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Lifetime Incomes in the United States over Six Decades

Listed author(s):
  • Fatih Guvenen
  • Greg Kaplan
  • Jae Song
  • Justin Weidner

Using panel data on individual labor income histories from 1957 to 2013, we document two empirical facts about the distribution of lifetime income in the United States. First, from the cohort that entered the labor market in 1967 to the cohort that entered in 1983, median lifetime income of men declined by 10%–19%. We find little-to-no rise in the lower three-quarters of the percentiles of the male lifetime income distribution during this period. Accounting for rising employer-provided health and pension benefits partly mitigates these findings but does not alter the substantive conclusions. For women, median lifetime income increased by 22%–33% from the 1957 to the 1983 cohort, but these gains were relative to very low lifetime income for the earliest cohort. Much of the difference between newer and older cohorts is attributed to differences in income during the early years in the labor market. Partial life-cycle profiles of income observed for cohorts that are currently in the labor market indicate that the stagnation of lifetime incomes is unlikely to reverse. Second, we find that inequality in lifetime incomes has increased significantly within each gender group. However, the closing lifetime gender gap has kept overall lifetime inequality virtually flat. The increase within gender groups is largely attributed to an increase in inequality at young ages, and partial life-cycle income data for younger cohorts indicate that the increase in inequality is likely to continue. Overall, our findings point to the substantial changes in labor market outcomes for younger workers as a critical driver of trends in both the level and inequality of lifetime income over the past 50 years.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23371.

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Date of creation: Apr 2017
Handle: RePEc:nbr:nberwo:23371
Note: AG DAE ED EFG HE LS PR
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  1. Feldstein, Martin & Liebman, Jeffrey B. (ed.), 2002. "The Distributional Aspects of Social Security and Social Security Reform," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226241067, September.
  2. Martin Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Aspects of Social Security and Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number feld02-1, October.
  3. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 705-746.
  4. Martin S. Feldstein & Jeffrey B. Liebman, 2002. "Introduction to "The Distributional Aspects of Social Security and Social Security Reform"," NBER Chapters,in: The Distributional Aspects of Social Security and Social Security Reform, pages 1-10 National Bureau of Economic Research, Inc.
  5. Jeffrey R. Brown & James M. Poterba, 2009. "Introduction to "Tax Policy and the Economy, Volume 23"," NBER Chapters,in: Tax Policy and the Economy, Volume 23 National Bureau of Economic Research, Inc.
  6. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, October.
  7. Milton Friedman & Simon Kuznets, 1954. "The Data on Income from Independent Professional Practice," NBER Chapters,in: Income from Independent Professional Practice, pages 46-62 National Bureau of Economic Research, Inc.
  8. Jeffrey R. Brown & James M. Poterba, 2009. "Tax Policy and the Economy, Volume 23," NBER Books, National Bureau of Economic Research, Inc, number pote08-3, October.
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