[Type here] THE ECONOMIC SECURITY OF 

AMERICAN HOUSEHOLDS

Issue Brief One: 

The Evolution of Earnings and Income

U.S. Treasury Department

Office of Economic Policy

April 2016

Ryan Nunn and Tara Watson were the principal drafters of this report. Inquiries should be 

directed to the Office of Economic Policy at (202) 622-2200
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The Economic Security of American Households

Issue Brief One

This report is the first in a series investigating the current economic situations of 

Americans. What are areas of strength and weakness? What factors contribute 

to household-level economic insecurity, and what are sources of resilience?

The first issue brief will motivate and set the stage for the following briefs by providing an 

overview of the long-run trends in the economic situation and outlook for American households 

over the past forty years. There will be two contributions of this brief. First, we will examine 

how earnings have changed at over time at each age for American workers. Second, we will 

describe the evolution of income levels and the income distribution of American households. 

We will specifically look at the experience of different generations as their income evolves over 

their lives. And we will look at differences across educational groups and different parts of the 

income distribution.

Future briefs will examine issues such as perceptions of economic security, household income 

volatility, the transition into the labor market for young adults, assets and debts, retirement 

security, and the role of the safety net.

Key Findings

 Recent cohorts of men who work full-time (those born in the 1960s and 1970s) have lower 

real earnings in early ages than men in the past, and it appears that the age of peak 

earnings is later.

 Compared to prior generations, men with a high school degree have seen substantial 

earnings declines across the life cycle. Men with advanced degrees, on the other hand, have 

seen substantial earnings gains.

 The earnings of full-time women are higher in more recent generations at every level of 

education. Despite these gains over time, women still earn less than men.

 For both women and men, there is more inequality across the wage distribution than in the 

past.

 A declining fraction of households are led by married couples, and this especially true 

among less educated Americans. As a result, despite the expansion in women’s labor force 

participation, there are fewer adult earners in a typical household than in the past.

 Households headed by individuals without a college degree have seen the biggest decline in 

the number of earners and total hours worked.

 The combination of rising wage inequality and changing household structure has produced

higher levels of household income inequality in recent generations. Economic gains over 

the past four decades have not been broadly shared.
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The Economic Security of American Households

Issue Brief One

What is Economic Security?

The term “economic security” is used in a variety of ways. Here, we think of economic security 

to mean one’s current and prospective material well-being, assessed both objectively and 

subjectively. Thus, economic security is related to both actual and perceived current economic 

status, expectations about the future, and future risks. In past studies, the term has been 

sometimes used to mean household volatility in income or economic well-being. We will 

devote a future brief to the exploration of volatility, but we view it as just one component of 

economic security, albeit an important one.

For young adults, economic security is determined by employment prospects, income, and 

possibly debt accumulated from higher education and other investments like a first car or 

home. As people age and approach retirement, concerns are likely to shift towards assets and 

retirement income adequacy. Future issue briefs will look more closely at debt and wealth at 

different stages in the life cycle, as these are key underpinnings of economic security. 

We now start by describing the earnings of American workers, as labor income is the main 

source of income for most households and thus a primary determinant of economic well-being 

and security. We will examine hourly wages, hours worked, and overall earnings inequality for 

both men and women. Because individual well-being is strongly affected by household-level 

income, we then turn our attention to changing household structures. We then consider how 

trends in male earnings, female earnings, and household composition combine to affect 

household-level income and income inequality. 

How have earnings evolved over time?

We look at the evolution of earnings over the life-cycle for different generations. In particular, 

we examine hourly wages of full time workers ages 25 to 64 for different birth cohorts, 

highlighting the differences in trends for men and women over the last few decades. Here we 

use the Current Population Survey and focus exclusively on the non-institutionalized 

population.

