# Did real incomes drop significantly since the 1950s?

From what I heard, in 1950s America, you didn't have to go to college to support a large family and a stay-at-home wife. People could buy houses easily, drove giant cars and didn't worry about gas prices.

Did real incomes drop significantly since then? What was the cause?

(My college history professor had this pet theory that America gobbled up almost all the world's gold reserves during WW2, and that was what caused its post-war economic boom. Not sure if that is true, but perhaps this effect went away?)

• As a counter-point, most Americans in the '50s lived in what today would be considered very small houses and had only 1 car per household. Also, with respect to large families, most did not eat out, instead eating home cooked meals which are more economical, eating out was maybe a once a month treat. – Glen Yates Aug 17 '20 at 18:34
• There was definitely a boom we're paying off today (not just in the US) related to demographics. Any large change in population trends means trouble for the next few generations - and that's where the US is today (thanks to wildly above average population trends for a while) or Russia is (thanks to the reverse, a brutal demographic toll thanks to WW2 and socialism). I doubt gold reserves in particular have anything to do with anything, though; especially given that the US dollar became the new "gold standard" (what a great idea that was). – Luaan Aug 18 '20 at 11:39
• Everyone's bringing up quality-of-life improvements from technological advancement. However, only a small portion of your income is spent on electronics, etc. – bobcat Aug 18 '20 at 12:13
• @MaxB technological advancement is much, MUCH more than electronics. Todays houses are warm in the winter, and cool in the summer. Showers are hot and near infinite, cloth is soft and fine. Chairs support your back in a dozen new ways, shoes and clothes are fitted to a never before seen level. Power is stable, medical treatment is plentiful. There are too many entertainment options for any one human being to enjoy. Food is incredibly varied, available from all over to globe. Limitless information is at your fingertips. Technology improved our lives in a myriad ways beyond 'electronics'. – Torque Aug 18 '20 at 14:05
• @Torque AC systems (and whatever else you are talking about) don't cost that much today. Another example: New drugs invented: 90% garbage or inexpensive generics: ethics.harvard.edu/blog/risky-drugs-why-fda-cannot-be-trusted I'm not arguing that tech progress is useless, just that only a small portion of your income is spent consuming its fruits. – bobcat Aug 18 '20 at 14:15

Most of the US real earnings data which go only as far as mid 60s. According to the statista data presented in this article by world economic forum the evolution of real hourly earnings in the US for production and non-supervisory workers looked like this:

If we extrapolate to 50s then the real earnings are now higher overall. However, this being said the real wages first peaked in the 70s at $$\\\23.24$$ then fallen to about $$\\\20$$ and recently in 2019 they finally again reached the previous peak from the 70s. Hence, we cannot really say they dropped significantly but rather they tended to stagnate.

There is no single agreed upon explanation for this. Some authors argue this is due to technological change and decline in demand for low skill workers (see Fernandez 2001), other arguments include declining union membership (see David, Katz, and Kearney. 2006), or international competition (see here). Others argue that CPI overstates inflation and that this can be also due to increase in non-monetary benefits such as health insurance (see here). A good explainer is also provided by this brookings article.

• Does "the basket of goods" used here include housing? – bobcat Aug 17 '20 at 3:08
• @MaxB btw this is just my conjecture but I think that reason why this stagnation might feel like a decline is a result of social pressures people are expected to spend more to 'keep up with the Joneses'. In 50's people were not expected to send all their children to college - now its expected even for people who dont need it, it was also not usual to go on vacation so often, have always new dress, eat outside etc. Moreover, the picture many people have of 50s is also bit rosy and note housewives are not a dead weight they economically contributed to family output significantly in the past. – 1muflon1 Aug 17 '20 at 10:21
• The obvious problem with averages like this is that they hide variance. My intuition is that even among "non-supervisory" roles the span is huge nowadays, larger than it used to be (at least according to various critics on the left side of the political spectrum). In Western Europe commentators sometimes talk about the vanishing middle class - more working people end up living very wealthy lifestyles, at the cost of more and more people ending up working poor. – xLeitix Aug 17 '20 at 13:20
• I'd say that, in the spirit of the question, a fluctuation of +/- 10% amounts practically to "no significant change". – leonbloy Aug 17 '20 at 23:26
• @craq these are averages for production and non-supervisory employees. The widening inequality is primarily driven by the star managers and the like which are not included. The distribution among production and non-supervisory employees is less skewed. Furthermore, even quite a lot of research uses average wages as you can see in the sources that I provided. In addition if you plot all average and median wages you will see that there is no large divergence even as inequality increases so even though median will be bit lower they will vary in virtually same way which is what matters for – 1muflon1 Aug 18 '20 at 8:48

Average standard of living is massively higher today compared to the 1950s, primarly due to technological progress.

