June 30, 2005
Trying to make sense of the steady stream of economic news can be frustrating. Is the economy getting better or worse? The news seems to change weekly and, depending on what is measured, can seem bleak or sunny. Wages are stagnant but productivity is up. The unemployment rate declines but so does labor force participation.
We can't even begin to understand how America is faring economically unless we first establish how its families are doing -- how much they're earning and how many hours they must work to earn this income.
We have set out here to examine the number of hours worked by families and the link between wage growth and work hours in families of different incomes. In order to illuminate these trends, we present new data on the increase in hours worked by married-couple families and the contribution that wives’ income make to real income growth in these families. We put this recent period in the context of the post-War period and explore the implications of the data we present. Finally, we offer some directions for policy consideration.
The data we present here reveal that, for the period 1979-2000, married-couple families with children increased their hours worked by 16 percent, or almost 500 annual hours. Yet the data also demonstrate that without the increase in women’s work, middle-quintile families would have experienced an average real income increase of only 5 percent -- instead of the actual 24 percent -- while families in the bottom two quintiles would have experienced a decrease in real income over that period -- by about 14 percent for the bottom quintile and about 5 percent for the second quintile.
These data reveal that the economic engine for middle- and lower-income advancement is in low gear.
Remarkably, this is true even when productivity has grown at a healthy clip. These trends represent a departure from those of the post-War years when median family income doubled -- tracking productivity growth. Today, middle- and lower-income families no longer see increasing returns to their hours worked in the same way that the previous generation did. The only way many of these families can keep their total income growing -- or not shrinking -- is to work harder and harder.
For the complete document, please see the attached PDF version.