Younger Perceptions of the American Dream

By Tatiana Bailey, PhD and Gaby Glassford, Associate Director of Workforce; Introduction by Sheyenne Livingston

In this article, mother-daughter duo Tatiana and Gaby Bailey explore the changing perceptions of the American Dream among younger generations. With a focus on the unattainability of homeownership and its impact on economic opportunities, the authors provide data and personal anecdotes to shed light on the current state of wealth and upward mobility in America.

TATIANA (MOM)

As an economist, I track a plethora of data points, and use both logic and anecdotal conversations to interpret that data as best I can. This is what all economists do.

As a mother with a brood of children ages 17 to 31, my kids are a big part of those anecdotal conversations. For any parent, the perceptions and experiences of our kids are both personal and formative in how we see the world. And what I hear from them and their friends is fascinating to me as an economist.

Those conversations help explain the disconnect between my age cohort and today’s young adults around the importance of work and the accumulation of wealth. Since I am part of the “older” cohort, I’ve pulled in my 22-year-old daughter as a co-author, so you too can hear her voice as a representative of younger generations.

Central to these anecdotal conversations is the current unattainability of homeownership. I pay close attention to residential real estate trends because, for most Americans, owning a home is the primary method to obtain wealth and financial security. All age groups agree that the American dream of owning a home should be within reach for anyone who is willing to work and save.

The fascinating cultural shift, however, is that the affordability crisis has gotten so bad that many young people dismiss the notion of buying a home immediately. It’s striking to me that I hear this from young adults whose parents have done well financially. I wonder what those conversations are like in households that struggle financially.

Sadly, in the work we do with lower-income school districts, the unattainability extends to college attendance. School counselors and administrators say the vast majority of their kids don’t even broach the conversation of college or other training after high school. And postsecondary training is often the means to higher paying jobs that enable someone to earn and save for a home.

It is disheartening that the unattainability factor is impacting perceptions of opportunity and the associated motivation that usually goes with attainable goals. Cynics might say that’s a cop-out; but if we look at some data, these young adults have a point.

GABY (DAUGHTER)

The American dream has defined our country’s history. The 20th century was marked by war, the Great Depression, and the fight for civil liberties – but a predominant theme was the tangibility of upward mobility. This theme encouraged participation in the labor force, and readily engaged members of society. In the 20th century you did not have to be exceptional or “rich” to own a home and provide for your family. You did not have to be exceptional to die in a higher tax bracket than the one you were born in. Hope was a prevailing theme, as most young people acquired more wealth than their parents, not less.

In 2022, nearly a third of homes purchased in the U.S. were all-cash deals, up 8% from just the previous year. Today, there are more all-cash home buyers than first-time buyers, suggesting that “only the wealthy are buying homes,” as stated by Lawrence

Yun, chief economist for the National Association of Realtors. We are also at a 40-year low for first-time homebuyers, who made up only 26% of all home buyers in 2022 even though today there are more millennials than senior citizens. In 1981, 44% of homebuyers were first-time purchasers. How can younger generations start to build wealth if they are completely edged out of the housing market by both higher prices and competition with all-cash buyers?

The typical age of a first-time homebuyer also increased in 2022 to 36; it was 29 in 1981. Younger generations face other factors: rising student debt (average debt is approaching $40,000) and the steadily increasing cost of living which makes it nearly impossible to save enough money for a down payment. For the average home price in Colorado Springs of $500,000, the corresponding downpayment is $100,000. If you don’t want to live with your parents, the option is to rent. But rents too are off the charts – with almost a quarter of today’s renters spending 50% or more of their income on rent alone.

Homeownership disparities also persist along racial and ethnic lines, with 74% of White adults owning a home, compared to only 43% of Black Americans and 48% of Hispanic Americans, according to Pew Research. Continued increases in home prices exacerbate these disparities, making it increasingly difficult for all demographics to achieve financial stability through homeownership. It seems to me we are moving in the opposite direction of our history, with economic security becoming more and more out of reach.

TATIANA (WITH MORE DATA)

There has been a lot of research on the growing wealth disparities in the U.S. and its association with homeownership. An important dimension centers around the value and proportion of the gross domestic product (GDP) going to “capital” – these are in the form of stock dividends, property income, interest payments, and other gains from investments. This investmentrelated portion of U.S. combined wealth has been growing since the 1970s, and especially since 2000. At the same time, the value and proportion of GDP going towards wages has declined, according to the Bureau of Labor Statistics. In other words, the income from owning stuff is getting larger and the income from working is getting smaller. As Warren Buffet states, there is also preferential tax treatment for investments versus earnings of middleincome wage workers, in particular.

This partially explains the wealth inequality I often address (Gazette, January 2021). But to defend my cohort, my husband and I have done the “right” thing by investing in the stock market through retirement accounts. And we’ve only been able to do that through hard work (not inheritance). And, if we live into our 80s or 90s, we will truly need those investment dollars just to survive.

But what youngsters see is that my age group owns all the homes (including many second homes), we have little or no student debt, and we live very comfortably. At some level, they understand that older, wealthy Americans have “portfolios” we can live off without doing much, in large part because the American dream was more attainable when we were young. Today’s young adults are put off by the perception that they don’t work as hard as their parents did. They turn it around and say that older, wealthy Americans live off their investments – and don’t “do much.”

Wow, that is a huge disconnect with oversimplifications on both ends. I would worry that my husband and I have abysmal parenting skills with our kids’ perceptions, but I hear the disenfranchisement from other youth. It’s apparently also pervasive in the (younger) social media outlets. What I will say, as an economist looking at the data, is that the pathway to the American dream is tougher now; and it’s impacting the next generation’s decisions around work. And this is happening precisely at a time when we need more workers, with one in five American workers at or above age 65 by 2030.

Comparisons between the young and the old are an ancient theme, but this many seniors and this low labor participation rate for prime working ages (25-54) sets us up for ballooning deficits and stagnant growth rates. We may bemoan the situation but focus needs to be on efforts that restore an (attainable) American dream where our youth work hard, but also thrive.