When Incomes Stagnated

When Incomes Stagnated

It's a common refrain that America's median household income has hardly risen since the 1970s -- and has even declined recently. But what if, instead of lumping every household in America together to measure trends, we followed cohorts of people over time?

That's the approach taken in a fascinating new Brookings Institution paper from economist Robert J. Shapiro today. Here is what he found:

The national median income has indeed been stagnant lately, but until the turn of the century, at least we could say that people were earning more as they got older and gained experience, up until the point they retired. That apparently is no longer the case. Though there's evidence of stagnation for everyone -- even college graduates are seeing their incomes grow less -- households headed by those without a college degree are actually worse off than they were a decade ago.

This is a worrying trend, and Shapiro has some policy recommendations. He notes that globalization has put Americans in competition with the rest of the world, and (almost paradoxically) suggests liberalizing trade to give our exporters access to fast-growing nations. He also suggests improving infrastructure, helping people gain the skills they need to compete, controlling health-care spending, and taxing "all businesses and capital income at the same rates as salaries and wages." "Another decade like the last 12 years will change American politics and society in unpredictable and almost certainly disturbing ways," he writes.

I highly recommend taking a look at the paper; if you're the right sort of person, you can get lost in its countless graphs and tables, which break the numbers down demographically in various ways. It should also be a springboard for further research. I'd be especially interested to see how changes in family structure and living arrangements -- i.e., changes in household composition -- affected the trajectories of the cohorts.

Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen

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