The Elusive American Income Dream: How Real Wages Remain Stuck in Time

The image of white picket fences surrounding suburban homes with happy families inside used to define the aspirational American dream. Financial security allowed a single breadwinner to comfortably provide for an entire household. But decades of income stagnation for most workers shows this dream remains out of reach across huge swaths of the country.

The Majority of American Workers Are Economically Stuck in Place Over Generations

Thriving middle class households were once the hallmark of a robust economy. But while America still boasts the highest overall gross domestic product globally, national prosperity is increasingly concentrated among high earners. Leaving the vast majority of workers struggling financially.

Median household income in the U.S. was $70,784 in 2021 according to U.S. Census Bureau data. Adjusted for inflation, this figure is only marginally higher than peak earning years in the late 1990‘s. But the lifestyle afforded by that income has declined significantly over the past 20+ years.

Table 1. Median Household Income Over Time

Purchasing power is the true indicator of prosperity. While income numbers may rise slightly over generations, most American households actually lose ground due to the higher costs of big-ticket necessities like housing, healthcare and education outpacing pay.

Over the past five decades, income growth occurred almost exclusively within the top 10% of highest earning households. The bottom 90% actually earned 3.7% less in 2019 than in 1970 when factoring in inflation:

Figure 1. Cumulative Change in Real Annual Earnings Since 1970

• Workers below the 80th percentile now earn less than in 1970
• Only top earners experienced real income growth

Stretched thin by flat incomes, over 60% of Americans can’t afford an unexpected $1,000 expense today without relying on credit according to CNBC reporting.

The data shows the American dream increasingly belongs to the privileged few. So what is blocking widespread financial security and prosperity?

Economic Mobility Remains Structurally Out of Reach for Most Workers

Financial security depends on progressing up the economic ladder via pay raises and promotions over a career. But flattening corporate hierarchies mean less advancement opportunities, while pay growth remains negligible at under 1% annually for typical workers since 2017 according to Pew Research data.

external factors like eroding union membership and an expanding low-wage service economy also contribute to flatlining incomes for the bottom 90% of earners since 1979. This perfect storm of negative forces squeeze bank accounts and leave families increasingly desperate.

Reviewing average income data on an individual level shows even those earning well above minimum wage still struggle in the modern economy. And structural factors largely outside individual control are at play.

A College Degree No Longer Boosts Earnings Like Decades Past

Earning a four-year college degree has traditionally been sold as the ticket to a financially secure middle-class life. But shifting economic dynamics mean a Bachelor‘s degree guarantees heavy student debt burdens but little income premium.

Bachelor degree holders only earn about $7,500 more annually on average than those with just a high school diploma according to federal income data. However, with over 45 million student borrowers nationwide now saddled with $1.75 trillion in collective college debt, academic credentials stretch bank accounts even thinner.

Table 2. Average Income by Education Level

While advanced degrees like PhDs or professional credentials in fields like law or medicine lift earnings significantly, these routes prove very time intensive and expensive to attain.

And even those holding master‘s, doctorates and professional degrees experience negligible income growth year over year. Outpaced by rapidly rising costs of housing, healthcare and insurance, advanced degrees provide less security than decades past.

Geographic Disparities Stack the Deck

Where you call home also significantly impacts your income earning potential and ability to get ahead. Adjusted for costs of living, households in economic hubs on the coasts earn substantially more than rural parts of the country.

Figure 2. Average Household Incomes by US Region

Urban areas simply offer more abundant job opportunities across fields like tech, finance and healthcare that raise average wages. Rural communities relied on industries like manufacturing that severely contracted over recent decades, evaporating local earning potential.

Populations and job markets remain highly clustered around urban economic hubs. But with big cities come higher tax rates and steep housing costs that counterbalance stronger wages. This geographic imbalance blocks financial mobility for small town residents despite lowering costs of living.

Race, Gender & Age Gaps Reinforce Pay Disparities

Demographic factors including race, gender and age overlay on location, education and occupation to exacerbate income divides.

Figure 3. Income Disparities by Demographics

• Asian and White households significantly out earn African Americans and Hispanics
• Men continue earning substantially more than women

Experience captured through age positively correlates to earnings, but climbing the ladder slows significantly by middle age:

Table 3. Average Income by Age Bracket

While America sets itself apart economically via high productivity and innovation, this national prosperity fails to reach most citizens.

Ultimately, achieving financial security involves overcoming systemic headwinds outside personal control. Changing course to equalize opportunities and income potential better across gender, racial and regional divides is necessary to rescue the American dream.

Taking Action to Regain Income & Career Traction

While pushing for systematic economic reforms represents the most sustainable path towards financial mobility, individuals can also take targeted steps to improve their income outlooks.

Acquire In-Demand Skills

Staying up to speed on economic trends and workforce demands can guide smart reskilling decisions. For example, seeking training credentials in fields like cybersecurity and data analysis where talent shortages persist can unlock major salary bumps by landing specialized roles.

Aggressively upskilling also signals dedication during job searches and negotiations to increase offers. Volunteering expertise with nonprofit community groups also builds applied experience.

Relocate Strategically

Moving into tech or business hub urban areas unlocks far more lucrative job options than what rural hometowns provide, though costs of living typically run higher. Even mid-sized regional cities like Columbus, Pittsburgh and Nashville now brand themselves as burgeoning locations for startups and corporations alike hungry for talent.

Factor taxes, typical salaries and living expenses based on priorities like home ownership or recreational amenities as part of relocation decision calculations. Weigh incomes needed to come out ahead overall.

Seek Out Remote & Freelance Work

The explosion in remote white collar roles during the pandemic provides newfound location flexibility to improve job searches and income potential. Taking on freelance contracting engagements also allows skilled independents to set rates higher than typical employee salaries.

Diversifying income by consulting or creating digital products for sale online lends stability too compared to relying on a single employer. Though the variability and time investments to consistently secure new business poses risks over the traditional 9 to 5.

While individual actions to earn more provide short term relief from financial strains, systemic change remains necessary to equalize incomes, accessibility and living standards regionally. Until zip code proves as irrelevant to income mobility as gender or ethnicity, the nostalgic suburban American dream will increasingly fade for more families by the year.

Sources:

• Federal Reserve Economic Data
• US Census Bureau
• Economic Policy Institute
• Pew Research Center
• Investopedia