In a new study entitled "Lifetime Incomes in the United States over Six Decades," economists from University of Minnesota, the University of Chicago and Princeton University took a look at the median lifetime earnings (from ages 25 - 55) of Americans over a multi-decade period starting in 1960. And while we would typically recommend a healthy dose of skepticism when it comes to reviewing 'economic' studies, this one actually makes some sense... we know because we've been saying it for some time now.
The new paper includes some “astonishing numbers,” said Gary Burtless, an economist at the Brookings Institution who was not involved in the research. “The stagnation of living standards began so much earlier than people think,” he said.
Using wage and salary data from the federal Social Security Administration, what the research finds is that real wages in the U.S. peaked with Baby Boomers born in 1942 and have been steadily declining ever since (with the exception of a modest, temporary uptick for those folks who happened to turn 25 in the year 2000, at the absolute peak of the dot com mania, when anyone with a pulse could land a six-figure contract for watching paint dry at the new Pets.com corporate headquarters).
As the Washington Post points out, women have fared slightly better than men over the past 60 years through their wages are still stagnant, which is hardly a victory.
For instance, the typical 27-year-old man’s annual earnings in 2013 were 31 percent less than those of a typical 27-year-old man in 1969. The data suggest that today’s young men are unlikely to make up for that decline by earning more in the future.
Women have done much better than men. More women have entered the labor force and taken on more prestigious and remunerative careers. Still, women are making less than men over their working years, and women’s rising earnings have not made up for the decline in men’s incomes for the population as a whole.
Recently, women’s progress has stalled, in part due to the financial crisis. The typical female worker who was 27 in 2013 made no more than the typical woman of that age did in 1980.
“Overall, this is a pretty bleak picture,” said Fatih Guvenen, an economist at the University of Minnesota and one of the authors of the new paper.
Meanwhile, at the same time that median real wages in the U.S. have stalled/declined, real GDP has grown indicating that all that wealth creation is being consolidated into the hands of just a select few folks.
America is getting richer every year. The American worker is not.
Far from it: On average, workers born in 1942 earned as much or more over their careers than workers born in any year since, according to new research — and workers on the job today shouldn’t expect to catch up with their predecessors in their remaining years of employment.
Stagnant or falling earnings have put a squeeze on working- and middle-class households. The trend has also widened the gap between the rich and everyone else as, overall, the economy has continued to grow overall but the bulk of those gains have ended up in the pockets of the affluent.
"This idea that we’re having this progression of increasing incomes over time — I think that might be true for the upper regions of the income distribution but not for the median,” said Nathaniel Hendren, a Harvard University economist who was not involved in the stud
Of course, the real issue isn't whether median real wages have stagnated, but rather why they've stagnated. Unfortunately, that question can't be so easily answered by downloading some data and running it through an econometrics software tool.
That said, we're going to go out on a limb and speculate that, like most pricing anomalies, declining real American wages has something to do with a massive supply/demand imbalance in the U.S. labor markets. While supply (population) continues to grow at ~1% per year, demand for U.S. labor continues to be eroded by the ability to find cheaper human capital in lower cost countries and increasing financial returns on capital investments in technology.
But you just keep pushing for higher minimum wages, Bernie: we're sure your effort to increase supply in an already oversupplied market will somehow work out just perfectly.