The Fall and the Stall

Throughout this blog, I am going to be focusing on explaining five “stylized facts” about the U.S. economy since the mid-1970s. Stylized facts are not facts after a trip to The Gap (sorry, this is an Economics blog, so the only jokes you get are pretty bad).  Instead, stylized facts are well-documented correlations or trends that are simple to understand and that are widely agreed upon by researchers. Broadly, the five stylized facts this blog will focus on are about:

1. middle-income workers’ struggles;
2. the stall in women’s progress in closing the wage gap;
3. inequality in marriage and total household income (as opposed to individual income);
4. racial inequality; and
5. wealth inequality.

Today, I want to focus on data illustrating the first two facts on the struggle of middle-income workers and the stalling out of women’s progress. In the coming weeks, I will introduce data on the others, and then turn to discussing why these facts have occurred.

To illustrate the struggles of middle-income workers, I am going to talk about a group that we do not often think about as struggling — men — before turning to the progress of women. Why look at men? Well, since the 1970s a whole lot has changed for female workers (more education, more work experience, somewhat less discrimination, etc.). These changes make it hard to discern one economic trend from another. Less has changed for men, so economy-wide trends that have hurt middle-income workers are more visible. The figure below shows the first stylized fact: middle-income men have seen their wages — adjusted for inflation — decline since the 1970s.

Figure 1. Annual Earnings for Working Men, 1975-2017.

When you look at the figure, think of the red line representing the “median” — the point at which 50 percent of all workers make that amount or less — as roughly the typical worker. The figure clearly shows two trends: 1) men at and below the median have struggled, seeing their wages decline; and 2) much higher income men are doing better, seeing relatively large increases over the same time period. The result of these trends is that while things were unequal in the 1970s, they are much more unequal now.

For women, the story initially looks a whole lot better. The data below show that women have seen increases in income across the board. Still, it’s worth noting that higher income women are doing a whole lot better, while lower-income women are doing a little bit better. After all, lower-income women have been buffeted by some of the same forces as lower-income men, but other forces like their increased education and work experience have pushed back in the other direction.

Figure 2. Annual Earnings for Working Women, 1975-2017.

Of course, I am an economist and therefore duty bound to follow up any good news with bad news (this tendency is why I spend more time with data than other people…sigh). To see this bad news, we can just divide the lines in Figure 2 (women’s wages) by the lines in Figure 1 (men’s wages). These ratios will show us how women with various earnings levels compare to men with those earnings levels. For example, does the median woman make the same amount as the median man — which would be a ratio of 1 — or not? Figure 3 shows the ratio for the median woman and man (at other earnings levels the results are similar), and illustrates the second stylized fact: although women made progress during the 70s, 80s, and early 90s, women today make less than men at all earnings levels, and progress towards equality stalled out in the late-1990s.

Figure 3. Ratio between the Median Women’s and Median Men’s Earnings, 1975-2017.

So, we have our first two facts: 1) middle-income men are falling behind higher earners; and 2) women are remaining behind those same men, having made no progress since the late 1990s.  In the coming months, I will try to use data and good old-fashioned economic research (often from economists far smarter than me) to explain these two facts.  My hope is that these explanations are worth the wait, as they touch on a wide-range of interesting issues including automation, trade, the decline of unions, and the continued role of women as caregivers.  But for now, just know that some men are falling out while women are simultaneously stalling out.