You’ll notice it if you drive through the suburbs of Columbus, Memphis, or Fresno on a Tuesday afternoon: the number of For Rent signs has increased over the past two years, the Dollar General has taken the place of a grocery store, and a payday lender has replaced the pharmacy in the strip mall. The US economy appears to be doing well on paper. GDP is increasing. There is little unemployment. Earnings reports from corporations consistently exceed forecasts.
However, in household after household throughout our nation, individuals are performing math that doesn’t work: using credit cards to pay rent in months when their wage isn’t enough, delaying doctor’s appointments, and watching a first home fade into a future that keeps getting farther away. There has previously been a discrepancy between the figures and the lived experience. Seldom have they been apart for so long.
It was a particular promise. It was based on the post-World War II decades, when productivity gains generally translated into wage growth that was widely shared. At that time, the median American family could reasonably expect each generation to live somewhat better than the previous, and jobs in manufacturing, retail, or clerical work offered health insurance, pensions, and the plausible possibility of owning a home on a single income.
The advantages of such economy were not shared equally, and it was not without its flaws and exclusions. However, the fundamental idea—that economic expansion would help the majority of people—was so plausible that it became the standard by which everything has been evaluated ever since. Since then, the decoupling between GDP growth and median household purchasing power, as well as between productivity and compensation, has been quietly building for fifty years without ever really making headlines.
The disparity is described by figures that are not difficult to understand. The productivity of US workers has increased by more than 64% since 1979. Over the same time period, the average worker’s inflation-adjusted hourly wage has increased by less than 18%. Decades of economic output that went somewhere other than into the paychecks of the individuals who made it are represented by the difference between the two lines on a chart, which used to closely follow one another prior to the early 1970s.
As a percentage of GDP, corporate after-tax profits have been close to all-time highs. From about 64 percent in the 1960s to the current high 50s, labor’s share of the national income has decreased. These numbers are uncontested. They can be found in data from the Bureau of Economic Analysis, analyses from the Economic Policy Institute, and scholarly works that have been developed over many years. What is still up for debate is how to address them and if it is politically feasible to do so in a setting where the stock market is the key indicator of the state of the economy.
The greatest tangible gap between the promised and real economies is found in housing. In the 1970s and 1980s, the median property price to median household income ratio fluctuated between three and four times; this was already difficult but attainable with perseverance and discipline. Today, that ratio is seven to eight times, and occasionally greater, in large metropolitan regions. Although it is a contributing factor, this is not largely a shortage of supplies.
The goal of homeownership, which continues to be important to the American idea of economic stability, is being pulled in opposing directions by the cumulative effect of decades of wage stagnation and asset price inflation. According to data from the Pew Research Center, the percentage of middle-class Americans decreased from 61% in 1971 to 50% in 2021. During that time, the lower-income tier expanded more quickly than the upper. This is the population-level manifestation of economic divergence.
Watching the divergence unfold in real time makes it difficult to ignore how the official language of economic success—the GDP reports, the unemployment statistics, the earnings call optimism—has grown more and more detached from the reality of everyday economic life for those without assets. A low unemployment rate is a great thing.
However, the low-unemployment economy that the postwar promise suggested is not the same as a low-unemployment economy where a large portion of the workforce is juggling gig work and part-time hours without benefits, where about 36% of workers engage in platform-based work in some capacity. The figures are accurate. They are actually measuring stuff. The broad, shared, progressive prosperity that the promised economy was meant to bring about is no longer what most Americans believe they are measuring.
