The Milken Institute Review
Trends: Reduced Earnings for Men in America
For most of the past century, a good job was a ticket to the middle class. Hitched to the locomotive of rapid economic growth, the wages of the typical worker seemed to go in only one direction: up. From 1950 to 1970, the average earnings of male workers increased by about 25 percent each decade. And these gains were not concentrated among some lucky few. Rather, earnings rose for most workers, and almost every prime-aged male (ages 25-64) worked.
Technological advancement and ever-broadening global markets brought opportunities that increasingly educated American workers raced to embrace. This resulted in steadily rising living standards, generations of children who outearned their parents, and a thriving middle class.
But in the mid-1970s, that pattern abruptly changed. Technological change and globalization continued to power both economic growth and the total earnings of the work force. Women, who were entering the market at increasing rates, enjoyed the fruits of that prosperity in rising wages. But the fortunes of a large segment of workers – male workers lacking specialized skills – was unhitched from the engine of growth.
Over the past 40 years, a period in which U.S. GDP per capita more than doubled after adjusting for inflation, the annual earnings of the median prime-aged male have actually fallen by 28 percent. Indeed, males at the middle of the wage distribution now earn about the same as their counterparts in the 1950s! This decline reflects both stagnant wages for men on the job, and the fact that, compared with 1969, three times as many men of working age don’t work at all.
There are obvious challenges to making comparisons about income and the relative quality of life over a long span that included significant advances in health care as well as any number of new goods, ranging from personal computers to sunscreen. Nevertheless, the reality that the relative income of a large portion of working Americans has sharply declined is indisputable.
What could have caused this divergence? Standard economic theory tells us that it is a consequence of reduced earnings opportunities and/or a greater desire to spend time outside the formal labor market. And while the latter is a plausible contributor – as society becomes wealthier, people may well wish to take more of their income as leisure – the evidence suggests that the primary cause is declining opportunity.
Indeed, the earnings deterioration has been concentrated among specific subgroups of men rather than being equally shared – as would be the case if a cultural shift had led Americans to become more interested in time off. In particular, the decline is concentrated among less-educated men.
That’s consistent with the large body of evidence suggesting that these changes have been driven by reductions in the demand for the kind of work that men used to do, in favor of jobs that many are less qualified to do. The most salient demonstration of these labor-market forces is the rising return attributable to a college education. In 1969, the average male college graduate working full time earned about 55 percent more than an average worker with only a high school diploma. Four decades later, this wage premium was 116 percent. Powerful economic forces, including technological change and globalization, have reduced job opportunities for less educated, less-skilled workers while increasing them for higher-skilled workers.
The disruptive effects of changing trade patterns and “labor saving” innovation have been ever present in American economic history. In the past, however, technological advancements benefited a majority because most workers adapted by investing in skills and education. When mechanization replaced unskilled labor in factories in the first half of the 20th century, Americans with high school degrees found better jobs elsewhere.
The difference today is that men have largely stopped upgrading their skills – the portion of young men who complete college has hardly budged since the late 1970s. The reasons are not entirely clear, but include the end of the Vietnam War (which had artificially inflated college attendance rates among men) and a temporary narrowing of the wage gap in the 1970s as the supply of skilled workers in the labor force surged.
In any event, ordinary men who face diminishing job prospects are less likely to earn middle-class wages.