggest that they have reason to worry: More than half (55 percent) said that they either break even or spend more than they make and that their income or expenses fluctuate each month, making it difficult to plan and save. A full one-third reported having nothing in savings, which causes a great deal of anxiety.
In addition, many Americans experience economic shocks that strain family finances and often derail savings plans and aspirations. These unexpected expenses, combined with frequently unpredictable income, even eat away at the budgets and savings of families at the upper end of the income ladder: One in 10 of those with income of $100,000 or more has no savings, and 1 in 5 reports income volatility.
As policymakers look for ways to bolster families’ economic security in the post-recession economy, they must consider Americans’ changing perceptions as well as their financial realities. For example, specific components of savings plans, such as opt-out versus opt-in choices for 401(k)s, can dramatically increase retirement savings.
But decision-makers must also take into account that policies can present conflicting messages about—and even hinder—asset accumulation. For example, although many low-income families understand the importance of saving, a host of states include asset limits in the eligibility requirements for cash and food assistance programs, which can deter potential participants from enrolling or keep enrollees from building savings. These unintended consequences can, in turn, further compromise families’ financial security and feed the growing sense among many Americans that economic mobility is no longer readily available in the United States.
As they prepare platforms for the 2016 election, many policymakers have begun to outline proposals intended to increase Americans’ opportunities to move up the ladder. But before going too far down the mobility path, they should consider families’ priorities, attitudes, and financial realities. People can’t be economically mobile if they aren’t first financially secure.