This study presents a very pessimistic picture compared to other more reliable data sources. Median income with two earners was 101,331 in 2017 and 77,824 in 1989 in constant 2017 dollars. So income for two earner households increased 30% since 1989.
https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-families.html
On page 11, the paper writes that the income increase for young married couples in 2014 (millennial) versus 1978 (boomer) “likely reflects the rise in the female labor force participation rate and the increase in the prevalence of dual income households”.
The numbers are in Table 1 on page 47. Boomer families in 1978 earned $77.5k, while millennial families in 2014 earned $78.2k. Not a big increase, considering that more of the millennials were two versus one income. The millennials are also more educated (page 8 and Figure 3 on page 40) to get to that level of income. Education was also much more expensive for millennials than boomers.
In other words, millennials had to “run faster to stay in the same place” – needed more and more expensive education and more both-spouse-working situations, in order for their married families to do about the same as their boomer parents at the same age.
Note that the gap between the top 10% of earners and the bottom 50% of earners has been rising steadily since 1965, as shown on chart 2 here: http://apps.urban.org/features/wealth-inequality-charts/
Marginal tax rates of course were quite a lot higher in the 1960s, though of course few people paid them because the entire structure of income taxation was different (basically all interest was deductible, and passive and accounting losses were unrestricted deductions against active income).
Higher taxes will not fix this inequality at all. And they wouldn’t increase overall revenue for the Federal government either, at least not on a sustained basis (see Hauser’s Law).
At current levels of taxation, using recent legislation as an example, lowering taxes mainly for the highest income people and inheritors will accelerate the trend toward inherited inequality, and probably societal conflict, degradation, and failure that becomes more likely under extreme inequality. It also increases the budget deficit.
@ucbalumnus – at what level of taxation do we cease to be a “free people”? By that I mean, what if the government could step in and vacuum out 100% of your bank account, seize your house, etc? Would you consider yourself “free”?
I don’t know where this persistent fallacy comes from that most people are better off in Europe or Japan. Using the following link, I compared median individual incomes in those countries (note that the USA data is 2016, whereas the others are 2013). I was going to use household incomes, but it wasn’t available for Italy.
https://en.wikipedia.org/wiki/Median_income
USA: $34,514
France: $25,547
Japan: $21,675
Italy: $20,860
The median US worker is far better off than the vast majority of people in these other countries. Most of the time, high tax redistribution policies increase equality only by making everyone poorer. And before someone says, wait look at the Scandinavian countries, the right way to do this is to compare similar type of populations, such as all of Europe to all of the United States. And then the differences become even more stark.
Simply put, median US workers have far more discretionary cash than Europeans. They make more. They get taxed less. Food and housing generally costs less than in Europe.
It is only at the bottom where the US worker is worse off, because the US social safety net is weaker, particularly with regards to lack of universal health care. That is one area where the US could learn from other countries.
Running faster to stay in place doesn’t apply to everyone. Adjusted for inflation, full time women with at least a Bachelor’s saw their median earnings increase 33% from 1979-2010. Men with a Bachelor’s saw their median earnings increase 20% over the time period. However, men without a Bachelor’s and women without a high school diploma saw a drop in earnings.
https://www.bls.gov/opub/ted/2011/ted_20110722.htm?view_full
It would be interesting to see this data if health care costs for those in the USA were subtracted from their income.
Anecdotally, I definitely see where those graduating from high school now have it much tougher trying to attain the same “level” of living that H and I did when we graduated back in the early 80s. Those who have parents who can help definitely have a big advantage. That latter part has been true from the beginning of time though. Birth lottery means a ton.
As a parent, we’re definitely helping our kids. As a donor to charities I try to help other folks.
Just by being born in the United States in the 20th century, you’ve won the lottery compared to just about every other person who has ever walked the planet.
In our fantasies about getting the “evil 1%” we shouldn’t lose sight of that fact.
@hebegebe: Note that you are looking at income. In a lot of those OECD countries with lower average income, health care and education costs for citizens are a small fraction of what they are for Americans. So it’s not clear that the average American has more disposable income. We should look at median net assets. As I noted, the median Japanese household has greater assets than the median American household despite lower average wages.
