The political, economic, and social system that emerged in Western countries after the Second World War was rooted in a straightforward promise: if you worked hard and exerted enough effort, you could consistently enjoy a better standard of living than your parents. This truth held for several decades, but the early 1980s marked the onset of a gradual decline, culminating definitively in the Great Recession of 2008.
The repercussions of that crisis represented a pivotal moment, signaling a departure from the growth and economic distribution model that had prevailed for the preceding sixty years. For the first time, a generation of young people confronted the harsh reality, bitter and unwelcome, that they were destined to experience a lower quality of life than their parents. Generational and labor inequality became prominent topics of discussion in Europe and the United States, yet the Great Recession merely expedited an existing trend.
An illustrative graph from Opportunity Insights captures this trend vividly, focusing on wealth data collected by the US administration from the mid-20th century to the present day. The visual representation paints a far-from-optimistic picture: with each passing generation, children face increasing difficulty in matching or surpassing their parents' earnings. The social elevator, once a promise of contemporary capitalism, has vanished, now relegated to the dreams of only a fortunate few.
So, what led to this transformation? The causes are diverse, and extensive debates have ensued. Wages, for instance, have stagnated, with Western workers earning approximately the same as they did four decades ago. Concurrently, access to higher education has emerged as the linchpin for aspiring to a successful professional career and substantial earnings. Uneducated workers from lower socioeconomic strata can no longer aspire to secure middle or managerial positions with decent salaries; instead, they are increasingly relegated to precarious and temporary employment.
This paradigm has penalized each succeeding generation in comparison to their predecessors, crystallizing notably in the millennials. This cohort entered the labor market during the peak of the Great Recession in 2008, experiencing youth unemployment rates reaching 55%, which persistently hover above 40%. Their job opportunities no longer revolve around stable, long-term positions in established companies; rather, they entail a high degree of labor turnover, a consequence of temporary employment and, for certain demographic cohorts, pervasive job insecurity.
The statistics from the United States paint a telling picture. The likelihood of a young person surpassing their parents has gradually declined across all income deciles. In 1940, children in the lowest percentile (those from the poorest families) had a 95% chance of achieving a higher economic standing than their parents. By 1980, this percentage had fallen to 79%. A similar trend unfolded in the middle percentile (representative of the middle class): while 93% of their children could aspire to a better life than their parents in 1940, by 1980, only 45% could harbor such aspirations.
In essence, by the time of Generation X, the prospect of exceeding the wealth and status of their parents became increasingly elusive. Comparable patterns are evident in the high percentile as well: in 1940, the children of affluent families experienced a 41% increase in their parents' earnings, a stark contrast to the mere 8% observed in 1980. This represents a precipitous decline across all strata.
As mentioned, the contributing factors are diverse but can be broadly encapsulated in two overarching trends: wages have stagnated since the mid-seventies (with workers earning $20.27 per hour in 1964 compared to $22.65 in 2018), and the economy has become polarized, resulting in a diminished middle class and an exacerbated wealth gap that is increasingly formidable to overcome. This reality has not escaped the notice of new generations, who are progressively more politically active, radical, and discontented with capitalism.
In the United States, the demise of the "American dream" is evident—a dream that faded away many years ago. A telling indication is that your parents' income now stands as the most reliable predictor of your future earnings. In Europe, a similar process has unfolded, albeit with the mitigating factors of greater social assistance and a more redistributive nature. Nonetheless, the prevailing conclusion for millions of young people remains unchanged: they are destined to live a life inferior to that of their parents, or at best, aspire to maintain their current status by inheriting real estate properties. The once-prominent promise of capitalism has not even become a viable option for them.