The following excerpt is from the report, The Lives and Times of the Baby Boomers, published by the Russell Sage Foundation and the Population Reference Bureau. This report is one of several in the new series, “The American People,” which sets the results of Census 2000 in context and collectively provides a portrait of the American people in a new century. Each report is written by an author or team of authors selected for their expertise with the data and their broad understanding of the implications of demographic trends. Reynolds Farley and John Haaga are the series editors.

(October 2004) The prosperity the boomers experienced in childhood was the culmination of several decades of improvement in the American standard of living, interrupted only by the Great Depression. Income and wealth steadily increased over most of the 20th century, accompanied by a decline in overall inequality until sometime before 1980. Since then, the standard of living has arguably continued to improve, but a reversal in the earlier trend toward equality has occurred.

A general pattern of dispersion in earnings, household income, and wealth has dominated the last two decades.1 Households are the basic units of economic activity in the United States and thereby serve as a gauge for the standard of living of families. Resource accumulation, consumption, and reproduction activities all occur in the context of the household, and household members produce significant goods and services as well. As such, households are more than addresses and social arrangements; they are complex economic relationships within which individual resources are pooled to manage both the expected and unexpected opportunities and difficulties of daily life.

The economic well-being of households has been a matter of increased concern among policymakers over the past four decades as the War Babies and baby boomers have aged. Changes in household arrangements have increased this preoccupation, since families have changed from the once predominant married male-breadwinner form to the current mixed complement of dual earner, single family-headed, and never-married single types. As a result, the incomes, poverty levels, and net worth of households are monitored to take account of the well-being of the nation.

At midlife, the boomers live with an even higher standard of living than their parents. But they also live with more inequality. The inequality is evident in their household incomes, home ownership patterns, and net worth. Their labor market histories contribute to this inequality, but so too do their family histories and current household arrangements.

The Polarization of Household Income

Household income closely monitors the general day-to-day well-being of individuals and families. It represents the capacity to meet the ordinary and extraordinary needs of household members. After World War II, average household income grew until 2000. But beginning in 1980, inequality in household income increased dramatically. Households in the top fifth of the income distribution have increased their share of aggregate income, while those in the bottom four-fifths have lost ground.2

These trends have held for the boomer cohorts. Median household income (in constant dollars) increased across successive cohorts, including both boomer cohorts (see Table 1). However, household income inequality was higher in the boomer cohorts relative to the War Babies, who up to that point had the highest level of inequality.


Mean and Median Household Income by Cohort, in 1989 Dollars

Cohort Year Mean Median
At ages 44–53
Young Progressives 1960 $31,473 $27,264
Jazz Age Babies 1970 44,070 38,646
Depression Kids 1980 47,469 43,186
War Babies 1990 53,225 45,000
Early Boomers 2000 54,593 43,310
At ages 35–43
Early Boomers 1990 48,147 41,200
Late Boomers 2000 49,340 39,544

Source: Authors’ calculations using the Integrated Public Use Micro-data Series (IPUMS), 2003.


Increased income inequality is evident in the difference between cohort mean and median household incomes. As in the case of wages, the level of household income in a population can be measured two different ways. The mean income shows the arithmetic average. The average is sensitive to values at the very high or very low ends. The median income is the point at which half the group has higher income and half the group has lower income. The median is not sensitive to extreme values. Because of the differences in how the mean and median measure income, comparing them shows the degree of income inequality in the population. For example, increases in mean income combined with stability in median income indicate that incomes are increasing at the high end of the income distribution, but the middle point is remaining the same. Thus, a small proportion of high-income households have experienced income growth, but most did not, leading to higher levels of income inequality. This intercohort pattern mirrors the one observed earlier for earnings inequality, since earnings are the principal source for most preretirement households.

These trends in household income have been affected by the diversification of living arrangements and patterns of employment instability described earlier. Dual earner households and single family-headed households are not on level ground for household income attainment. In addition, involuntary job loss or wage decline—even in dual earner households—can depress household income.


Mary Elizabeth Hughes is an assistant professor of sociology at Duke University. Angela M. O’Rand is a professor of sociology at Duke University.


References

  1. Seymour Spilerman, “Wealth and Stratification Process,” Annual Review of Sociology 26 (2000): 497-524.
  2. Arthur F. Jones, Jr. and Daniel H. Weinberg, “The Changing Shape of the Nation’s Income Distribution,” Current Population Reports P60-204 (Washington, DC: U.S. Census Bureau, 2000).