Why the American Dream Isn’t Working for Most People Anymore
For a long time, the American Dream meant something simple: buy a home, raise a family, earn more than your parents did, and maybe retire before your knees give out.
That story used to be believable, because for a while, it actually worked. A stable job could buy a decent life, and the next generation had a real shot at doing better.
But the numbers now tell a different story. As Pew Research puts it, Americans are split on the state of that dream. About half (53%) still think it’s possible. 41% say it used to be but isn’t anymore. And 6% say it never existed at all.
That shift isn’t just about money, it’s about expectations no longer matching reality.
This article looks at what the American Dream was supposed to be, why it worked for some and not others, and what’s changed over time. Housing, income, generational mobility, it’s all here.
The real question isn’t just can you chase the dream. It’s what exactly are you chasing now?
Table of Contents
What Is the American Dream, Really?
The phrase “American Dream” came out of a 1931 book by James Truslow Adams. His version was about opportunity and reward through effort, not inheritance or status.
That idea stuck because it lined up with what happened in America after World War II.
The Golden Age Myth
Back then, the dream went mainstream. Thanks to the GI Bill, stable jobs, and cheap real estate, homeownership in the U.S. jumped from 44% in 1940 to 62% by 1960, according to U.S. Census data.
Incomes nearly doubled between 1946 and 1973. Families built wealth through homes, pensions, and rising paychecks. It felt like anyone who put in the work could move up.
That was the model. And for a few decades, it worked. But those conditions, one income, one house, one steady climb, don’t exist anymore.
What people call the American Dream today comes with a much higher price tag.
Homeownership Is Now a Stretch
The cost of buying a home has officially broken away from what most households earn. As of 2024, the typical home costs 7.3 times the median income, way above the historical average of 5.
Monthly mortgage payments have more than doubled since 2020, driven by price jumps and interest rates now hovering around 7%, based on Redfin’s latest reports.
For younger Americans, the dream keeps slipping further out of reach. As Bankrate noted, homeownership among those under 35 fell to 39% in 2022, down from 45% in 1990.
But this isn’t just about age. The National Association of Realtors found that homeownership rates dropped between 2010 and 2020 for every income bracket. Even six-figure earners are pressing pause.
Related: Why the Housing Market Isn’t as Unaffordable as the Headlines Say
Bigger Homes, Bigger Bills
Part of the issue? Homes got huge. Since the 1970s, the average new home has grown by more than 1,000 square feet, based on analysis by the American Enterprise Institute.
Household sizes shrank, but the living space nearly doubled. That means buyers today aren’t just paying more, they’re paying for more house.
If you control for size, inflation-adjusted home prices per square foot stayed relatively stable until 2015. But since 2020, even that figure has jumped by another 11%.
The American Dream didn’t just get more expensive, it got upsized. And now, fewer people can afford to step in.
Video: Gen Z and Millennials Are Redefining Starter Homes. It’s Driven Up Housing Prices
Wages Aren’t Keeping Up
It’s not just housing that’s outpaced income, wages themselves haven’t kept up with the cost of living.
According to the Economic Policy Institute, worker productivity in the U.S. rose by nearly 60% between 1979 and 2019. But real wages for the typical worker only grew about 13.7% during that same stretch.
The gap didn’t happen by accident. It’s the result of structural shifts where capital, stocks, real estate, ownership, has outperformed labor.
The people who’ve benefited most? The top 10%. Most of the wage growth in the last few decades has gone straight to executives, knowledge workers in tech and finance, and business owners.
For everyone else, raises have barely covered the cost of staying afloat.
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Mobility Isn’t What It Used to Be
Back in the day, moving up the income ladder felt achievable. But that ladder has gotten shakier with each generation.
Research from Opportunity Insights shows that 93% of Americans born in 1940 outearned their parents. For those born in the 1980s, that figure dropped to around 50%. In other words, a coin flip.
The odds aren’t the same for everyone, either. Children born to wealthier parents are more likely to stay at the top. Those born into low-income households have a tougher time moving up, even with degrees, even with jobs.
