The Declining Fortunes of (Most) American Workers

68 Pages Posted: 23 Jun 2020 Last revised: 14 Sep 2020

See all articles by Laura Harvey

Laura Harvey

University of East Anglia (UEA) - School of Economics

James Rockey

University of Birmingham - Department of Economics

Date Written: May 29, 2020

Abstract

While real US GDP per capita has increased around 80% since 1980, median incomes have remained roughly constant. However, as this paper documents, this stagnation masks an important decline. Male median real incomes have been lower than that of their forebears, at every age, for the last 30 years. We show that this is true across the life cycle and across the wage distribution. Moreover, younger generations have also had to wait longer to reach peak earnings. Further analysis shows that this decline is particularly concentrated on high school graduates. The same pattern is found for female high school graduates yet, African American and Hispanic American women are an important exception. Variance decompositions suggest that these intergenerational differences are quantitatively important. While reductions in hours worked cannot explain the decline, substantial decreases in the labour share are consistent with decreasing incomes in the face of productivity growth. Calculations suggest that hedonic improvements in the quality of goods and services would have to have been equivalent to 30% of younger cohorts’ lifetime consumption for their consumption levels to match those of their predecessors.

Keywords: Wages, Inter-generational Differences, Labor Share, Stagnation, Jobs

JEL Classification: E24, J24, J31, D33, D31

Suggested Citation

Harvey, Laura and Rockey, James Charles, The Declining Fortunes of (Most) American Workers (May 29, 2020). Available at SSRN: https://ssrn.com/abstract=3613679 or http://dx.doi.org/10.2139/ssrn.3613679

Laura Harvey (Contact Author)

University of East Anglia (UEA) - School of Economics ( email )

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University of East Anglia
Norwich, NR4 7TJ
United Kingdom

James Charles Rockey

University of Birmingham - Department of Economics ( email )

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University of Birmingham
116 Edgbaston Park Rd, Birmingham B15 2TY
United Kingdom

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