We expect that each generation of Americans will have higher incomes than preceding ones — that, in other words, there will be upward absolute intergenerational mobility. Data from a report by the Economic Mobility Project suggest some reason for concern.
The data are for various generations of families with a man in his thirties, thereby holding stage of the work career constant. The question is how much family income (adjusted for inflation) increases across generations, with a generation defined as 30 years. As the following chart shows, the median income of these families increased by about $12,000 between 1964 and 1994. Between 1974 and 2004, in contrast, it increased by only $4,500. The gain from generation to generation declined. And this is despite the fact that a growing share of these families have two earners rather than just one.
This could be because economic growth slowed. Or it could be due to rising inequality; a larger and larger share of the economy’s growth has gone to families at the high end of the distribution and less and less of it to the rest.
The second chart here suggests that rising inequality may have been more important than slow economic growth. From 1964 to 1994, the average annual growth rate of GDP per capita was 2.2% and the growth rate of median income for families with a man in his thirties was 0.9%. From 1974 to 2004, GDP per capita grew at an annual rate of 2.0% while median income for families with a man in his thirties grew at 0.3%. The drop in income growth across generations was much sharper than the drop in growth of the economy.