The Boom that Wasn't
In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureauâ€™s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less â€” about $60,500.
This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew while the economy did. You can think of this as the most basic test of an economyâ€™s health: does it produce ever-rising living standards for its citizens?
â€śWe have had expansions before where the bottom end didnâ€™t do well,â€ť said Lawrence F. Katz, a Harvard economist who studies the job market. â€śBut weâ€™ve never had an expansion in which the middle of income distribution had no wage growth.â€ť
Real median family income more than doubled from the late 1940s to the late â€™70s. It has risen less than 25 percent in the three decades since. Statistics like these are now so familiar as to be almost numbing. But the larger point is still crucial: the modern American economy distributes the fruits of its growth to a relatively narrow slice of the population. We donâ€™t need another decade of evidence to feel confident about that conclusion.