The American Dream still works in some cases. It’s just no longer the norm.
The Cost of Living Has Exploded
You can argue that people have more stuff now, better tech, faster internet, access to things their grandparents couldn’t dream of. But when it comes to the basics, housing, healthcare, education, the costs have gone into orbit.
According to data from the Bureau of Labor Statistics, between 2000 and 2022, college tuition rose by roughly 180%, housing by over 100%, and medical care by about 115%. Wages didn’t even come close.
Even if someone manages to earn more than their parents did on paper, it doesn’t go as far. A bigger paycheck can’t stretch across rent, student loans, daycare, groceries, and medical premiums all at once.
So while smartphones got cheaper and streaming got better, the essentials of middle-class life got priced like luxury goods.
Related: Retirement Shock: 22 Expenses Some Boomers Might Struggle to Afford Soon
What You Can Afford Isn’t What It Used to Be
That gap between what things cost and what people earn shows up everywhere.
In 1990, a young adult could often rent, save, and make real progress. Today, many full-time workers spend more than 30% of their income just on housing. Add in car payments, rising insurance premiums, and inflated food costs, and there’s not much left to build with.
It’s not about budgeting harder or skipping lattes. The math is different now. Essentials that used to be attainable on one income now take two incomes, perfect credit, and usually some outside help.
Parents Are Still Footing the Bill
A big reason some young adults appear to be doing fine? Their parents. According to a 2025 Fortune report, around 50% of Gen Z and Millennials still receive regular financial support from mom and dad, even if they’re working full-time.
That support shows up in rent help, insurance payments, cell phone plans, or even student loan coverage.
And it’s not just early-twenties college grads. Many adult children are relying on family support well into their 30s.
The Federal Reserve even noted that some of the upward mobility seen in younger generations is skewed by intergenerational wealth transfers, gifts, inheritances, or help with big-ticket purchases like homes or cars.
The traditional American Dream was built on independence: make your own way, earn your own future. But for many, that’s been quietly replaced with a different model, one where progress is only possible if your parents are still in the financial picture.
Related Video: 25 Effective Ways to Teach Kids How Money Really Works
New Metrics of Success Are Emerging
The classic markers, marriage, mortgage, steady career, don’t carry the same weight they used to. For younger generations, the idea of “making it” is starting to look different.
According to a report by Deloitte, Millennials and Gen Z are prioritizing flexibility, purpose, and mental well-being over high salaries or homeownership. That doesn’t mean they don’t care about money, it means they’re chasing control, not just titles.
Remote work, freelance income, digital entrepreneurship, these weren’t part of the original dream, but they’re real options now.
Travel is cheaper. Education is online. And thanks to technology, building income streams outside a 9-to-5 is no longer reserved for the elite.
There’s also been a quiet cultural shift. Success used to be about accumulation. Now it’s just as often about autonomy. Time freedom, location freedom, and choosing how to work have started replacing the old formula of working 40 years for a gold watch.
Is the American Dream Dead or Just Different?
So is the American Dream gone? It depends on how you define it. If the dream still means owning a big house on a single income, raising kids debt-free, and retiring at 60 with a pension, then yes, that version is out of reach for most people.
But that might’ve been a temporary window, not a permanent model. A post-war economy with cheap housing, rising wages, and no student debt doesn’t exist anymore.
The problem isn’t that the dream failed, it’s that the blueprint never adjusted. We moved the goalposts but expected everyone to play the same game.
That said, people are still chasing a better life. It just looks different now. The new dream might be smaller in square footage, but bigger in freedom. It might not come with a front lawn, but it might come with peace of mind.
For many, it’s no longer about owning everything, it’s about owning their time.
What the American Dream Really Looks Like Now
The old version of the American Dream isn’t working the way it used to, and pretending it still does won’t fix anything.
The cost of basics is up, wages are flat, and independence now comes with a price tag.
But that doesn’t mean the dream is dead. It just means the definition needs an update. Owning your time might matter more than owning a house.
And success today might be less about climbing a ladder, more about building your own.
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