January 04, 2016
Robert Samuelson used his column today to tout a Pew study that recycled well-known Census data showing stagnating family incomes over the last four decades. Unfortunately, Samuelson thought the results showed the opposite, telling readers:
“But the study convincingly rebuts the notion that the living standards of most Americans had stagnated for many decades. Pew calculated household incomes, adjusted for inflation, all along the economic spectrum and found that, until the early 2000s, most households reaped slow but steady increases. Growing inequality did not siphon off all gains for those who are not rich . Here’s how Pew describes this period:
“‘Households typically experienced double-digit gains in each of the three decades from 1970 to 2000. Middle-income household income increased by 13% in the 1970s, 11% in the 1980s, and 12% in the 1990s. Lower-income households had gains of 13% in the 1970s, 8% in the 1980s and 15% in the 1990s.'”
Rather than representing impressive gains in living standards, these are very modest gains compared with both prior decades and the economy’s rate of productivity growth. In the late forties, fifties, and sixties, family incomes were rising at an annual rate of more than 2 percent, which would translate into gains of more than 20 percent over the course of a decade. For example, the cutoff for the top third quintile of income rose by almost 16 percent in just the six years from 1967 to 1973. (The cutoffs for the second and first quintiles rose by 11.1 percent and 12.6 percent, respectively.)
Furthermore, most of the rise in incomes enjoyed by households in the late 1970s, 1980s, and 1990s was due to women entering the labor force. While it is a good thing that women enjoyed increased opportunities in these decades, we would not ordinarily think of it as a rise in the standard of living because two earners have more income than a single earner. Since we know that the wages of most workers were nearly stagnant over this period, the only way that most households were able to acheive gains in income was by putting in more hours.
Comments