American Dream



Kevin Drum has up this graph of median income, in 2004 dollars, for men and women since 1947. There are several dramatic features shown, but the most interesting to me was the rapid and continuous income growth for men from 1947 to 1973, followed by stagnation and actual decline since. Per capita GDP has approximately doubled since then, so who got all that money? Women's income increased a little, so they got a small piece of it. Ditto, the young (under 26) and old (over 65). The overwhelming share of it went to the wealthy though. While median wage earners lost ground, the very rich (top 1/1000 and top 1/10000) saw huge increases in their incomes (several hundreds of percent).

A more important question is why this happened. Several possibilities have been mentioned: the entry of the baby boomers into the labor force, globalization, and increased immigration. It's hard to disbelieve, though, that a crucial aspect was the dramatic changes in the tax code that increased taxes on most workers (mostly social security taxes) and decreased top tax rates for the wealthy. Note that almost all of this occurred befor the Bush tax cuts, which seem certain to dramatically increase inequality.

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