Long-Term Tends in the U.S. Standards of Living and Economic Growth

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Long-Term Tends in the U.S. Standards of Living and Economic Growth

As we’ve highlighted in previous issues, the U.S. economy is experiencing the worst recovery since World War II.

In fact, we’ve repeatedly compared the period from 2000-2015 with the 1929-1945 period. Both periods represent the wrenching transitional phase at the mid-point of a techno-economic revolution.

However, just as the middle class was better off in 1945 than they were in 1910, they are actually better off today than they were in 1980. But that isn’t immediately evident from the economic data.

For example, according to a report by Robert J. Shapiro for the Center for Effective Public Management at Brookings, “From 2002 to 2013, through nine years of economic expansion and two years of recession, the median income of American households, across age cohorts, fell an average of 5.5 percent as they aged.1 The median incomes of households headed by people in their late-30s to mid-40s stagnated as they through this period, and the median incomes of households headed by people in their 50s fell by 22.5 percent.

“Across age cohorts, households headed by people without college degrees—covering two-thirds of all households—saw their median incomes fall by 9.4 percent (high school graduates) to 17.3 percent (no diploma). Households headed by college graduates and by people in their late-20s to mid-30s eked out modest income gains as they aged over this period, but those gains were a fraction of the progress that households of comparable education or age achieved in the 1990s and 1980s.”

Another study found that real U.S. median household income increased only 9 percent cumulatively since 1980, based on Census Data.

But as James Pethokoukis points out on AEIdeas, the public policy blog of the American Enterprise Institute, that 9 percent figure includes household income from wages and investment income, as well as government cash benefits such as Social Security and unemployment insurance benefits.2 It does not include noncash benefits such as food stamps, Medicare, and Medicaid. And it is a measure of income before taxes. When the benefits that the Census excludes are included, median income increased by about 40 percent.

Pethokoukis cites economists from the IGM Economic Experts Panel who argue that the data do not account for improvements in Americans’ quality of life that aren’t captured in measures of income.3

  • David Autor points to “secular improvements in healthcare, longevity, technology, and air quality...

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