Male Earnings

To compare how different generations fare over the life cycle, we plot the hourly earnings of 

each generation at different ages. Typically workers experience steadily increasing earnings 

early in their careers, a gradual flattening, and eventually a decline at older ages, even for those 

who remain in the labor force full time. For example, the light green line in Figure 1 below 

shows the median earnings of full-time workers born in the 1950s, shown at different ages and 

adjusted for inflation. By comparing different lines – each representing a certain generation’s 

path over the life cycle – one can learn how earnings patterns for more recent generations 
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The Economic Security of American Households

Issue Brief One

compare to those in the past. (The lines span different ages for different cohorts because of 

limited data availability.) 

First, we see a striking pattern in Figure 1: men born in the 1960s and 1970s (shown with the 

yellow and gray lines in the figure) earn substantially less in real terms at young ages than they 

did in earlier generations Men born in the 1970s (gray line) earned significantly less than men 

born in the 1950s (light green line) at age 30. As men approach middle age, however, they 

gradually approach the earnings of men in their fathers’ generations. For example, the earnings 

of men born in the 1940s (dark green line) exceeded their counterparts born in the 1950s (light 

green line) by 7 percent at age 40, but both groups had similar earnings at age 50. In addition, 

it appears that age-related declines in earnings are occurring later (or perhaps not at all) for 

newer cohorts. The decline in earnings around age 55 observed in the 1930s birth cohort (dark 

blue line) is not evident in the 1940s birth cohort (dark green line). In other words, men seem 

to maintain their peak wages into older ages, perhaps because of health improvements or the 

changing nature of work. 

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23

25

27

25 30 35 40 45 50 55 60

1970-79

1960-69 1950-59

1940-49

1930-39

1920-29

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64. 

Figure 1: Median Real Wages by Birth Cohort, All Full-Time Men 

Median Real Hourly Wage ($2014)

Age

Younger men working full time earn less than they did in the past after adjusting for inflation, 

and the age of peak earnings is reached later than in the past.
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The Economic Security of American Households

Issue Brief One

The graphs below demonstrate stark differences between the fortunes of high-school-educated 

men and college-educated men. Young men with only a high school education have earnings 

that are substantially lower than those in their fathers’ generations earned at the same age 

(Figure 2). For instance, the generation born in the 1960s (yellow line) earned roughly 13 

percent less in real terms at age 40 than the generation born in the 1940s (dark green line). A 

similar gap is apparent comparing those born in the 1950s (light green) to those born in the 

1930s (dark blue line) at age 50, or those born in the 1920s (light blue line) to those born in the 

1940s (dark green line) at age 60. This pattern of declining wages for high-school graduates 

likely represents a combination of weakening labor demand for this group, changes in the 

characteristics of the typical high school graduate, and institutional factors like declines in 

unionization and the real value of the minimum wage.

There are several silver linings to an otherwise discouraging picture. First, the downtrend in 

earnings for high-school-educated men may have abated. The full-time workers in the 1970s 

birth cohort have had similar or slightly better early-career earnings than the 1960s birth 

cohort. Second, as in the population overall, the age of earnings decline may be occurring later, 

if at all. Unlike in the past, high-school-educated men who were born in the 1960s and have 

stayed in the labor force appear to have been able to maintain their peak earnings into their 

50s (the last point at which we can observe them). In addition, as men become more educated, 

fewer will be part of this hard-hit group in the future.

10

15

20

25

25 30 35 40 45 50 55 60

1930-39 1920-29

1940-49

1960-69

1950-59

1970-79

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64. 

Median Real Hourly Wage ($2014)

Figure 2: Median Real Wages, by Birth Cohort, Men with High School 

Diploma

Age

Compared to past generations, real earnings for high-school graduate men are lower at every age.
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The Economic Security of American Households

Issue Brief One

Earnings of full-time workers with exactly a four-year college degree follow a similar trajectory 

relative to previous generations, with evidence of higher earnings early in life for the most 

recent generations (Figure 3). The 1970s birth cohort has slightly higher earnings at age 30 

than the 1960s birth cohort, which in turn has higher earnings at age 40 than the 1950s birth 

cohort. By age 50, however, the 1930s cohort, the 1940s cohort and the 1950s cohort all earn 

similar amounts.

