For decades, the American Dream has nourished the aspirations of millions. So when Ronald Reagan asked the public in 1980 and again in 1984, "Are you better off than you were four years ago?" he was tapping a deep and resonant well of public and private faith in continual upward mobility.

But the dream has turned to fantasy, and the American people are in for a harsh awakening. According to the latest research:

The pace of upward mobility appears to have declined sharply in the United States in the past decade or more. Class divisions are growing so rigid that three-quarters of American households may have to forsake their hopes of economic advancement in the forseeable future.

Will our political system become more unstable if and when the vision of upward mobility no longer provides its integrating promise?

When Dreams Collapse

Average real hourly earnings for production workers have not only stagnated but have declined since 1979. So has median family income. And yet, however familiar these depressing facts, we are just now beginning to appreciate their longer-term effects on the once buoyant American Dream.

Progress within generations has come screeching to a halt. Economists Frank S. Levy and Richard C. Michel report in recent articles that an "average" 30-year old male, who was able to look forward to rapid income growth in the '50s and '60s (see box), is now able to project only a 10-20 percent growth in income from age 30 to 40 -- at the height of his potential career advancement. Older workers are now experiencing absolute declines in real earnings. In a December 1986 report for the Joint Economic Committee, economists Barry Bluestone and Bennett Harrison documented the extraordinary concentration of recent employment growth in low-wage jobs: From 1979 to 1984,58 percent of net new employment was in jobs paying $7,000 or less (in 1984 dollars).

The prospect for future generations look just as bleak. Those hit hardest by the decline in real household earnings have been families with children -- especially poor households and those headed by women. Levy and Michel report that, evidently as a consequence of that decline, young families in 1981 were able to save less than 1 percent of their after-tax income, compared with 4 percent for similar young families in 1973.

With shrinking incomes and declining savings, a family's ability to help provide for its childrens' futures is eroding. One result has been that the postwar pattern of relatively stable income shares has been shattered. Inequality in annual wage-and-salary income has increased sharply since the mid-1970s. So has inequality in the distribution of personal wealth.

Perhaps most strikingly, the distribution of income among families with children has become substantially more unequal, according to evidence reported last year by Sheldon Danziger and Peter Gottschalk. The share of income earned by the bottom 60 percent of such families declined by nearly 14 percent between 1967 and 1984. Moreover, this trend does not affect minority families alone; among white families with children, for example, the decline in the share of the bottom60 percent between 1967 and 1984 was just under 13 percent.

Meanwhile, several developments point to an ominous hardening of class divisions. The first important indicator is that there will be no more room for upward movement at the top of the occupational ladder. Between 1950 and 1980, total managerial, professional and technical employment grew from 10.2 million to 25.7 million, increasing its share of the experienced civilian labor force by nearly half: from 17 percent to25 percent.

New Class Barriers

In sharp contrast are the Labor Department projections released last year, which show that the share of managerial, professional and technical groupings in total employment is likely to increase only marginally over the next decade, rising to 27 percent by 1995.

Who will be able to lay claim to those future jobs with the greatest income, status and security? The ideal in an egalitarian society is that all children, irrespective of background, will have relatively equal chances of "making it." We have rarely approached this ideal in the past, but if we were doing so now, it would be reflected in two measures:

First, we would expect increasing movement among occupations, reducing the close association between parents' status and their childrens' achievements. Second, we would expect to find evidence that an increasing number of children were moving "above" the status level of their parents' occupations ("upward mobility"; and correspondingly that fewer were moving "below" ("downward mobility").

Yet what limited data are available on the subject run counter to these expectations. Recent research by sociologist Michael Hout of the University of California at Berkeley indicates that occupations of employes are now more similar to their parents' than they were in the early 1970s. This trend is most striking in managerial and professional ranks, in which the index of the similarity between current occupation and parental attainment increased by roughly one-third from the early '70s to the early '80s. In short, established parents are passing their mantles to their children.

Another fairly dramatic development involves a reduction in the ratio of employes experiencing upward and downward mobility. In the early 1960s, the number of male employees experiencing upward mobility was 238 percent higher than those experiencing downward mobility -- where mobility is defined in terms of an index reflecting both income and the perceived status of occupation. By the early 1980s, that ratio had dropped by two-thirds, falling to 78 percent. (The earlier studies did not provide comparable data for women.) Although there remains slightly more upward mobility than downward mobility, the recent trends point fairly decisively toward an increasingly frozen class structure.

