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The American Dream gains a harder edge

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The American dream, at least on the economic side, is fading. Most people see the United States as a special place where there is plenty of opportunity for someone to work hard, play by the rules, and get ahead - maybe even become wealthy.

Today, though, nearly 1 in 5 American households has zero net worth or actually owes more than it owns. And the odds of a son or daughter rising above their parents in such a financial predicament have shrunk.

"Income mobility has declined in the last 20 years," says Bhashkar Mazumder, an economist at the Federal Reserve Bank of Chicago.

What that means is that the US is becoming less of a meritocracy, where skill and intelligence determine success, and becoming more of a class-bound society, where economic background, including the better education money can provide, matters more. There are still many rags-to-riches stories. But there's stagnation in the underclass.

Most Americans don't believe that to be true, surveys show. But academic studies suggest that income mobility in the US is no better than that in France or Britain. It's actually lower than in Canada and is approaching the rigidity of Brazil.

That marks a change from the past.

From 1950 to 1980, Americans were more and more likely to see their offspring move up - or down - the income ladder. For example: poor parents in the US had good odds of seeing children make great strides in overcoming their parental heritage. And if they lived long enough, they might well find that a grandchild had risen to a median income level.

Today, it could take five or six generations to close the gap between poverty and middle-class status, calculates Mr. Mazumder.

Of course, there are always exceptions. Remarkable children still get rich - or plunge to the bottom - in one generation, depending on education, attitude, diligence, and other factors. The point is that average intergenerational experience seems to be more frozen in place today.

Of course, Mazumder's research looks at income - not wealth, which results from saving and investing income, and from inheritances.

A broader look at the overall financial security of American families isn't encouraging either. It measures ownership (homes, financial assets, and so on) and protections against financial setbacks, such as health insurance to cover large medical bills that cause almost half of individual bankruptcies.

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