In his Washington Post column today Robert Samuelson pronounces upwards mobility dead:
About 90 percent of children born in 1940 ultimately exceeded their parents’ incomes. That is, almost everybody. This makes sense; the babies born in 1940 were affected by both the 1930s’ Great Depression (which reduced incomes) and the post-World War II economic boom (which raised incomes). However, for children born in 1970, only 61 percent earned more than their parents, and for those born in 1980, only 50 percent did.
That’s a sea change. It suggests that we’re already at the point where many in the present and next generations of younger Americans won’t live as well as their predecessors. If current trends continue, that certainly will be true.
You can see the consequences among millennials, those born from 1981 to 1996. Their squeezed incomes have forced them to rearrange their lives. They’re marrying later, buying homes later, having children later and — to save money — living longer with their parents. What’s also surprising is that the biggest losers seem to be the children of the middle and upper-middle classes, precisely those who are supposedly most protected against adverse changes, according to a new study by Brookings Institution scholars Richard Reeves and Katherine Guyot.
“For many people, [economic success] does consist of doing better than your parents did,†they write. “This seems to have become steadily harder to achieve for those born into middle-class families in particular from 1950 onward.â€
That is certainly the case with my siblings and me. More of us earn less than our family did growing up than earn more.
There are many reasons for the change. Trade with China is all but certainly one of them but it isn’t the only change. I think the decline of unions is more a consequence of the change than its cause but I seem to be in the minority in that belief.
I can’t help but suspect that abandoning middle class morals, mores, and habits are had consequences that the Me Generation didn’t imagine.
It would be hard to argue that issues you and the researchers cite aren’t all factors. But I think a major one has been missed, and it has been a dominating factor in the economy for 60-some years. The baby boom.
People born towards the end of the baby boom came of working age right into the teeth of a bulge of people senior to them in the workplace, many of whom are just now retiring and clearing room. Combine global competition and the boom induced competition for more senior and well paying Jobs has gone through quite intense, massive and 60 year in duration structural issue.
I’d bet those two issues account for a large proportion of the issue. But quantifying and proving it is probably a fools errand. But if true, at least one of the issues should subside.
and many of whom aren’t retiring because they can’t afford to. A large group of the Baby Boomers have been flying into significant headwinds. They had their stock values fall in the early Aughts then had the values of their houses fall during the Great Recession. In addition low interest rates have wrecked their other savings holdings. They haven’t been saving other than their 401Ks (which aren’t worth what they thought they would be) and their houses (which aren’t worth what they thought they would be).
“…..and many of whom aren’t retiring because they can’t afford to.â€
I remember the EMRO wars of the Obama years, and the disingenuous attempts to explain away employment issues citing retirement. But as Ice was fond of citing, and correctly so, the Fred data and a number of St Louis fed studies debunked that by partitioning age groups.
I think you know how I feel about the Fed and easy credit, and the affordable housing for all debacle started in the late 90s. May they all roast in hell.
The dissolution of the family hurt, but I suspect that losing our competitive advantage against the rest of the world after WWII is more of a factor. Detroit used to able to send out any poorly engineered POS they wanted and still make big profits. Rest of the world caught up, and I think you could make the argument passed us in some areas. Also, the effects of the international banking crisis has had and will continue to have long lasting effects. Add in assortative mating, and we shouldn’t be surprised at the results.
Steve
One thing left out of the analysis is the vast change in technology, both physical and electronic. People now have cheap access to foods, devices, communication, medicines, and travel that either didn’t exist or that only the very rich could afford. We might be effectively earning less than our parents if you use the fabled easily-jiggered ‘basket of staples’ standard, but we also have a much wider variety of goods and services available than they did. Some of those you may wish didn’t exist, but you have the choice to forgo them.