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Why the American Dream Hasn’t Gone to Hell
Mar 31st
Image: Herb Knufken/PBase
What are we supposed to do with the American Dream? You know, the one where you work hard at a friendly, faceless corporation, have a McMansion with a white picket fence and 2.5 kids, and vacation on the Kona Coast every year?
The Great Recession has scoured the dead skin off this dream. I think it still exists in our national psyche, something like a psychological heiroglyph, but current economic conditions have stuck the old version of it into a harsh, almost surgical light.
After exploring the dream in more detail, I came to the conclusion that the dream hasn’t disappeared. Indeed, some of its main tenets, including homeownership and business ownership, are still very much intact. Indeed, the dream’s trajectory, assuming it projects the way I think it will, is something to look forward to. Here’s my breakdown.
Where We Are Now
Working hard and basking in the fruits of your work—the nice house and car, the decent, secure life situation—still does happen for people. But consider the obstacles that employees in today’s world face:
• Wage stagnation (combined with price inflation)
• Fewer long-term guarantees for jobs
• Sparse pension plans
• Increased global and technological competition
• An unemployment rate of 10% or more means more competition from your peers
• No guarantees higher education will get you a job
That’s in addition to a couple of new norms:
• Having a part-time job or two full-time jobs has become more common
• Diving deep into the debt that supported consumer spending between 1990-2008 isn’t an option anymore. You used to be able to tap your inflated home value through a refinance, then spend away. Or grab your credit card and indulge in the national negative savings rate. Since the financial crisis, however, banks have made accessing personal debt harder. Saving is a new norm; many people can’t sustain steady debt the way they used to. That translates into forsaking the new entertainment center, backyard pool or convertible that used to be an American Dream-themed reward, or entitlement.
Austerity is necessary during times of recession, but I’ve noticed that downward mobility has also become a fact of life for many Americans. For example, older Americans are especially having trouble finding new jobs. Some manage to stabilize themselves off savings. When that runs out, and your real estate assets have depreciated, you end up downsizing.
Our Bootstraps Are Broken
Will hard work really dredge you out of today’s hypercompetitive, underemployed, time-stressed situation? The economic situation makes the staunch American individualism and can-do attitude feel more like weight on Atlas’s shoulders than a real solution. We can’t work our way out of this one, because the jobs don’t exist, or we’re so overworked that we don’t have time.
The traditional American Dream, based on hard work and ever-increasing income, is what Matt Miller calls the Dead Idea. “One in three Americans, of all races and at all income levels, now live in families that earn less than their parents did,” he writes in this CNN article. “Americans see themselves as authors of their economic fate, while Europeans tend to believe that forces outside the individual’s control have greater influence. Yet the forces that are now undermining upward mobility in America are in fact largely outside people’s control,” he says.
What Next?
Knowing this, what’s the best way to revise the old American Dream? There’s a collective movement towards increased sustainability (read: less waste, in all senses of the word), social cooperation, especially through technology; and increased self- and community reliance. It sounds communal and countercultural, and in some ways, this “Echo Boomer” meme is.
As I researched this shift more, however, I’ve found that it’s not a matter of communes vs. staunch capitalism. We’re moving in a hybrid direction. Americans are still holding onto the old dream, albeit with modifications. For example, “seventy percent of Americans still view home ownership as part of their own American dream,” according to this Forbes article. What’s more, Echo Boomers are on board. “(T)he demographic most interested in living the dream is actually the Y generation, A.K.A. the ‘millennials’ aged 18 to 34.”
The other hopeful aspect to Gen-Yers is that they’re entrepreneurially oriented. Since small businesses hire a huge proportion of employees in America, this bodes well, even in while the American Dream model is changing slightly. The fact that the majority of innovation has moved from R&D parks and into small startups is also encouraging, and negates the idea that global competition will turn us all into fruit vendors.
In other words, the American Dream is still entrepreneurial. It still involves homeownership. It just doesn’t center around swimming in debt to coddle the senses as much; it’s more community-oriented. If some parts of the American Dream have composted, these are the shoots growing out of them. This gives me hope.
