Annual Report of the White House Task Force on the Middle Class

One view of the implicit social contract that has defined the American middle class is that as the economy expands, the living standards of middle-class families will improve. Between 1947 and 1979, real median family income grew at an annual rate of 2.4 percent, which amounts to about a doubling of real income over this period; that contract was fully operative in the [those] few decades. After 1979, however, this trend decelerated significantly, as real median
family income grew only 0.4 percent per year, for a total increase of 14 percent. Since 1979, the growth of family income has become increasingly disconnected from the broader growth of output and productivity. While productivity has continued to grow robustly, middle-class families are no longer getting their share of that growth income in the 2000s.

In the last three decades, the relationship [between productivity and income] has broken down and middle-class incomes have diverged sharply from productivity. This divergence has become even more dramatic in recent years; half of the total increase in the gap occurred in the years between 2000 and 2008, a period of particularly weak middle-class income growth.

Understanding the economic challenges facing middle-class families is essential in crafting the policy agenda to help meet those challenges. In this [report], we briefly examine some of the longer-term trends responsible for the middle-class squeeze, including the increased gap between productivity and wages; economic inequality and mobility; and shifts in gender roles and the need for work-life balance in today's economy.