American men in their 30s today are worse off than their fathers’ generation, a reversal from just a decade ago, when sons generally were better off than their fathers, a new study says.
The study, the first in a series on economic mobility undertaken by several prominent think tanks, also says the typical American family’s income has lagged far behind productivity growth since 2000, a departure from most of the post-World War II period.
The findings suggest the up escalator that has historically ensured that each generation would do better than the last may not be working very well says the study. It was written principally by John Morton of the Pew Charitable Trusts, which is leading the series, called the Economic Mobility Project, and Isabel Sawhill of the Brookings Institution. Other participating think tanks are the Heritage Foundation, American Enterprise Institute and Urban Institute.
In 2004, the median income for a man in his 30s, a good predictor of his lifetime earnings, was $35,010, the study says, 12% less than for men in their 30s in 1974 — their fathers’ generation — adjusted for inflation.
A decade ago, the median income for men in their 30s was $32,901, 5% higher (after adjusting) than 30 years earlier. It seems there’s been some slowdown in economic growth in the middle class.
The study suggests that absolute mobility — the rate at which an entire generation’s lot improves relative to previous generations — has declined. But within a particular generation, individuals can still get ahead if relative mobility, the rate at which the rich and poor trade places, remains high. Poor fathers may have rich sons, and vice versa.
The report also says that between 1947 and 1974, productivity, or output per hour, and median family income, adjusted for inflation, both roughly doubled. Between 1974 and 2000, productivity rose 56% while income rose 29%. Between 2000 and 2005, productivity rose 16% while median income fell 2%, challenging the notion that a rising tide will lift all boats.
Sawhill said several factors could explain the divergence: a growing share of income going to the highest-paid workers, or to profits; an increased share of labor compensation going toward benefits such as health care; or a decline in the number of wage earners in the typical family.
This means that individuals need to become more entrepreneurial in order to break this unsettling trend. Creating extra income through a home bases business, or other activity is making more important cents all the time. Pun intended….
No comments yet.