The case for economic doom is easy. Whether it’s liberals worried about widening inequality and middle-class struggles, conservatives saying we’ve lost the war on poverty and are saddling future generations with enormous debt, or polls reflecting fears that the country is heading in the wrong direction, America’s economic decline seems a done deal.
Done, that is, until you remember that these types of challenges have been with us before and have preceded eras of broadly shared prosperity. From slowing health-care costs to rising college graduation rates to a shrinking federal budget deficit, the American economy could look a good deal brighter — and not just for the 1 percent — over the coming decades.
One reason we should be more optimistic is that we’ve finally become aware of just how lousy the past several decades were for the average U.S. worker, thanks to research and a new political focus on the subject. After most Americans enjoyed rising wages for many years following World War II — a period of “growing together” — the past few decades have been a era of “growing apart,” as two top scholars have called it. Perhaps the most chilling statistic is that median income was the same in 2012 as it was in 1989 — about $51,000 — once inflation is taken into account.
The main explanation for stagnant wages is that companies haven’t felt pressure to pay their workers more. But another important reason is that companies have been paying a higher share of employees’ compensation in health-care premiums. Firms think about compensation in terms of salaries plus benefits — and they’ve been paying higher health-care costs, instead of higher wages, as the price of insurance has skyrocketed. Increases in health-care costs have also hit workers directly, since they have to pay more for premiums and co-pays. One study has suggested that a decline in health-care costs could mean thousands of dollars in additional income for a family of four.