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For most Americans, income is on the decline

Income inequality problem
Does China or the U.S. have a bigger income inequality problem? 01:04

President Ronald Reagan might have clinched the 1980 election when he asked: "Are you better off now than you were four years ago?" Today the question is: Are you better off than your parents were 50 years ago? 

According to a study by the National Bureau of Economic Research (NBER), the answer -- at least in terms of paychecks -- is no. Most Americans are worse off, and becoming even more worse off, if possible.

In particular, men have endured "stagnation in lifetime incomes," said the NBER report, with earnings that have dropped 19 percent when inflation, as measured by the Consumer Price Index (CPI), is taken into account. In real dollars, males have lost close to $300,000 in lifetime earnings compared to the generation that came of age during the 1950s and 1960s boom years.

So, what did those "Mad Men" have that subsequent generations lacked? "Back then, the economy was going full-throttle," said Kim Blanton of the Center for Retirement Research at Boston College. In contrast, boomers walked into "twin 1980s recessions in heavy industries and two high-tech booms and busts."

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For men, the news gets even worse, according to the Bureau of Labor Statistics. Their "participation in the civilian labor market has been dropping steadily since 1950, when it was 86 percent. It's now about 70 percent and is expected to drop even further in future years." Not very encouraging for millennials.

For women, the news is somewhat better. Their median lifetime income rose 33 percent as their participation in the workforce grew from 34 percent in 1950 to a high of 60 percent in 2000. But the NBER study showed that the gains look less impressive when measured against the low base from which they started. 

"Women's earnings are higher because more of them are working," said Greg Kaplan, an economics professor at the University of Chicago and an author of the study.

The NBER study was unique because it looked at earnings, as measured by individual income histories from the U.S. Social Security Administration, from 1957 to 2013.

Overall, the study showed a steady decline for most Americans. "The total amount of income earned by the U.S. population has increased substantially during this time," said Kaplan, "but much of that increase has gone to women. A lot has also gone to older people because there are more of them. And much of it has also gone to the top, to the 0.1 percent."

Kaplan said that after bottoming out in the 1960s, the top 1 percent and top 0.1 percent shares of total income have been rising steadily, an already well-known trend. While in the interim, the lifetime income for 90 percent of all men has decreased.

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This could mean women have had to fill in the wage gap for men who are either unemployed or not earning what they used to. Although the study didn't address the subject of two working people per household, Kaplan said it's likely that "some of the stagnation in income at the household level may be made up by the double earnings."

Women may not be working because they want to, but because they have to. And could have even more than one job.

The often-portrayed stay-at-home mom TV image may not exist anymore, not because all women want a career, but rather because they have to help feed the family. The gains that women made in income are expected to level off in coming years, according to the NBER study, as women's participation in the labor force drops below 60 percent.

"One disturbing trend is how the declines are concentrated among younger people," said Kaplan. "You might think that older people would find it harder to adapt to the changing market, but it seems that younger people have been affected just as much if not more. And the increase in inequality is likely to continue."

Looking at lifetime incomes is a more realistic way of comprehending how much people earn, rather than observing only one point in time because earnings can vary sharply during a working career, said the NBER study. 

It cited a medical intern who might earn $40,000 now, but will likely end up in the top five percent in lifetime income. In contrast, an NFL rookie may earn $400,000 his first year, but could easily plummet out of the top 10 percent over his lifetime.

The NBER study cuts both ways politically. It reinforces the mantra of Vermont Sen. Bernie Sanders that more income is flowing to the top 1 percent and to the top 0.1 percent, whose annual earnings are in the $7.2 million range, according to Kaplan's calculations. But it also explains why so many men are angry at being stuck on an economic treadmill -- and why President Donald Trump's message seems so appealing.

"I can see why people are frustrated," said Kaplan, a native of Australia. "But I try to stay out of politics."

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