Men with advanced degrees have witnessed substantial earnings gains in recent generations 

(Figure 4), consistent with the general picture of rising inequality. Men with a graduate degree 

born in the 1960s earned 19 percent more at age 40 than comparable men born in the 1940s, 

for example.

It is also worth noting that - regardless of birth cohort – men with higher levels of education 

have a delayed onset of age-related wage declines relative to less-educated men. Rising 

education levels therefore may allow men to enjoy high wages for a longer period of time. 

Those that stay in the labor force appear to be able to largely maintain their peak level of 

earnings beyond age 60.

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25

30

35

40

25 30 35 40 45 50 55 60

Age

1920-29

1930-39

1960-69

1970-79

1940-49

1950-59

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64. 

Figure 3: Median Real Wages by Birth Cohort, Full time Men with 

College Degree Median Real Hourly Wage ($2014)

Men with a college degree have a similar earnings trajectory to those in the past, and men with 

a graduate degree earn far more than in the past.
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The Economic Security of American Households

Issue Brief One

The earnings picture for men overall (Figure 1 above) represents a combination of two notable 

changes. The first is a movement towards higher educational attainment, which is associated 

with higher earnings at every age for every cohort. In addition, education may allow men to 

sustain high earnings into their 50s and 60s more than they did in the past. The second striking 

fact is a growing disparity between more- and less-educated men. Greater educational 

attainment raises overall earnings, largely offsetting declines stemming from weak wage 

growth within some education groups. There is also rising inequality within education groups

(not shown).

Figure 5 shows how these factors – shifts in the educational distribution and changes in 

inequality between and within educational groups – fit together. There is widening inequality 

in earnings of men working full-time, with wages at the 20th and 50th percentiles stagnant or 

declining after adjusting for inflation, and substantial gains in earnings at the 80th percentile.

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25

30

35

40

45

25 30 35 40 45 50 55 60

1920-29

1930-39

Figure 4: Median Real Wages by Birth Cohort, Full time Men with PostGraduate Degree Median Real Hourly Wage ($2014)

1960-69

1970-79

1950-59 1940-49

Source: Current Population Survey and Treasury calculations. Source: Current Population Survey and Treasury calculations. The sample is restricted to full The sample is restricted to full-time workers aged 25 time workers aged 25-64. 

Age
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The Economic Security of American Households

Issue Brief One

The figures thus far are based on men working full-time and, as a result, do not tell the entire

story. During peak working years (ages 25-54), only about 77 percent of men work full-time. 

Another 6 percent or so work part-time, and these workers typically earn lower wages. On 

average, the number of hours worked by men is lower for recent cohorts, especially if one 

includes men not participating in the labor force, as shown in Figure 6. The shift towards fewer 

hours impacts the total earned income for men. 

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12

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22

27

32

37

42

25 30 35 40 45 50 55 60

80th Percentile

50th Percentile

20th Percentile

1920-29

1930-39

1940-49

1950-59 1960-69

1970-79

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64. 

Figure 5: Distribution of Real Wages by Birth Cohort, All Full Time Men 

Median Real Hourly Wage ($2014)

Age

15

20

25

30

35

40

45

50

25 30 35 40 45 50 55 60 65

Hours

All Individuals

Labor Force Participants

1920-29

1940-49

1930-39

1950-59 1960-69

1970-79

Source: Current Population Survey and Treasury calculations. The sample is restricted to respondents aged 25-64. 

Figure 6: Average Hours Worked by Birth Cohort, Men 

Age
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The Economic Security of American Households

Issue Brief One

In Figure 7 we show the distribution of annual earnings for all men ages 25 to 64, including 

those who work part-time or are not working. Because those who work fewer hours also tend 

to earn lower hourly wages, the inequality in annual earnings is more pronounced than that of 

hourly wages of full-time workers. The 80-20 ratio at age 45 has risen from 3.6 in the 1940s 

birth cohort to 4.8 in the 1960s birth cohort. In other words, a 45-year-old man at the 80th

percentile of annual earnings among 45-year-old men now earns almost five times the income 

of a man at the 20th percentile.

