Middle-class squeeze: Productivity slowdown doesn't explain it

Economic growth has been doing an end run around the middle class for some time.

US Census Bureau and Bureau of Labor Statistics
Productivity and income growth were much more correlated for the first three decades after World War II than the next three decades. (Click on the chart for an enlarged view.)

I’ve been crunching all day on a paper on the middle-class squeeze. Here are two figures from the work that tell a lot about the story.

First, there’s the well-known split between the growth in real middle-class family income (here, the median income) and productivity growth. People used to say: “well, you’d expect family incomes to grow more slowly since productivity growth slowed.” But the deceleration in median income has been so much greater than the slowdown in productivity.

Clearly, growth has been doing an end run around the middle class for a while.

It’s not, btw, from lack of trying. While middle income husbands generally worked full-time, full-year over this period, hours worked in the paid labor market by middle-income wives grew steeply, by over 400 hours.

Since middle-income men’s wages were stagnant and wives’ were rising, this dynamic helped to keep middle-class incomes from falling, but it also gave deepened the challenge of balancing work and family. (Note large hours losses for both husbands and wives over the great recession.)

I also look at single moms in the paper, and they too work a lot more over this period—clearly as the sole breadwinner, their work/life balance challenge is a lot harder.

More to come on this.

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