Also, is there another OECD country where medical emergencies are the main reason why families go bankrupt?
Exactly. About 1/2 of the United States is in the “global 1%” in terms of income. The vast majority are in the “global 10%”.
There is a reason why the USA was, until recently, the preferred choice of immigrants worldwide.
I highlighted lack of universal health care in my original post and I am not going to defend the USA’s lack of it, given that other countries manage to cover their entire population and get far better outcomes at lower cost.
But as far as higher education goes, my understanding is that they are not really comparable between the US and other countries. College in Germany is free, but only to those that are on the college track as opposed to the vocational track. Whereas in the US, college is available to anyone as long as they can pay for it.
@hebegebe, these days, there are lots of ways to enter a German uni, so no one is truly shut out if they put in the effort and have some academic aptitude.
In any case, I’m not so sure a system where you can’t truly be shut out unless you have money is better than one where you can’t be truly shut out unless you lack the academic aptitude.
Wealth is the integral of (income - expenses) through time. The reason the median Japanese household has greater assets than the median American household is because the Japanese save, but most Americans don’t.
Tell me more about when this changed. This to me was the big flaw of the German system. Only students who demonstrated they were “college material” early enough got to go.
@hebegebe:
From Wikipedia:
These days, less than half of German uni students come in through the traditional uni-prep track (Gymnasium).
https://en.m.wikipedia.org/wiki/Education_in_Germany:
Students wishing to attend a German Universität must, as a rule, hold the Abitur or a subject-restricted qualification for university entrance (Fachgebundene Hochschulreife). For Fachhochschulen, the Abitur, the Fachgebundene Hochschulreife certification or the Fachhochschulreife certification (general or subject-restricted) is required.
Lacking these school leaving certifications, in some states potential students can qualify for university entrance if they present additional formal proof that they will be able to keep up with their fellow students. This may take the form of a test of cognitive functioning or passing the Begabtenprüfung (“aptitude test”, consisting of a written and oral exam). In some cases, students who do not hold the Abitur may enter university even if they do not pass the aptitude or cognitive functioning tests if they 1) have received previous vocational training, and 2) have worked at least three years and passed the Eingangsprüfung (entrance exam). Such is the case, for example, in Hamburg.[61]
While there are numerous ways to achieve entrance qualification to German universities,[62] the most traditional route has always been graduation from a Gymnasium with the Abitur; however this has become less common over time. As of 2008, less than half of university freshmen in some German states had graduated from a Gymnasium. Even in Bavaria (a state with a policy of strengthening the Gymnasium) only 56 percent of freshmen had graduated from a Gymnasium.[63] The rest were awarded the Abitur from another type of school or did not hold the Abitur certification at all."
This gets me wondering how much you’ve traveled, because IRL I only hear “facts” like this from those who haven’t seen many parts of the world, esp first world countries. The US isn’t bad, but neither are most other first world countries. I’ll admit there are some I prefer TBH and this is not simply related to who’s in power. It’s the overall lifestyle differences in other places we enjoy - less stress, more enjoyment.
If they can pay for it. That’s a big “if.” Almost any place in the world can be a terrific place to live if one is wealthy enough (and that doesn’t always mean Top 10%). There are some exceptions - what I know of North Korea comes to mind - but even in third world countries those who “can pay for it” seem to do just fine.
In all countries we’ve been to we’ve seen kids laughing and having fun and met adults enjoying themselves and their country. Not everyone ascribes to “he with the most toys wins” (or is the happiest).
Depressions are just sales for rich people, and when they occur, they produce even greater upward transfer of wealth unless legislation is introduced to prevent that extraction (as was introduced in the 1940s–94%+ marginal tax rates for the very rich in '44-'45, 70%+ for decades thereafter). I know this because right now I have some money and I face a conflict between my class interests–staying liquid to be able to gobble up assets if (when?) the bubble bursts where I live (not US)–and my moral values–recessions hurt the most vulnerable among us.
Avoiding losing money or making money (within legal and what you consider ethical methods) gives you more options than losing money. For example, you can use the money for whatever political activism or charitable endeavor you want. If you lose money, it may go to someone who may use it against what you believe in, or just be lost completely.