Obama’s push to revive middle class clashes with long-term trends
Obama has spoken nostalgically of his grandparents’ generation and said he hopes to “restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”
Economists have come to call that period, following World War II, the “Great Compression,” because inequality dramatically declined as middle-class wages surged. It lasted until the 1970s.
Some economists today are skeptical about whether that could happen again.
The economy often achieved growth of nearly 4 percent per year in the decades after World War II, and much of the gains accrued to middle-class workers. Over the past 30 years, it has grown at an annual pace of less than 3 percent.
In 1960, there were more than five workers for every retiree. Today, there are fewer than three. And in 1960, the U.S. economy represented about 40 percent of the world economy. Today, it represents less than a quarter of the world economy.
“It’s a very different world and I don’t think it’s going to come back close,” said James Heckman, a Nobel winning economist at the University of Chicago.
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