REALITY BITES

America’s missing wage growth has been particularly cruel to one generation—and it isn’t millennials

You’ve probably heard every US presidential hopeful proclaim the average American hasn’t gotten a raise in 15 years. Globalization, with its resulting competition from foreign workers, is the most frequently cited villain for this persistent wage stagnation. That’s emboldened candidates Donald Trump and Bernie Sanders to call for abandoning trade deals. They’re wrong, though. Yes, if you take all Americans and calculate the average wage, it hasn’t gone up in 15 years. But looking at a giant mass of earnings doesn’t tell us much about what’s going on for most individuals. And some digging reveals earnings have not stalled in the way many people think, meaning we likely have the culprits wrong, too.

As you age and progress in your career, your earnings normally increase. And for many Americans that’s still the case. Using the US Census Bureau’s March Current Population Survey, I estimated median earnings of 31 to 36 year olds in 2000, a group made up entirely of those considered Generation X. I aged them one year, each year, until 2015 (ending with them between 46 and 51). And, like generations before them, the typical Gen Xer’s earnings increased over that time. The figure below plots Gen X earnings and the median earnings of the whole population.

So if the economy hasn’t stopped handing out raises entirely, what’s keeping the median wages of the population down over the past 15 years? For one, more of the US population is made up of retired people—11.8% in 2000 compared to 13.4% in 2015—who tend to draw a smaller income than when they were working. Median wages may also be flat because raises are smaller than they used to be. Then there’s the fact new entrants to the labor market are paid less than earlier generations. In 2015, Americans under 30 earned 5% less than the same group in 2000.

But here’s a really important point about the Gen X data: nearly all the gains occurred before 2009, and the increases you’ve seen over the last couple years have only gotten us back to our pre-recession levels. Hardly anyone has gotten a significant raise since the recession. Gen Xers are worth singling out because they’re in their peak earning years. They’ve now missed out on what should be the biggest raises of their careers.

That alone is troubling, but the fact that stagnation has been largely confined to the post-recession period is also meaningful. There may be more to the story than trade or technology dragging on wages. Both of these factors were around before the recession when Americans were still getting raises. Lingering effects of the recession may be keeping wages low, too. Talk of rejecting trade agreements only distracts from the real issues.

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