By David Knox
The good news made headlines across the nation last month: poverty down, incomes up at least a little.
The bad news came a little deeper in the stories: Median wages for full-time, year-round workers dropped in 2006 for the third year in a row.
The decline was downplayed for good reason.
The erosion of earnings shown in the Census Bureau's annual report on income isn't new. It's a continuing trend.
Most workers today take home less pay per hour, adjusted for inflation, than they did in 1973.
Yet household income stays up mostly because more spouses and more children are entering the work force and everyone is working longer hours to maintain their standard of living.
But what happens when Americans run out of spouses, kids and working hours to prop up their bottom line?
Like the proverbial frog in the cooking pot who doesn't know it's being boiled to death because the water is heated slowly, the American worker has adapted.
But there are limits. The pot eventually boils.
And workers today especially the young are running out of ways to cope.
Pay for workers in their 20s has fallen steadily for decades. As a result, young people today are starting out much lower on the wage ladder than their parents.
Mid-career workers have been losing ground even longer. Since the first full decade after the end of World War II, each successive generation of men in their 30s and 40s has seen smaller pay increases. Women and blacks have joined the downward trend in recent years.
The combination of lower starting pay and smaller mid-career wage hikes for later generations has caused a growing earnings and wealth gap between the young and the old in Ohio and across the nation.
Those are the key findings of a Beacon Journal analysis of more than a half-century of census data 51 million records.
The study tabulated median annual earnings meaning half took home more and half less for workers grouped into generations by year of birth. The earnings were further broken down by gender, race and level of education.
The trends found in the census data raise an ominous question about the future of the middle class.
If the bulk of the income gains over the decades went to earlier generations, what happens when older workers retire, exchanging their big paychecks for smaller Social Security and pension checks?
The logical answer is that they would be replaced by workers with markedly lower wages, resulting in an overall drop in purchasing power and the nation's standard of living.
''It's a tremendous question to ask; it's one of the problems of the graying of the population these highly paid older people stepping off the payroll into retirement,'' said John E. Morton, director of the Pew Charitable Trusts' ongoing research project, Economic Mobility: Is the American Dream Alive and Well?
''That surely is going to have fairly adverse impacts.''
The Pew project, conducted by economists at the Brookings Institution and several other think tanks spanning the political spectrum, released its first report in May, showing that men in their 30s today make an average of 12 percent less than their fathers did at the same age.
The Beacon Journal study found younger workers even harder hit by the erosion of starting pay for each successive generation of new workers.
Lower starting pay
From 1969 to 2005, median earnings for people beginning their working lives, ages 20-24, dropped from $24,002 to $17,885 a 25 percent decline, according to the Beacon Journal study.
The declines cut across gender and race lines, but white men sustained the biggest percentage loss, slipping nearly 29 percent, from $28,754 to $20,515.
As bad as those numbers are, they're conservative. The Beacon Journal study adjusted earnings to 2006 dollars using a revised scheme recommended by the Census Bureau that assumes inflation was lower in the past than initially reported.
The traditional yardstick, still used by the Bureau of Labor Statistics, shows median earnings for 20- to 24-year-olds dropped by more than a third since 1969.
The biggest wage losses for young men and women of both races came in the 1980s, following the recession at the start of the decade.
The return of good economic times in the 1990s provided only modest gains that were more than wiped out by substantial drops since 2000.
Slightly older workers, ages 25-29, saw less of a drop in earnings about 12 percent since 1969 thanks to the pay premium awarded to those with a college degree.
Education not enough
The study found that since the 1980s, workers in their late 20s with a four-year college degree earned on average 50 percent more than those with only a high school education.
For dropouts, the gap was wider: In 2005, a typical college grad was earning nearly $39,000 about double the $19,674 median pay for those without a high school diploma.
There's no question that more education translates into higher pay, but the bar for an education that guarantees a sure ticket for a good-paying job has moved higher.
Wages for all 20-somethings dropped steeply in the 1970s and continued down for those with anything less than a four-year degree. Workers with some college, including an associate degree, are seeing paychecks 20 percent smaller than four decades ago.
But even those with degrees have seen a drop in pay in the past several years.
''Since 2001-2002, we've seen no wage growth for either college grads or high school grads,'' said Lawrence Mishel, president of the Economic Policy Institute, a Washington, D.C., think tank.
Earnings have continued to rise only for those who pursue a graduate or professional degree ''the 9 percent with an education beyond a bachelor's degree,'' said Mishel, whose organization every two years publishes The State of Working America, an in-depth survey of the U.S. labor market and living standards.
The increased supply of college graduates has made a four-year degree ''far less a guarantee'' of entry into the middle class, he said.
''We are more educated than ever,'' he said, but ''people with a college degree and working in their 20s today are less likely to get jobs with employer-provided benefits.''
Smaller mid-career gains
Lower starting wages wouldn't be as much of a problem if workers could catch up with mid-career pay increases, thanks to period raises, promotions or job changes.
