Stag-nation: The Lack of Growth in Household Income

Although last week’s post provided some predictably depressing news — falling income for middle-class men and stalled progress for women — some good news was also present: middle-income women are doing better today than in the past. In between 1975 and 2017, the typical middle-class working women’s annual income increased by about 25 percent, from $35,000 to $44,000. Furthermore, women are working a whole lot more too, with their participation in the labor force climbing from 56 to 75 percent.

The combination of women working more often and earning more when they do offers some hope for the middle-class. After all, while individual earnings are important, what really matters is household income, since people share resources within households. And, many households consist of both a man and a woman. So, women’s gains could offset any damage done to middle-class men, with the end result being middle-income households seeing considerable growth in resources. See, hope!

Nope. The figure below shows income for middle-income households (represented by the red line, or median), as well as households above and below the median. The figure shows another one of the stylized facts this blog hopes to explore: a startling lack of progress for middle-class households since the 1970s, with total income growth of just under 10 percent.

Figure 1. Total Household Income, 1975-2017

Note: The figure shows total household income for households where the “householder” was 25-54 years old. All lines are adjusted for inflation and presented in 2018 dollars.

If 10 percent sounds like a lot, consider the fact that the highest income households in the figure saw growth of about 60 percent. Or that the size of the overall economic pie — as represented by GDP per capita — has more than doubled. So what the heck happened?! Why hasn’t the rise of middle-class women fueled the rise of middle-class households? Because it sure seems to have fueled the rise of the highest income ones in the figure above.

The answer has to do with another kind of inequality in something we don’t often think about as an economic outcome: marriage. After all, the story of rising women making up for declining men depends on a marriage happening and having two combined incomes in a household. And it just ain’t happening as much as it used to. In 1975, 85 percent of people age 25-54 were married. In 2018, the number was 58 percent.

And, of course, the drop hasn’t been equal. If we assume middle-class households are more likely to consist of the high-school educated, and higher-income households of those with a college-education (an obvious simplification), then the figure below shows the issue.

Figure 2. Share of Individuals Age 25-54 Who Are Married by Education, 1975-2018

In 1975, those without a bachelor’s degree were more likely to be married than their college-educated counterparts. By 2018, this fact had been reversed. So as middle-class women entered the labor force more and more and as middle-class men saw their incomes decline, marriage went right along with it. So instead of having households saved by a second earner, those households failed to form in the first place. Furthermore, because marriage is now more common for those with more education, it has actually driven higher-income households even further above the middle. Marriage used to be an equalizer, now its another divider.

Indeed, as we will discuss later, the fall of men’s income and the fall of marriage are likely related. Later on, we will talk about how economic inequality can fuel marriage inequality, and we will introduce the sexy sounding but ultimately “economicky” topic of “assortative mating” — the idea that increasingly high-income people marry other high-income people, increasing inequality. But that’s all for a later date. The main point for now is that the middle-class has spent the last forty years experiencing stagnation in their income levels.

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