How Trickle Down Can Fail: The U.S. Case

Like some other affluent countries, the United States since the 1970s has experienced lengthy periods of economic growth with little or no improvement in the incomes of poor households. Both employment hours and wages are implicated in America's trickle down failure. With the exception of the late 1990s, economic growth has not translated into wage growth for Americans at the low end of the labor market. Employment hours for low-income working-age households did tend to rise fairly sharply during the growth years of the 1980s and 1990s business cycles. But in the 2000s that ended abruptly. Moreover, in the years during and shortly after the recessions of the early 1980s, early 1990s, and early 2000s, work hours for these households fell precipitously, offsetting the gains achieved during growth years. It is, as many commentators have urged, worth considering ways to increase both the wages and the employment hours of working-age persons at the bottom of the distribution. Yet the U.S. experience, coupled with that of other rich nations, suggests it is helpful to think about using social policy to boost incomes directly.