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Study: Demographics to Drag Down Median Income

By    |   Monday, 09 September 2013 08:17 AM

Americans who expect wages to rise as the nation recovers from the recession may be in for disappointment. A new report suggests incomes may be headed downhill for decades.

America's history is one of booms and busts. Like a predictable cycle, after economic hardship, there's recovery. But this go-round may be different warns economists Richard Burkhauser of Cornell University and Jeff Larrimore, a staffer on the Congressional Joint Committee on Taxation.

In the past, demographics have been a positive contribution to the economy; in the future demographic trends could lead to serious economic decline, the economists claim.

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Retirees Slammed with 85% Pay Cut (New Video)

Pointing to past decades, the economists say median household incomes rose 9 percent between 1979 and 1989 and jumped 13 percent between 1989 and 2000. They say the primary driver of this growth was women, The Wall Street Journal notes.

But women's contribution to income growth started to plateau around 2000 and male earnings began to fall. Americans took the changing trends in stride because home prices were rising and there was easy credit, The Journal adds.

Then, the recession came and ravaged household incomes. Now, as the nation tries to recover, demographics are set to be a headwind, with race being a major factor.

"Baby boomers are now going to retire and we also know that the racial composition of the country is going to change," says Rick Newman, Yahoo Finance senior writer, explaining the study's findings.

"Those two factors are likely to drag down median income all the way through 2050," he adds.

Hispanic and black individuals earn less than white Americans do. According to The Journal, the economists peg the average incomes for minorities' at only about 60 percent the average income for whites.

Census data show that by 2030, about 20 percent of the U.S. population will be over 65, The Journal explains.

In forthcoming decades, minorities will account for a larger share of the working population. And as the "relatively high-earning whites" leave the work force, the economists say the nation is set to see a reduction in median income growth.

According to the study, median income could be reduced by about a little less half a percentage point per year between now and 2020. And a little over half a percentage point per year may be shaved off in the decade that follows.

The rates of decline would vary thereafter but are projected to continue until 2050.

"Those numbers might sound small, but over time it adds up to a significant loss of purchasing power for the typical American and a long era of decline for the entire nation," Yahoo states.

"We could change some of this if we wanted to," says Burkhauser, one of the study authors.

"What we need to do is come up with better education, better training and a greater effort to encourage blacks and Hispanics to stay in the labor force," he urges, Yahoo reports.

Demographics are not destiny, Newman agrees. But he says the economists outlined solutions, which we all know about already, but are hard to do.

Editor’s Note: Retirees Slammed with 85% Pay Cut (New Video)

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Americans who expect wages to rise as the nation recovers from the recession may be in for disappointment. A new report suggests incomes may be headed downhill for decades.
demographics,income,median,work
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2013-17-09
Monday, 09 September 2013 08:17 AM
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