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The American Dream slips even further out of reach

July 26, 2011: 12:26 PM ET

Add stagnant wages to a list of woes hitting American families struggling for a life that was better than their parents had.

FORTUNE -- A key tenet of the American Dream is that each generation will do better than the last. That principle was severely shaken by the Great Recession. Most of the blame rested on the housing crisis, which forced families out of homes they couldn't afford. Now a new study suggests there's another measure of well being that's keeping Americans from fulfilling the dream.

The typical American family earns more today than it did decades ago. But that's mostly because parents are working longer hours -- not because their wages have risen that much more -- according to a report from the Brookings Institution's Hamilton Project.

Households today are struggling with an unemployment rate hovering above 9%. And those lucky enough to have jobs aren't free of challenges. Median wages for two-parent families grew 23% since 1975, according to the study. But in 2009, two-parent households worked 26% longer than those two and a half decades ago. The figures reflect more women entering the workforce, but it also implies that wages haven't increased as much as the rise in worker hours would suggest.

Those numbers capture only part of the challenge as the traditional nuclear family breaks up. A drop in the marriage rate has resulted in a doubling of single-parent households over the past three and a half decades. In those households, annual hours have risen 53% since 1975, while earnings growth has grown by 69% during the same period. Nevertheless, at single-parent households where the financial burden tends to fall on one earner, median earnings are about $16,500 -- which is less than one-fourth that of a two-parent family.

The Brookings study echoes the conclusions of other research that show American workers are producing more without a corresponding rise in wages. But it also highlights deeper problems that workers are facing down the road. The crash of the real estate market plus the deep recession that followed forced many out-of-work and heavily indebted families to reexamine the notion of the American Dream. And future generations are wondering if it's even a possibility.

Gluskin Sheff Economist David Rosenberg notes in a recent report that unlike baby boomers who often viewed homeownership as a retirement asset, the larger group of 82 million Millennials that followed are more apt to rent than buy.  And they'll likely be paying for the shambles of the real estate market for a while. The 35% spiral in home prices nationwide over the past four years has constrained consumer demand, stalling companies from hiring more employees.

So for future generations, stagnant wages won't be the only big issue; they'll have to find a job first.

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About This Author
Nin-Hai Tseng
Nin-Hai Tseng
Writer, Fortune

Nin-Hai Tseng covers economics and finance. Before joining Fortune, Tseng was a reporter at The Orlando Sentinel and a public affairs associate at GE. She holds an MPA from Columbia University and a BS in Journalism from the University of Florida. She lives in New York City.

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