The panel data great stagnation and also student debt edition, courtesy Justin Weidner

Yes it supports what many of us have been saying for what is now quite a few years:

Using panel data on individual labor income from 1957 to 2013, we document two empirical facts about the distribution of lifetime income in the United States. First, we show that from the cohort that entered the labor market in 1968 to the one entered in 1983, three-quarters of U.S. workers did not experience any increase in lifetime income. Further, during the same period, median lifetime income actually declined by 10-20% for men but increased by 20-30% for women, yet the latter increase was not enough to offset the decline for males because of the very low lifetime income of the earlier cohorts of females. Accounting for rising employer provided health and retirement benefits partly mitigates these findings, but does not overturn them. Much of these changes across cohorts that we document come from the large changes in starting income levels (i.e., at age 25) across cohorts. Based on partial life-cycle income observed for cohorts that are currently in the labor market, the stagnation of lifetime incomes is unlikely to reverse. Second, turning to inequality in lifetime incomes, we find that it has increased significantly within each gender group, but the closing lifetime gender gap has kept overall lifetime inequality virtually flat.

That is from forthcoming work by Justin Weidner, Fatih Guvenen, Greg Kaplan, and Jae Song.  Right now I am looking at Weidner’s site, his job market paper (pdf) is also quite interesting:

I demonstrate that rise in debt since 1990 has contributed to income stagnation, lowering affected graduates’ income by 1.9\% on average. Because it does not distort occupational choices, an income contingent repayment scheme would increase income for constrained graduates by 3.5% on average.

I look forward to following his work in years to come.


Why does an income-contingent repayment scheme not affect occupational choices. Seems for sure it would, and that's what led to its failure at Yale. Not impressed at all w/ Weidner!

What he means is that it doesn't distort the choice between a high-risk/high-mean job and a low-risk/low-mean job. There is always a tradeoff but if getting a poor outcome in the high-risk job means bankruptcy because of student debt then the student will excessively avoid the higher-mean outcome. The same would not be true if getting a poor outcome meant getting a low but still adequate income (even after paying a few percent towards repayment).

What are some examples of high-risk/high-mean jobs that we want more marginal students to pursue?

Inventing cool stuff.

But that's really not a high-risk job. People who are paid to work on inventing cool stuff in the tech industry and elsewhere are very well paid by their employers -- even when the inventions don't pay off. Those kinds of folks also have plenty of fallback options that may be less cool but are still high-paying. What's more, people like that won't sign up for income-based repayment plans because they have good reason to believe it would be a bad deal for them.

How did it affect occupational choices? I have not heard about this.

The paper said it did not affect said choices, probably since everybody was affected across the board.

Nuts, this was supposed to be in response to skeptic's note about Yale. Mobile, sigh.

"[M]any of us have been saying"? Stagnant incomes at the lower end of the income distribution is the flip side of rising incomes at the upper end. Does that mean that rising inequality is a good thing or a bad thing? Is rising inequality an economic issue or just a social issue? What about the financialization of the economy? Is that a good thing or a bad thing? That financialization of the economy occurred concurrently with rising income and wealth inequality mean that the latter caused the former? And rising debt, was it caused by rising inequality: did those all along the income and wealth distribution incur debt to compete with those above them in the distribution? Is there irony in the election of the king of debt as the next president or is it just the inevitable political culmination of the economic trend? As for the king of debt, I suggest the developer's creed: money borrowed is money earned; a debt refinanced is money saved; and a debt repaid is money lost forever.

"If you want a picture of the future, imagine a boot stamping on a human face — forever."

You do realize that Orwell was a policeman in southeast Asia, would not hesitate to inform for the government against communists, and to a degree was projecting his own totalitarianism when he wrote 1983 + 1? Good book tho...

He knew the British colonia system and he knew the Fascist and Stalinist models in Spain. He himself said near the end of WWII that all national ideologies that seemed able to emerge from the war nightmare were totalitarian or totalitarian-like from De Valeras and Gandhi's religious nationalism to Stalin's communism to Franco's Falange and the American moneyed interests' ideology. It is ever clearer that the boot oesn't want to stop stamping Mankind

... 's and doesn't want to stop crucifying Mankind upon a cross of gold. Can Trump stop it? Does Trump want to stop it? The answer for those two questions can change the course of history forever.