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50

60

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90

100

25 30 35 40 45 50 55 60

80th Percentile

50th Percentile

20th Percentile

1920-29

1970-79

1960-69

1950-59

1940-49

1930-39

Source: Current Population Survey and Treasury calculations. The sample all respondents aged 25-64. 

Figure 7: Distribution of Annual Earnings by Birth Cohort, All Men 

(Including Non-Earners)

Real Earnings (thousands of $2014)

Age
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The Economic Security of American Households

Issue Brief One

Female Earnings

Full-time women earn substantially more than they did in the past at every age (Figure 8). For 

example, the typical full-time working woman born in the 1960s earned 11 percent more at age 

45 than her counterpart born in the 1940s. Hourly earnings levels are still substantially below 

those of men, however. For example, at age 45 a typical full-time woman born in the 1960s 

earns $18 per hour, whereas the typical man of her cohort earns $23 per hour.

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25 30 35 40 45 50 55 60

1920-29

1930-39

1940-49

1950-59

1960-69

1970-79

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64.

Figure 8: Median Real Wages by Birth Cohort, All Full-Time Women 

Median Real Hourly Wage 

Age

In contrast to the trajectories of men, recent cohorts of full-time women are improving their 

earnings at every age.
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The Economic Security of American Households

Issue Brief One

As shown in Figure 9, high-school educated women have not seen the same wage declines 

experienced by high-school educated men. Women with a college degree (Figure 10) or a postgraduate degree (Figure 11) have seen substantial gains relative to years past.

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25 30 35 40 45 50 55 60

1920-29

1940-49 1930-39

1950-59

1960-69

1970-79

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64. 

Figure 9: Median Real Wages by Birth Cohort, Full Time Women With a 

High School Degree

Median Real Hourly Wage ($2014)

Age

Higher earnings are not just a function of rising education. Women at every education level earn 

higher inflation-adjusted wages than previous cohorts of women.
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The Economic Security of American Households

Issue Brief One

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25

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25 30 35 40 45 50 55 60 65

Age

1920-29

1930-39

1940-49 1950-59 1960-69

1970-79

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64.

Figure 10: Median Real Wages by Birth Cohort, Full-Time Women with 

Undergraduate Degrees Median Real Hourly Wage ($2014)

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25

27

29

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35

25 30 35 40 45 50 55 60 65 Age

1920-29

1930-39

1940-49 1950-59 1960-69

1970-79

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64.

Figure 11: Median Real Wages by Birth Cohort, Full-Time Women with 

Post-Graduate Degrees Median Real Hourly Wages ($2014)
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The Economic Security of American Households

Issue Brief One

As is the case for men, the economic situation of full-time women is not fully described by the 

education-specific graphs because women are becoming increasingly highly educated over 

time. There is also rising inequality within education groups. 

Figure 12 makes it clear that the highest earning women in recent generations have much 

higher earnings than those in prior generations, resulting in rising wage inequality among fulltime women. Wage inequality among women is more modest than among men, with an 80-20 

ratio at age 45 of 2.6 for the 1960s birth cohort and 2.4 or the 1940s birth cohort.

It is also important to note that many women do not work, and the propensity to work full time 

varies by generation. At age 40, for example, around 56 percent of women in the 1950s cohort 

and 1960s cohort are full time workers, compared to 48 percent in the 1940s cohort. Figure 13 

plots the changes in weekly hours worked for women – both for those in the labor force and for 

all women – across cohorts. There were particularly dramatic gains in the number of hours 

worked between the 1930s birth cohort and the 1950s birth cohort.

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20

25

30

35

25 30 35 40 45 50 55 60 65 Age

80th percentile

50th percentile

20th percentile

Source: Current Population Survey and Treasury calculations. The sample is restricted to full-time workers aged 25-64.

