The American Dream Is Alive and Well

Don’t listen to the populist naysayers: The U.S. economy continues to deliver jobs, higher wages and upward mobility for those who need it most.

By Michael R. Strain. He is director of economic policy studies at the American Enterprise Institute. Excerpts:

"Consider the wages of “typical” workers—those who are not managers or supervisors."

 "Have their wages stagnated for decades? No. Since the summer of 1990 (a peak in the business cycle), their wages have increased by 33%, after accounting for inflation."

"From the late 1940s to the mid-1970s, inflation-adjusted wages experienced rapid growth. Then followed two decades of stagnant, and even declining, wage growth."

"The nonpartisan Congressional Budget Office (CBO) computes a comprehensive measure of inflation-adjusted market income that includes labor market earnings, the value of employer-provided health insurance, and business and capital income. The median household saw market income gains of 21% between 1990 and 2016"

"The CBO also computes inflation-adjusted income after taxes and government transfers, which grew by 44% for the median household during this period. Households in the bottom 20% saw their post-tax-and-transfer income grow by 66% over these years."

"Using a standard measure of income inequality (the “Gini coefficient”), the CBO finds that the rich-poor gap in market income grew by only 2% between 2007, when concern about inequality increased at the start of the Great Recession, and 2016. When measuring income after taxes and transfers, the CBO finds that inequality decreased by 7%.
Or consider that between 2007 and 2019, the ratio of the 90th percentile of usual weekly earnings to the 10th percentile—a more straightforward measure of inequality—increased by only 2%."

"in 1970, total employment was split evenly among low-, middle- and high-wage occupations: 31%, 38% and 30%, respectively. Today, employment in middle-wage, middle-skill occupations has fallen to 23%.

The primary cause of this dramatic change has been advancing technology, not free trade. As the cost of computing has plummeted, companies have increasingly turned to robots and software to perform rules-based tasks and procedures. The jobs that have taken a hit—the jobs that were most easily automated—include production workers, machine operators and assemblers. These are precisely the sorts of jobs whose disappearance has such political salience today."

"As employment in these traditional middle-wage jobs has shrunk, employment in newer middle-wage jobs has increased."

"the fastest-growing jobs in the “new middle” include sales representatives, managers of personal services, computer support specialists, event planners, health technologists and technicians, audiovisual technicians, chefs and head cooks, and food service managers."

"Hollowing out is mostly a story of upward mobility. Employment in high-skill occupations has grown as employment in middle-skill occupations has shrunk. On balance, the share of employment in low-skill occupations hasn’t increased.

Data from the U.S. Census Bureau from 1967 through 2018 shows a 12 point drop in the share of households with inflation-adjusted income between $35,000 and $100,000. The share of low-income households—those earning less than $35,000—has also fallen over this period, from 36% to 28%. And the share of households earning over $100,000 has tripled, rising from 10% to 30%."

"The headline unemployment rate is lower than it has been in 50 years. At its peak during the Great Recession, there were more than six unemployed workers for every job opening. Today, there are more job openings than unemployed workers. This fall, the employment rate for people between the ages of 25 and 54 surpassed its prerecession peak."

"wages are currently growing at an annual rate of 3.4%. This is arguably faster growth than what productivity growth and inflation would suggest. With consumer prices growing at less than 2% a year, that represents real increases in purchasing power for typical households."

"Data from the BLS show that weekly nominal earnings for workers in the bottom 10% have grown by 19% over the past four years—over one-third faster than growth at the median. The unemployment rate for workers without a high school diploma has dropped by more than 10 percentage points since its peak following the Great Recession."

"The rate of employment for people with a disability has increased by over 20% since its postrecession low in 2014."

"around three-quarters of people in their 40s today have higher (inflation-adjusted) household income than their parents did when their parents were of similar age. Eighty-six percent of people raised in the bottom 20% have higher income than their parents did at similar ages, as well. Well over half of American men earn more in the labor market than their fathers did; this is true for 79% of men raised in the bottom 20% and 72% of men raised in the working class."