Even a cheap low end car today is much better than the big cars of the 1950s, it is orders of magnitude safer, much more comfortable and has a whole bunch of new features that didn't exist back then.

Houses as such haven't changed that much, also afaik the average square footage of a house is much higher today. If you think about the amenities the difference is just as stark. Even an upper class household in the 1950s did not have a microwave or a dish washer and maybe had a small black and white TV which probably cost more than a month worth of wages. Anything electronic in your household either didn't exist back then or was much worse and much more expensive than it is today.

The standard of living an average single non-college educated worker can afford for his/her family today is much higher than what a similar job gave you in the 1950s.

• I just can't imagine an average blue-collar being able to easily support a family of 6 (including his housewife) today. Maybe with government assistance... – bobcat Aug 17 '20 at 10:05
• I guess it depends on what exactly constitutes "support". Note that, as pointed out in another comment, contrary to popular belief, women often did contribute to the household income. They may not have worked full-time, and not have had a career, but they certainly may have had jobs. And the children probably, too, had jobs as paperboys, or doing chores for the neighbors. They would have had one car, at most, not two or three. Playing a game wouldn't have cost 600\$for a gaming console, plus hundreds of \$s for the games, it would have been "go outside, grab a stick". – Jörg W Mittag Aug 17 '20 at 11:02
• The children wouldn't have been shuttled in an SUV from karate class to band practice to soccer practice to baseball game to the mall for shopping. They wouldn't have eaten take-out or have food delivered, or go out for food. And so on. Without the need of shuttling the kids around, they wouldn't have had a second car, if they even had one at all. They'd have one phone per house, not one phone per person. They'd have one computer per city, not multiple per person. They'd have one vacation a year, if that. Certainly not in another country. – Jörg W Mittag Aug 17 '20 at 11:03
• @JörgWMittag In short, what is considered a "middle class lifestyle" shifted considerably since the 1950s (everywhere in the Western world). in Austria, my parent's families (both from middle class families at the time) barely had a car when they were children - now you aren't really middle class if you don't have a pool and/or a vacation home. My father stopped going to school when he was 16, now this is almost unheard of among middle class families. The first real vacation any of them did was as adults - now people barely survive a year without summer vacation due to COVID-19. – xLeitix Aug 17 '20 at 13:13
• Yes, even a low-end car is much fancier than it was in the 50s, but even a low-end car is far more expensive than it was, and it doesn't matter how nice it is if you can't afford any at all. You could build a car in 2020 that would be a perfectly useful way of getting from A to B, be more comfortable and more efficient than a 1950s car, and cost 10% to 20% as much as a Kia Rio... but it wouldn't be legal to sell. – hobbs Aug 18 '20 at 4:51

The book “The Two Income Trap” (2003) by Elizabeth Warren (recent Democratic presidential candidate) and Amelia Warren Tyagi discussed this. They looked at spending breakdowns in the 1970s and when they were writing.

One thing to keep in mind is that the mix of spending has changed, as well as the characteristics of products. E.g., modern cars appear to be more expensive, but have longer average lives, which roughly cancels out.

The big difference in spending shares was housing. This is not very well captured in consumer price inflation measures, since the housing mix was changing. This effect can explain what you observed, which is not captured by real wage measures.

• Modern cars are also much safer and far more comfortable. Few people would prefer driving a 1957 car over a modern one, even if it was in top condition: no power steering, no airbags, no cruise control, no AC, an analogue radio, etc. etc. All these improvements are very hard to capture in purchasing power comparisons over time. – Stephan Kolassa Aug 17 '20 at 9:31
• Agreed, but I actually would be happy to delete a lot of the electric frills in post-1970s cars - they are a major source of maintenance issues. However, “lemons” are no longer a concern, which is another hard-to-measure improvement. However, from a spending share perspective, they found that the percentage was largely the same. For houdehold budgeting, that is what matters. – Brian Romanchuk Aug 17 '20 at 12:31
• The cars I have been driving so far have not had any maintenance issues related to the electronics. I may have been lucky. My hunch is that a modern car still needs less maintenance than an older one back then. For budgeting, yes, the share of nominal income is relevant. For "real income", I would not say so. If I spend the same share of my paycheck on cars, but cars have gotten much better, then I would say that my real income in terms of utility has increased. And yes, intertemporal comparisons of utility are hard. – Stephan Kolassa Aug 17 '20 at 12:58
• Lemons are no longer a concern? – john doe Aug 17 '20 at 19:05
• Lemons now are nothing compared to the 1970s for North American built automobiles. – Brian Romanchuk Aug 17 '20 at 19:15

No. One can claim that growth has been disappointing or that inequality has increased. It is however absurd to claim that real incomes have dropped significantly since the 1950s.