"would not hestitate to inform for the government against communists" - not true, see "Why Orwell Matters by Christopher Hitchens

Okay, substitute Stalinists for communists then. Orwell was never less than skeptical about the far left, especially Soviet versions, as a result of what he saw in Catalonia.

I might give that some credence when the paper comes out. Over that period life expectancy has increased by about 8 years. This is worth about $1 million in the statistical value of a life sense. Given base line of 70 years this is around $15k per year. In 2000 dollars median income was 25k so that would be a 60% increase. Or, if we assume incomes didn't increase (excluding life expectancy) and take the current median personal income of 30k as the income back in the fifties than it is a 50% increase. Of course, average life expectancy is not life expectancy of people with median income - but the gains in life expectancy have mainly come from reducing death very early in life and in late fifties - not life extension beyond eighties. This also reduces people's annual income because they are living for longer while not working and falls in child mortality have been much stronger amongst the poor than elsewhere.

Of course that's true but does not detract from the paper. Also real GDP increased by 1.5% to 3% (somewhere along there) so the US economy is roughly twice as rich every 25 to 50 years, even if wage have stagnated. Capitalists like my family (DC real estate) have profited immensely (we're in the 1% in net worth, you need about 6-8M+ USD for that), but you cannot deny, due to the USA's bad technology policy (patents, basic R&D), that there's a Great Stagnation and GPD increases have only benefited the 1%. Low hanging fruit has been picked but the backwards looking historical pseudo-scientific school of scholars known as 'economists' don't offer solutions, instead they debate among themselves endlessly the IS-LM model and the Keynesian cross...sad but expected. Name one prominent patent scholar that's an economist? I can't think of a single one...I tried to get AlexT and TC interested on blogging on patents but they're not interested, preferring to stick to safe things like making basic five minute cartoon videos on IP basics.

"Based on partial life-cycle income observed for cohorts that are currently in the labor market, the stagnation of lifetime incomes is unlikely to reverse."

I feel like I was on this years ago. This is a true story. I said in pages like these that a light tariff, a few percent, might help. I was told, no lie, by rightists that this was protectionist and would cause a great depression. Besides, the invisible hand would provide. I said "a few percent," they said "protectionist."

Imagine my feeling now as a new right skips past light, marginal, tariffs to 35 percent.

I might still go for marginal increases in tariff, but am I still alone? Is it free trade on one side and 35 percent on the other?

Make no mistake. Those famous 35 percent are a desperate demand of an impoverished populace fighting for survival againt Wall Street's malefactors of great wealth and their lackeys. Mr. Trump has not come to praise free trade, but to bury it.

But Krugman is right in that free trade has already developed so much that even a 35% tariff cannot really derail the economy? Nowadays the multi-nationals are very 'vertically integrated' across countries so a tariff is meaningless? Recall the Japanese simply moved their factories to the USA when tariffs (i.e. effectively 100% tariffs) were imposed.

I'd love to see how Trump's patent policy evolves, but as a populist I doubt he does anything revolutionary like making employee-inventor automatic assignments of all their patent rights to their employer illegal (e.g., like adopting the pro-patent pro-employee rule of the Japan blue laser litigation). Trump is just a trumpeter of rhetoric.

I have not seen Krugman defend 35 percent, but obviously as a sudden whammy it would greatly disrupt employment. More slowly it would favor development of domestic goods. But if you really believe in comparative advantage you don't want hothouse tomatoes in winter time. It is a global loss in efficiency.

We need less IP, but to my knowledge Trump is a complete unknown on that.

"It is a global loss in efficiency" But it is a major national gain in well-being. It is stupid to think Americans can make a living by selling each other credit default swaps and apps and cutting each other's hairs. Americans need to build things again.

We make things, but with more automation and fewer workers.

Trump is going to have that problem too, if he wants to bring back jobs.

Meanwhile the work done by humans is sent tot he Chinese. It is a shame.

@Thiago: is that the work we want to bring home? Endless rows of Wisconsinites and Ohioans making cheap clothes and assembling smartphones?


It depends on whether the alternative is some more fulfilling and better-paid jobs, or sitting around on disability waiting to die.

"is that the work we want to bring home? Endless rows of Wisconsinites and Ohioans making cheap clothes and assembling smartphones?"
Not everyone can write apps or sell reverse currency swaps loans. What will Wisconsinites and Ohians and Chicagoans and Detroiters do? America can only eat so much hamburgers.

The accounting they've done is almost certainly highly dubious.

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