Figure 12: Distribution of Real Wages by Birth Cohort, All Full-Time Women 

Real Median Hourly Wage ($2014)

1920-29

1930-39

1940-49

1950-59

1960-69

1970-79
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The Economic Security of American Households

Issue Brief One

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25

30

35

40

25 30 35 40 45 50 55 60 65

Age 

Labor force participants

All Individuals

Source: Current Population Survey and Treasury calculations. The sample is restricted to respondents aged 25-64.

Figure 13: Average Weekly Hours Worked, Women

Hours 

1920-29

1930-39

1940-49

1950-59

1960-69

1970-79

0

10

20

30

40

50

60

25 30 35 40 45 50 55 60 65 Age 

80th percentile

50th percentile

Source: Current Population Survey and Treasury calculations. The sample includes all respondents aged 25-64.

Figure 14: Distribution of Annual Earnings by Birth Cohort, All Women 

(Including Non-Earners)

Real Earnings (thousands of $2014)

1920-29

1930-39

1940-49

1950-59

1960-69

1970-79
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The Economic Security of American Households

Issue Brief One

A complete picture of women’s earnings takes account of women who work part-time, who 

typically earn less on an hourly basis and work fewer annual hours, and those who are not 

working. Figure 14 shows the distribution of inflation-adjusted annual earnings for all women 

ages 25 to 64 (note that the 20th percentile is not shown, because it is equal to zero for all 

cohorts). Here we see higher annual earnings among workers throughout the income 

distribution for recent cohorts relative to past cohorts. There is also rising inequality in annual 

earnings because recent generations of women have seen particularly large earnings gains at 

the top of the distribution.
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The Economic Security of American Households

Issue Brief One

What is the economic situation of American households?

Because households often include more than one earner, the different wage patterns for men 

and women suggest that we should consider households as a whole. This section does so.

We have examined earnings per hour and seen that earnings among full-time male workers are 

lower than in the past, especially for younger and less educated men. It is also the case that 

male participation in the labor force has been steadily declining since the Bureau of Labor 

Statistics began reporting it in 1948. By contrast, earnings of full-time women are on the rise 

for all education levels, and women work substantially more hours than they did in prior 

generations. Thus, household incomes could – in principle - be increasing even in an era of 

declines in men’s earnings.

A countervailing force is declining marriage rates, which implies that more households have 

only one adult. Households headed by married couples or unmarried partners have the capacity 

to work more total hours, and therefore are more likely to be represented among the highest 

income households. 

In Figure 15, we focus on households head between the ages of 40-49 and examine the marital 

status of that group over time. Household heads are less likely to be married than in the past 

overall and for each education group. However, the probability of being married has stabilized 

around 65 to 70 percent among household heads in their 40s with at least a college degree. By 

contrast, only about 55 percent of household heads in their 40s without a college degree are 

married. 

Though the fraction of household heads that are married has decline in all education groups, 

the least-educated Americans experienced the most substantial drop in marriage rates.
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The Economic Security of American Households

Issue Brief One

Marital status directly affects household income to the extent that it impacts the number of 

adult earners in the household. Figure 16 shows that households headed by individuals in their 

40s are indeed less likely to have more than one adult earner than was true two decades ago. 

Furthermore, this trend away from two-earner families is more pronounced among less 

educated households.

0.45

0.5

0.55

0.6

0.65

0.7

0.75

0.8

0.85

1979 1984 1989 1994 1999 2004 2009 2014

Figure 15: Marriage Rates by Level of Education 

Portion Married

Source: Current Population Survey and Treasury calculations. The sample is restricted to household heads aged 25-64.

Some College

High School

College

Advanced

Some High School Average

0.3

0.35

0.4

0.45

0.5

0.55

0.6

1979 1984 1989 1994 1999 2004 2009 2014

Figure 16: Fraction with More Than One Adult Earner in Household -

Ages 40 to 49

Advanced

Average

Less than high school High School

Some college

College

Note: Adults earners are defined as individuals aged 25 to 64 reporting "person's total income, excluding unearned" greater than $1000. 

