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Old 05-26-2007, 10:04 AM   #1
Mosca
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Default Economy robust, middle class income dropping?

Comments? I've noticed this in my daily work, which consists partly of analyzing creditworthiness. I have no immediate opinion on the study's validity, but I thought some would find it interesting, seeing as how there has been a lot of talk in the media about "the war on the middle class".



NEW YORK (CNNMoney.com) -- American men in their 30s are earning less than their father's generation did, challenging a long-held belief that each generation will be better off than the one that preceded it, according to a new study published Friday.

The report, the first in an ongoing 18-month study on economic mobility in the United States, also revealed that the income growth of the median American household is declining.

The study was produced by a handful of politically diverse think tanks including the Pew Charitable Trusts, the American Enterprise Institute, the Brookings Institute, the Heritage Foundation and the Urban Institute. It looked at income levels of American men in their 30s, which can be a good indicator of lifetime income.

Relying on Census Bureau figures, the study's authors found that after adjusting for inflation, men in their 30s in 2004 had a median income of about $35,000 per year, for a 12 percent drop compared with $40,000 per year for men in the same age group in 1974.

That stood in stark contrast to men in their 30s in 1994, who earned 5 percent more than their fathers did.

Similarly, American families, which experienced a 32 percent increase in income levels between 1964 and 1994, saw household income growth slow to 9 percent between 1974 and 2004, according to the report.

"There is clearly some story here that [U.S.] productivity gains are not trickling down to the median family," said John Morton, a co-author of the study and the managing director of economic policy initiatives at the Pew Charitable Trusts.

Even as male incomes have declined and household income growth has slowed, the nation's productivity has remained robust. While the two once kept pace with each other, U.S. productivity has quickly outpaced income growth since the mid-1970s, according to the report.

The study's authors, who plan to examine relative mobility, or the ability of Americans to move up or or down in social strata, said their report shows the canonical belief in an American meritocracy may be unraveling.

"The expectation that each generation will do better than their parents has become a fundamental part of what we call 'The American Dream,'" said Morton. "But this new analysis suggests this bedrock belief may be shifting under our feet."
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