Finally, it appears that the gates of access to more advantaged occupations are closing. Historically, as professional and managerial employment has supplanted self-employment as the goal of the American Dream, the relative importance of higher education has risen dramatically. Achieving more equitable opportunity requires increasingly open and equal access to college and postgraduate degrees. That is what we had in the first three postwar decades. And that is what we are no longer getting. College enrollments rose steadily through the late 1970s but have leveled off. The portion of the population between 18 and 24 currently enrolled in college has also hit a plateau at approximately one-third.

Despite the drop in inflation over the past five years, the rate of increase in college tuition (and other required fees) has nearly doubled over the preceding decade. And whereas the real value of federal outlays for higher education rose more than 200 percent during the 1970s, it declined by almost 20 percent between 1981 and 1985.

In short, it appears that we are witnessing an increasingly rigid separation between the top quarter of the population and all the rest: Children from managerial and professional families will be even better able to compete for and afford a stable pool of slots in college. Those with college degrees will be best placed to compete for a stable pool of jobs in privileged occupations. Those from less advantaged backgrounds -- that is, three-quarters of all families -- will find it ever more difficult to realize their families' dreams of upward mobility.

There are three important reasons for expecting that this hardening of class divisions in the United States could produce political turbulence. First, and most clearly, people experiencing short-term hardship are likely to be less and less mollified by visions of future advancement. Over the past several decades, our political system typically has won acceptance for policies involving regressive shifts in the tax structure by promising future "trickle-down" rewards to the vast majority. (Witness the almost exclusive reliance since the early 1960s on investment tax credits and depreciation allowances as tools for stimulating economic growth.) But if the class structure is frozen, those below the top will be less likely to taste trickles than to be brained by icicles.

Second, it is apparent that both Republicans and Democrats are concentrating their attention on the top quarter of the income and occupational ranks. As Washington Post writer Thomas Edsall noted in "The New Politics of Inequality," "The distribution of power between income groups becomes a critical, if not the critical issue. Over the past decade, changes in the political process have strengthened the power of the affluent and eroded the power of the poor, the working class and the lower-middle class."

Third, the bottom 75 percent have fewer places to turn for help. Americans have a powerful tradition of seeking support in local communities, in the social ties that bind people together in the concrete experiences of daily life. But whole communities are being devastated. Rather than helping revive and reestablish their economic bases, government policy now simply tells the dislocated that they should pack their bags and move where the job-vacancy rates are highest.

Given these conditions, it is little wonder that pollster Louis Harris' "alienation index" rose from 29 percent in 1966 to 60 percent in 1986. The number of people believing that "the rich get richer and the poor get poorer" rose over the same period from 45 percent to81 percent; those agreeing that "the people running the country don't really care what happens to you" increased from 26 percent to55 percent. And when asked whether "most people with power try to take advantage of people like yourself," 33 percent agreed in 1971. By last year, the number had grown to 66 percent.

Reversing Policy Directions

Many observers insist that these potential sources of political turmoil will simply have to be faced because we now live in different and more difficult times. But there are some clear policy steps we could take.

First, we could help revive our economy with policies that would directly reverse recent trends toward rising inequality. Policies aiming at "wage-led" productivity growth would seek to strengthen the economy by promoting fuller employment, wage growth and a movement toward wage equalization (by raising wages at the bottom more rapidly than wages at the top). Such a strategy would pressure corporations to make more efficient use of their increasingly costly labor force, and would give workers more of a stake in the way their companies and the broader economy perform.

Second, we should quickly and decisively reverse recent reductions in support for higher education and occupational training for the non-college-bound -- a key element in the simple justice of equal opportunity.

A third policy imperative is in some ways both most difficult and most important. Public policy in the United States has relied for decades on individualistic, sauve qui peut rationales. We now need to turn toward policies that would place a much higher priority on developing strong community ties.

Economic policy could promote economic development where people live rather than where firms think they can earn the highest short-term profit. Public investment banks and private investment incentives could subsidize enterprises promoting community economic development and social needs. And support for education could stress the importance of education for the many, not the few.

Finally, we could begin to shift the terms of political discourse. It's time for our politicians to stop asking if we're "better off than before" and start asking if our communities are stronger than ever.