There’s some hand wringing going on about the viability of the American Dream, as today’s American men are reported have less income than their fathers’ generation did at the same age, according to a new analysis by the Economic Mobility Project.
According to the report, men who were in their thirties in 1974 had median incomes of about $40,000, while men of the same age in 2004 had median incomes of about $35,000, adjusted for inflation. Thus, as a group, income for this generation of men is, on average, 12 percent lower than those of their fathers’ generation. This in a period where productivity has exploded as well.
Is the American Dream dead? Not at all, but it has shifted. Lots of folks are bound to weigh in on this one with a simple version of cause and effect – expect organized labor to point to the downturn in representation for workers (that’s bad analysis), isolationists to point to the perils of globalization (that’s probably the start of the equation) and others to chip in as well. Others are pointing to the the worklife balance needs of Gen X and Y as the primary reason for the decreased average earnings. Not a bad thought on a contributing factor, but not the real story.
My take? Average wages are down due to multiple factors – it takes convergence of multiple trends to deliver this kind of change. Lead by the impact of globalization, here’s my punch list of factors which are be converging to lower the total income of today’s worker when compared with past generations:
1. It’s a Global Thing, Baby – Globalization has arrived in a big way since 1974 (see the Friedman book on the left column – read it if you haven’t already), and even if you agree with the isolationists that would shut down international trade, you can’t put the genie back in the bottle. The biggest impact to workers regarding globalization? Your work is a commodity if it can be done by someone else cheaper while maintaining the same quality – meaning your job potentially goes away as you know it today.
2. National is the New "Local" – If your good-paying job becomes a commodity and is shipped elsewhere, you can usually get a new job at the same wage – but your chances of doing that are limited if you aren’t mobile and able to relocate. Think about autoworkers who experience a plant shutdown. They can find work after the shutdown in another car plant, but it won’t be in the metro area they have been living in. The result? The solid worker with family in the metro area probably doesn’t move to find a job with similar wages, and his/her earning potential is subsequently slashed – contributing to the stalling of average wage levels.
3. Silos are Dead – Just like location, having a single skill set/professional identity (i.e., silo) is a limiting factor for many workers in the new economy. To keep the same comp after an office/plant closing, employees either need to move to a new area, or have a flexible enough skill set to reinvent themselves after the office/plant closing. For many workers at or below the average comp cited by the research (35K), reinvention is a difficult thing to pull off or even comprehend. Without a physical move or a redefinition of who they are professionally, many of these workers are destined to earn less as the economy evolves.
4. Technology and the Digital Divide – The impact of technology in the way we do our jobs has allowed many folks to avoid earning less through the transitions outlined above (example – see One Person/Multiple Careers on the book column to the left). Unfortunately, the advent of broadband and other disruptive technologies doesn’t help those at the lower end of the salary scale. With this in mind, workers in production-based jobs don’t have the same opportunities to use technology to maintain their earning potential, dragging the overall average down.
The good news for HR Pros? If you have the right type of skill set as a HR pro, your skills can transcend industry slowdowns, plant shutdowns, etc. The skills of recruiting, motivating and retaining talent will have increased value as the baby boomers retire, etc. Sure, you might have to change companies, but the need to relocate is probably less pronounced for you since you have skills that can be applied to multiple industries.