Is it time for the ‘American Dream’ v2.0?

A recent survey commissioned by the Walton Family Foundation of a sample of 2,000 Gen Zers and Millennials across the United States suggests a shift in the definition of the American Dream. When asked about the meaning of the American Dream, one respondent says, "For me, it's no longer about the iconic house with the white picket fence, the family of four, and financial success, but about living in a better America for everyone and the planet, in a society where there are fewer barriers, where everyone is equal and has access to the same resources."

Despite repeated economic downturns and the aftermath of a major pandemic complicating their lives, younger generations are not giving up. While they have realistic expectations about the state of the world, they also remain optimistic about their future and the critical role they will have to play in contributing their skills and energy to effect change.

There is growing evidence that people from diverse ethnic, religious, and gender backgrounds are climbing the socioeconomic ladder and beginning to reap the benefits that come with it. As we continue to progress toward greater equality and freedom from prejudice, future generations can remain confident that the American Dream will one day become a reality for most Americans.

What is the American dream?

The American Dream is the belief - central to American identity - which holds that everyone, regardless of birthplace or social class, has a fair shot at success - in a society where upward mobility is accessible to all and where the nation provides the necessary conditions to pursue our goals. Therefore, each generation should enjoy greater prosperity than the one that preceded it.

It originated as an ideal of equality, justice, and democracy for the nation, but it evolved considerably over the course of the 20century into a consumer capitalist vision of society, one defined by traditional milestones of homeownership, entrepreneurship, education, etc.

The term “American Dream” was first popularized in 1931, during the great recession, by James Truslow Adams in his best-selling book The Epic of America. He described it as “that dream of land in which life should be better, richer and fuller for all, with opportunities for everyone according to ability or achievement”. Adams went on to explain, "It is not a dream of motorcars and high wages merely, but a dream of social order in which every man and woman should be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position."

The roots of the American Dream run even deeper. Its tenets can be found in the Declaration of Independence, which proclaims that "All men are created equal" and are entitled to "Life, Liberty and the pursuit of Happiness."

How to measure the American Dream?

Homeownership is one of the most celebrated promises of the American dream. It symbolizes financial success and independence. Over the years, the homeownership rate has steadily risen. For example, at the end of 2020, it reached 65.8%, an increase of 0.7% from the previous year.

Being an entrepreneur and your own boss is also a way of realizing the American dream. In 2019 alone, small businesses added 1.6 million net jobs.

Other essential components of the dream include access to education, which is a key factor in unlocking opportunities to realize the dream of living life to the fullest, along with access to healthcare.

Generational differences in meaning of the American Dream

Over the past several decades, economic and social realities have upended the meaning of the American Dream, which since the 1950s was inextricably connected to a consumer capitalist economy. 

The Baby Boomers' version of the American Dream therefore stands in stark contrast to that of Generation X, Millennials and Generation Z. 

The spectacular shift in future life prospects for a child born in the 1980s compared to a child born in 1940 might be to blame. “In 40 years, the American dream went from being a widespread reality to essentially a coin toss”, says Derek Thompson of The Atlantic.

The baby boomers, born between 1946 and 1964, grew up in an era of great wealth and economic stability, not least because of the nation’s prominent role on the world stage in the latter half of the 20th century. In this context, with stable, well-paying jobs, a large portion of the population was able to realize the American Dream, which rested on post-war hallmarks of homeownership and family.

So, what does the American Dream mean for younger generations (Generation X, Millennials, Generation Z) who were raised in tougher, yet more open, diverse, and egalitarian conditions in the late 20th and early 21st centuries?

Younger generations, as the Pew Research Center notes in its 2018 study, are at a historic crossroads of economic stability and mobility, casting a shadow over the American Dream. Clearly, the cohorts who experienced the 2008 recession, further compounded by mounting student loan debt, were hit hard. This likely explains why most young people prioritize financial security and freedom over homeownership or family life. Unlike previous generations, nearly 50% of them place the pursuit of their passions at the top of the American Dream pyramid.

The average salary today has less purchasing power than 40 years ago

With income inequality rising dramatically since the 1970s, the American dream appears to have become less attainable for those not born into affluence or for younger generations. Decades of stagnant household incomes resulted in an inability to keep up with the rising costs of living. Given the significant decline in purchasing power, owning a home has become more difficult for younger generations than for their predecessors, the baby boomers.

To illustrate, let's take a brief look at home prices relative to average wages over the past several decades. In 1960, the median annual income for a family was $5,600, and the median home price was $11,900 – 2.1 times the average salary, according to the U.S. Census Bureau. In 2019, the median household income was a whopping $68,704, but the median home price was $315,000 – more than 4 times the median annual salary. Healthcare expenses for 1 person are 3 times higher than 25 years ago. Median tuition for a 4-year college degree is 1.8 times what it was then. Rising inflation and stagnant wages have led to an increase in the number of dual-income households, but also an erosion of their economic standing.

Is the American dream still achievable? 

Nationwide surveys indicate that Americans continue to believe that the American Dream is still "achievable."

However, major challenges lie ahead for younger generations – particularly: safeguarding the environment as well as ensuring access to affordable healthcare and higher education.

These are all issues that weigh heavily on the minds of all Americans and demand urgent attention and concrete solutions from political decision makers.

What might the new dream look like and how is it different?

While the American Dream originally rested on the promise of material prosperity and upward mobility, this concept has evolved with younger generations – for the greater good of people and the planet – toward more equity, sustainability, and security.

For Generation Z and millennials, there is no “one-size fits all” approach to success. The spectrum of opportunities they envision is pluralistic and unrestricted. They seek to explore multiple avenues that may lead them to make a significant impact on the world and the planet, thereby providing true meaning to their journey.

A great sense of optimism emerges from the determination of younger generations to assume a central role in bringing about meaningful change. While most young people expect the same things as their elders – the opportunity to earn a decent living and the freedom to shape their lives – the challenges of healthcare, education, and global warming remain far from resolved, and require an urgent response from political leaders. 

Interestingly, they view the American Dream in absolute rather than relative terms. That is, their dream falls within the scope of their own goals, the success of which they measure by their results. At the same time, they do not seek to benchmark their dream against that of others in terms of social, financial, or other success.

Final thoughts

Overall, our belief in the American Dream is still alive and well. That is, the belief in a society that offers each of us an opportunity to conceive our own version of the American Dream and live it to the fullest. But, because we are all different, we all have different dreams. So, the onus is on each one of us to uncover our personal interpretation of that dream!