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Contrary to What You May Have Read, the Recession Hasn’t Been Good for Entrepreneurs
Jun 14th
If you’ve been reading the newspaper recently, you might have heard that the Great Recession has been a boom time for entrepreneurs. No less an authority than former Labor Secretary Robert Reich wrote in a New York Times opinion piece, “LAST year was a fabulous one for entrepreneurs, at least according to the Kauffman Index of Entrepreneurial Activity released last month by the Ewing Marion Kauffman Foundation.”
Reich quotes the Foundation as saying “Rather than making history for its deep recession and record unemployment, 2009 might instead be remembered as the year business startups reached their highest level in 14 years — even exceeding the number of startups during the peak 1999-2000 technology boom.”
Because the idea that the recession has been fabulous for entrepreneurs didn’t fit with what I’ve been seeing for the past two years, I took a closer look at the numbers.
The Kauffman index uses information from the Current Population Survey (CPS) to measure “the percentage of the adult, non-business-owner population that starts a business each month.” Specifically, the Index is the ratio of the number of people between the ages of 20 and 64 not self-employed who became self-employed in a given month, divided by the population between those ages.
This percentage rose from 300 people per 100,000 in 2007 to 340 per 100,000 in 2009.
But this is where the numbers get a bit odd. The Bureau of Labor Statistics (BLS) uses the CPS to measure self-employment, and they reported that the number of people self-employed outside of agriculture fell from 9,557,000 in 2007 to 8,995,000 in 2009, a decline of 5.9 percent. (Because the population grew over this period, the decline in self-employment as a percentage of the population is an even larger 7.5 percent.)
For those of you who are still with me on the numbers, this means that the Kauffman Index of Entrepreneurial Activity and the BLS estimates for self-employment, which are both drawn from the same monthly survey, tell very different stories about what has happened to self-employment during the recession. The Kauffman Index shows a 13.3 percent increase from 2007 to 2009, whereas the BLS shows a 5.9 percent drop over the same period.
Although these numbers look contradictory at first glance, they are not because they measure different things. The BLS figures track the number of people who are working for themselves at a moment in time. By contrast, the Kauffman Index measures the number of people who become self-employed in a particular month.
What’s not measured by either source is the number of people who quit self-employment in a particular month. And the missing number is the key to putting both figures together.
As the Kauffman Index shows, during the recession, the number of people who moved into self-employment increased. But as the BLS shows, the number of people who are self-employed in at any point in time has declined. For both these numbers to be correct – and I have no reason to doubt the accuracy of either one – a lot of people must have given up on self-employment in 2009.
According to the Kauffman Index, an estimated 6.7 million Americans went from not being self-employed to being self-employed last year. Given the 224,000 person drop in the number of self-employed people reported by the BLS, 6.9 million people must have quit working for themselves in 2009.
Do these numbers mean that “last year … a fabulous one for entrepreneurs” as Reich wrote in the New York Times? Are the results of the Kauffman Index really “good news for the year 2009” as Kirsten Moore wrote in Newgeography?
I don’t think so. If we accept the Kauffman Foundation’s argument that the self-employed are entrepreneurs, then the CPS data show an entrepreneurial sector that has been damaged by the recession. The statistics indicate that the self-employment failure rate has become so large that the number of people working for themselves has dropped, despite a sizeable increase in the number of people becoming self-employed.
The reporters, bloggers and others making use of the Kauffman Index of Entrepreneurial Activity should be more cautious about how they interpret it. Headlines like “Despite Recession, U.S. Entrepreneurial Activity Rises in 2009 to Highest Rate in 14 Years, Kauffman Study Shows” http://www.kauffman.org/newsroom/despite-recession-us-entrepreneurial-activity-rate-rises-in-2009.aspx give the misleading impression that the recession has been good for entrepreneurs.
And I don’t know a lot of people who would call the Great Recession “fabulous” for those who work for themselves.
Contrary to What You May Have Read, the Recession Hasn’t Been Good for Entrepreneurs
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