That's not happening.
Again, the study found earlier generations did better.
But not just since the 1970s. The trend toward smaller raises goes back to the first decade of the postwar era.
Median wages for men of the GI Generation, who came of age during World War II and were in their early 30s by 1949, shot up nearly 50 percent over the next decade.
The next generation the Depression kids, mostly born during the 1930s got progressively smaller pay hikes of 36 percent and 26 percent during the 1960s and 1970s, when they were the same age.
The downward trend continued through the 1980s and 1990s as two waves of baby boomers in their 30s saw pay increases of only about 15 percent.
The twin trends of lower starting pay and smaller raises for later generations has dramatically shifted the balance of paycheck power to older workers.
Until the 1980s, workers in their late 30s and early 40s took home the biggest paychecks. Today, the peak earners are in their 50s.
The gap is greatest for male workers.
In the first two post-World War II decades, the difference between the median earnings of younger men, ages 25-29, and older men, ages 50-54, was less than 10 percent.
Since 1970, however, that earnings gap widened steadily, to 63 percent in 2005.
Wives take up slack
The decline in starting pay and earnings growth is significant because it provides an economic motive for the two biggest changes in the American family: the increase in working wives and the decline in number of children.
The percent of married women enrolled in the labor force increased from about 23 percent in 1950 to nearly 70 percent today.
At the same time, the average number of children in married-couple households dropped from 2.44 in 1965 to 1.82 in 2005.
More women in the work force is the main reason household incomes continue to rise, despite the steady decline in hourly wages, according to the Pew study.
Families pay a steep price to maintain household income.
''Absolutely, there's a real cost to having two earners in the family,'' said Isabel Sawhill, a senior researcher with the Brookings Institution, who worked on the study.
''There's less time to provide for all the other things, such as child care, and all the household work that needs to be done,'' Sawhill said. ''You either have to do that in your spare time or purchase it.''
Sawhill noted that child care is the ''largest expense for a two-earner family by far. That needs to be factored into the assessment of whether people are better off or not.''
Middle class squeezed
The increased anxiety registered by pollsters about the health of the middle class may reflect the approaching exhaustion of options to make up for shrinking hourly wages and smaller pay raises: Americans are running out of spouses to bring home extra paychecks and couples can't have fewer than zero children.
''It's an interesting and important way of viewing the middle-class squeeze,'' said Jared Bernstein, senior economist with the Economic Policy Institute and co-author of the group's biannual study of the nation's labor market.
Bernstein pointed out that the cost of ''core components'' of a secure, middle-class lifestyle owning a home in a good neighborhood, adequate health insurance, child care and a college education ''are going up much faster than inflation.''
Those increases are outstripping the ability of many families to keep up.
''Families are pretty tapped out,'' he said. ''Middle-income families are working as much as they can in the absence of a much more family-friendly workplace policy.''
The downward pay trend is shrinking the middle class in a measurable way.
The 1950 census found half of all workers in 1949 took home paychecks that were within a third above or below of the national median. That share has steadily dropped over the decades. Today, only about 38 percent of all workers are within that middle range.
Where did the others go?
Some sunk lower; more floated to the top. Those taking home less than that middle range went from 23 percent of all workers in 1949 to about 28 percent in 2005. Those earning more grew from 26 percent to 34 percent during the same period.
So what does the future hold for young workers?
Unless they're willing to change, nothing good, said Kay Strong, an economist at Bowling Green State University.
''I think we'll see an even greater divide between those on the top and those on the bottom,'' she said. ''We're going to squeeze out the middle.''
Strong said young people must adapt to the new rules of the global economy based on technology.
That means many more jobs over a lifetime. ''They have to be flexible,'' she said. ''They have to be able to move to where the next job is.''
And even fewer children.
''Your parents had four, you only have two, and your children are likely only to have one if any,'' she said.
Strong said she was optimistic Americans eventually will thrive in the new high-tech economy.
''Education is paramount,'' she said. ''Innovation and creativity is what should be promoted.''
Global trade threat
Some researchers disagree, arguing that unfettered global trade is a looming disaster.
''The kind of trading system we have today can't possibly work to the advantage of high-wage countries and their workers,'' said Alan Tonelson, a researcher with the United States Business & Industry Council, a Washington-based advocacy group representing medium and small manufacturers.
''Manufacturing is the only sector of the economy that provides workers, with average skills and schooling, with enough pay to support a middle-class life,'' said Tonelson, the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards.
Tonelson argued that manufacturing jobs moved offshore will not be replaced with high-tech jobs because those jobs too will be lost to other countries where wages are lower.
''Americans aren't the only smart people on earth,'' he said. ''We're also not the only people who have recognized the need for re-education and re-training.
''Low-income countries for the past 10 years, at least, have been working frantically to push their own workers up the knowledge and skills ladder.''