An earner may have any relationship to household head. the sample is restricted to household heads aged 40 to 49

Source: Current Population Survey and Treasury calculations.
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The Economic Security of American Households

Issue Brief One

Changes in hours per worker and changes in the number of earners combine to have important 

implications for the total number of hours worked in households. To examine hours worked, 

we combine the hours worked of the respondent and spouse (if any) in households in Figure 17. 

In fact, the combination of declining marriage rates and other factors means that the total 

number of hours worked in households has declined in recent decades despite more women 

participating in the labor market, and has declined more at the bottom of the educational 

distribution. 

This is not simply a story of unmarried partners substituting for married partners in lesseducated households. Results are similar if one looks at total hours worked in the household.

30

35

40

45

50

55

60

65

1979 1984 1989 1994 1999 2004 2009 2014

Less than High School

High School

Some College

College

Post-College

Source: Current Population Survey and Treasury calculations. Hours worked are calculated as the sum of hours for household heads aged 

25-64 and their spouses.

Figure 17: Combined Weekly Hours Worked of Household Head and 

Spouse Weekly Hours 

Changing earnings per hour, changing hours worked, and changing household structures 

combine to generate significantly rising income inequality at the household level.

Compared to two decades ago, households headed by a working age person with no college 

education work more than ten percent fewer hours each week, whereas there has been no 

similar decline in weekly hours at the top of the educational distribution.
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The Economic Security of American Households

Issue Brief One

Figure 18 below organizes the household income data following ten-year birth cohorts over the 

life cycle of household heads. The median income of each cohort (the 50th percentile) has 

evolved relatively similarly with age. By contrast, the 80th percentile at every age has higher 

income than in the past. The 20th percentile has incomes similar to or slightly lower than prior 

generations. This figure reflects both earned and unearned pre-tax income captured in the 

Current Population Survey.

Separate analysis (not shown) also shows rising inequality in family income-to-needs ratios for 

recent generations.

As shown in Figure 18 above, the 80th percentile has significantly higher income at age 25 than 

lower percentiles, and differences between the 80th and the 20th widen during the working 

years. The incomes of high-income households do not appear to decline until around age 55, 

whereas the decline starts about a decade earlier for low-income households. 

It is important to note that this analysis has only considered pre-tax income, does not account 

for in-kind transfers (e.g. health insurance benefits), and does not examine assets or debts. We 

hope to consider these other important determinants of economic well-being in future briefs.

0

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40

60

80

100

120

140

25 30 35 40 45 50 55 60 65 Age

80th percentile

20th percentile

50th percentile

Source: Current Population Survey and Treasury calculations. The sample is restricted to household heads aged 25-64.

Figure 18: Real Household Income Distribution by Birth Cohort of 

Household Head

Real Income (thousands of $2014)

1920-29

1930-39

1950-59 1940-49

1960-69

1970-79

Higher-income households have steeper age-income profiles and hit peak incomes later in life.
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The Economic Security of American Households

Issue Brief One

Conclusion

Major changes in the economy - such as stagnating wages for less educated men, the rise of 

female labor force participation, and changing family structures - appear to have had profound 

effects on the economic circumstances of American households. Households at the bottom of 

the income distribution and in the middle of the distribution have made little or no economic 

progress relative to generations past. In contrast, affluent households have seen substantial 

gains in their standards of living. Economic gains over the past four decades have not been 

broadly shared.

In the coming months, we will explore income volatility faced by American families and how 

they view their own economic security. We will also examine the forces behind changing 

economic security, and how they have impacted Americans at various stages in the life cycle. 

We will look at the role of higher education in labor market outcomes, and how the changing 

financing of higher education is affecting young adults. We’ll also look at how wealth and debt 

have changed over time, particularly in light of the Great Recession, and what that means for 

workers, those near retirement, and those who have already retired. Finally, we will look at the 

role of social insurance and the safety net in providing economic security in a rapidly changing 

economy.