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Income growth and decline under recent U.S. presidents and the new challenge to restore broad economic prosperity

March 5, 2015

The condition of most American households, and of the country as a whole, is set largely by people’s income – both the levels, and the income progress that people make as they age from their 20’s to their 30’s, 40’s and 50’s. For generations, most Americans have believed that if they work hard, they’ll have real opportunities to earn steadily rising incomes. Such broad based upward mobility is one of the reasons that Americans have been generally optimistic and willing to extend opportunity to successive minority groups. But is that the way America really works? One common view argues that wages have stagnated and most Americans have made, at best, modest income progress since the 1970s. This view is based on a time series of a single statistic, “aggregate median household income.” In fact, the true picture is more complex.

Today, the Brookings Institution issues a new report which I worked on for the past year. Using new Census Bureau data, I analyze household incomes by age cohort – say, people age 25 in 1980 or in 1990 –and then follow those age cohorts as they age. The results revise what we thought we knew about incomes. The data show that broad, strong income gains were hallmarks of the 19809s and 1990s. Moreover, the steady progress of the Reagan and Clinton years covered just about everybody — households headed by men and by women; by whites, blacks and Hispanics; and by those with college degrees, high school diplomas, and no degrees at all. This broad upward mobility, however, simply stopped under Bush and has not recovered under Obama. Moreover, this dramatic turnaround, including declining incomes from 2002 to 2013 for a majority of American households, affects every demographic group.

I’ll be writing more about what’s really happened to income, why, and what we can do about in coming weeks and months. If you want to read the report for yourself, click here