In 2018 dollars,

1. Median total money income among all households rose from \$47,085 in 1967 to \$63,179 in 2018.
2. Median earnings among $$\color{blue}{\textrm{male}}$$ full-time, year-round workers rose from \$39,941 in 1960 to \$55,291 in 2018.
3. Median earnings among $$\color{red}{\textrm{female}}$$ full-time, year-round workers rose from \$24,234 in 1960 to \$45,097 in 2018.

Data and sources for above chart. (Unfortunately, these data do not go back to the 1950s. But assuming the median American was no worse off in 1960 or 1967 than in the 1950s, these data should suffice to prove the point that real incomes are not significantly lower today than in the 1950s.)

P.S. The above data and graph do not take into account an important issue: Inflation may have been consistently overstated over many decades, in which case growth in incomes over the long term will be greatly understated. See e.g.

• The 'Household Income' approach actually understates income growth, because the average household size has dropped significantly since 1950. When households are statistically re-assembled into units of similar size to 1950 units, the growth is even more dramatic. – tbrookside Aug 18 '20 at 14:02
• @tbrookside: Yup good point. Average household size was 3.33 in 1960 and 2.53 in 2018 (source: Table HH-4 here). – user18 Aug 18 '20 at 14:33

While other answers and comments point out that the standard of living has risen, despite the inflation adjusted real incomes staying the same, I don't see anyone mentioning that this standard of living is nowadays usually achieved by a two person income instead of one.

I saw a comment that women in 1950ies still frequently(?) earned money, however, the fact that women participation in workforce has approximately doubled in almost every age group (from ~30% in 1950 to over ~65% in 1998) seems to indicate that for a lot of jobs a single earner household has over time become insufficient.

• No this interpretation assumes that housewives were some sort of dead weight in the household which is incorrect. In economics income=output, in past first most people were not employed so this was much more clearer both men and women just produced some output that household consumed, later during industrialization when employment how we know it today things got obscured - men exchanged their output for wages while women still created output directly for household but even if that output did not qualify as wage it’s still household income. Later during WW2 when it became normalized for – 1muflon1 Aug 18 '20 at 10:35
• women to work and become more emancipated and entering workforce they simply substituted the official employment for their home production. As a consequence saying that there was any time in history where households lived on only one income is incorrect as it ignores underlaying economics. In fact in the past even children significantly participated in home production whereas nowadays they only tend to do a little bit of it (cleaning dishes/mowing lawn) so it could be even argued today even less members of households contribute to household income than previously – 1muflon1 Aug 18 '20 at 10:46
• of course it is. Actually even econ 101 textbooks do that. Also by home work I don’t mean just chores for example in past women regularly repaired clothing making it so that one piece of garment was functional for a life time, in past women did much more cooking, nowadays in west people mostly eat out (at least pre corona). Furthermore a lot of food stuff such as marmalade that you today buy ready made was in past produced at home etc. If you look at economic literature I don’t think you can find anyone who would claim that woman’s household work was economically not significant. – 1muflon1 Aug 18 '20 at 11:19
• Another good example would be the advent of dishwashers. Washing dishes is more labor intensive and structurally different then putting them in dishwasher. By buying dishwasher household saves all the wasted labor which is costly but also incurred an expense for procuring and maintaining dishwasher- these expenses will be recorded in statistics while the labor spent washing dishes is not but this obviously does not mean that household without dishwasher has lower expenses in underlaying economic terms. The task of washing dishes still has to be done but in structurally completely different way – 1muflon1 Aug 18 '20 at 11:42
• The concept is wrong because you ignore the fact that labor is not homogenous. If two laborers are substitute for each other they might decrease the wage of each other. If they are complimentary they actually boost each others wages. Empirically most migration is complementary as workers who emigrate do so into countries where there is high demand for their work not where there is large supply. You should really educate yourself and at least read some economic textbook or research you can start with Clemens (2011) Economics and Emigration - published in one of the most cited econ journals – csilvia Aug 18 '20 at 12:40