Research summary
Research summary
Topic summary
Upward mobility collapsed due to legislative rollbacks on labor, tax restructuring, and the rise of shareholder primacy.
Key research questions
- Investigate "What Happened to the American Dream?" from this distinct point of divergence: Domestic Policy Shifts and Financialization.
Important claims and supporting citations
The Business Roundtable, formed between 1972 and 1974, coordinated CEO lobbying against the 1978 labor law reform bill, which included transporting small-business owners to Washington on corporate aircraft.
Between 1979 and 2019, net productivity grew by 59.7% while median worker compensation rose by 15.8%, creating a 43.9 percentage point gap.
Returning to 1940s absolute mobility rates through economic growth alone would require real GDP growth rates exceeding 6% per year.
The Labor Law Reform Act of 1978 (H.R. 8410), which aimed to expand the NLRB and stiffen penalties for unfair labor practices, passed the House but died in the Senate on June 22, 1978, after six unsuccessful cloture votes.
From 1973 to 1979, compensation inequality and labor's share of income showed no appreciable change, with productivity-compensation differences primarily reflecting price deflators.
Michael C. Jensen and William H. Meckling's October 1976 paper formalized agency-cost theory, creating theoretical justification for aligning executive interests with shareholders through equity-based incentive pay and corporate takeovers.
Former SEC Chair Mary Jo White conceded in a response to Senator Tammy Baldwin that issuers cannot legally violate Rule 10b-18 because it is a voluntary safe harbor.
Redistributing growth to match the distribution of the 1940 birth cohort would reverse more than 70% of the decline in absolute mobility, whereas higher GDP growth alone cannot restore it.
Competing explanations
AEI researchers Aparna Mathur and Cody Kallen argue the decline in mobility between 1940 and 1980 was concentrated among children of wealthier parents.
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From 1973 to 2014, U.S.
From 1973 to 2014, U.S. net productivity grew 72.2% (1.33% annually) while real median hourly compensation rose 8.7% (0.20% annually), with rising compensation inequality explaining 58.9% of the divergence and the decline in labor's income share explaining 11.5%.
Labels: Inferred, Low, known
From 1979 to 2012, the 10 states with the smallest decline in collective bargaining coverage experienced a 23…
From 1979 to 2012, the 10 states with the smallest decline in collective bargaining coverage experienced a 23.1% growth in real median hourly compensation, compared to 5.2% growth in the 10 states with the largest decline.
Labels: Inferred, Low, known
Labor Union Decline and the Labor Law Reform Act of 1978
Labor Union Decline and the Labor Law Reform Act of 1978
Labels: Inferred, Low
SEC Rule 10b-18 and Stock Repurchases
SEC Rule 10b-18 and Stock Repurchases
Labels: Inferred, Low
The Revenue Act of 1978 and 401(k) Plans
The Revenue Act of 1978 and 401(k) Plans
Labels: Inferred, Low
Productivity and Worker Compensation Divergence
Productivity and Worker Compensation Divergence
Labels: Inferred, Low
Rise of Shareholder Primacy and Executive Incentives
Rise of Shareholder Primacy and Executive Incentives
Labels: Inferred, Low
Decline in Absolute Income Mobility
Decline in Absolute Income Mobility
Labels: Inferred, Low
The Revenue Act of 1978 (Pub.
The Revenue Act of 1978 (Pub. L. 95-600) increased the long-term capital gains exclusion from 50% to 60% and introduced Section 401(k) to the Internal Revenue Code.
Labels: Inferred, Low, known
Redistributing growth to match the distribution of the 1940 birth cohort would reverse more than 70% of the d…
Redistributing growth to match the distribution of the 1940 birth cohort would reverse more than 70% of the decline in absolute mobility, whereas higher GDP growth alone cannot restore it.
Labels: Inferred, Low, known
Legal historian Brian Cheffins argues that the practical managerial shift toward shareholder primacy coalesce…
Legal historian Brian Cheffins argues that the practical managerial shift toward shareholder primacy coalesced in the mid-1980s during the wave of hostile takeovers and incentive compensation, rather than immediately following Milton Friedman's 1970 essay.
Labels: Inferred, Low, known
The SEC adopted Rule 10b-18 on November 26, 1982, establishing a safe harbor for corporate stock repurchases…
The SEC adopted Rule 10b-18 on November 26, 1982, establishing a safe harbor for corporate stock repurchases at 47 Fed. Reg. 53333.
Labels: Inferred, Low, known
Net productivity and typical worker compensation grew together from 1948 to 1973 before diverging sharply, fu…
Net productivity and typical worker compensation grew together from 1948 to 1973 before diverging sharply, fully decoupling after 1979.
Labels: Inferred, Low, known
The Labor Law Reform Act of 1978 (H.R.
The Labor Law Reform Act of 1978 (H.R. 8410), which aimed to expand the NLRB and stiffen penalties for unfair labor practices, passed the House but died in the Senate on June 22, 1978, after six unsuccessful cloture votes.
Labels: Source-linked, Low, known
By 1977, workers were losing more than half of NLRB representation elections, down from an 80% win rate in th…
By 1977, workers were losing more than half of NLRB representation elections, down from an 80% win rate in the 1940s, and the share of newly organized workers obtaining a first contract dropped from 86% in the 1950s to below 70% in the 1970s and 56% in the 1990s.
Labels: Inferred, Low, known
Unfair labor practice charges against employers increased sevenfold between 1950 and 1980, while the percenta…
Unfair labor practice charges against employers increased sevenfold between 1950 and 1980, while the percentage of the workforce newly unionized via NLRB elections with first-contract success fell from 0.46% (1966–1968) to 0.17% (1978–1980).
Labels: Inferred, Low, known
The fraction of U.S.
The fraction of U.S. children earning more than their parents fell from 92% for the 1940 birth cohort to 50% for the 1984 birth cohort under copula stability.
Labels: Inferred, Low, known
Between 1979 and 2019, net productivity grew by 59.7% while median worker compensation rose by 15.8%, creatin…
Between 1979 and 2019, net productivity grew by 59.7% while median worker compensation rose by 15.8%, creating a 43.9 percentage point gap.
Labels: Source-linked, Low, known
Social Security Administration records show the bottom 90 percent of workers saw annual earnings gains of 15.…
Social Security Administration records show the bottom 90 percent of workers saw annual earnings gains of 15.2 percent versus 61.9 percent net productivity growth between 1979 and 2013.
Labels: Inferred, Low, known
From 1973 to 1979, compensation inequality and labor's share of income showed no appreciable change, with pro…
From 1973 to 1979, compensation inequality and labor's share of income showed no appreciable change, with productivity-compensation differences primarily reflecting price deflators.
Labels: Source-linked, Low, known
Throughout the 1970s, the SEC proposed rules to restrict stock buybacks before reversing course in 1982 to ad…
Throughout the 1970s, the SEC proposed rules to restrict stock buybacks before reversing course in 1982 to adopt Rule 10b-18.
Labels: Inferred, Low, known
Michael C.
Michael C. Jensen and William H. Meckling's October 1976 paper formalized agency-cost theory, creating theoretical justification for aligning executive interests with shareholders through equity-based incentive pay and corporate takeovers.
Labels: Source-linked, Low, known
Absolute income mobility for U.S.
Absolute income mobility for U.S. sons compared to their fathers fell from 95% for the 1940 birth cohort to 41% for the 1984 birth cohort.
Labels: Inferred, Low, known
The decline in absolute income mobility between the 1940 and 1984 cohorts was largest for children with middl…
The decline in absolute income mobility between the 1940 and 1984 cohorts was largest for children with middle-class parents.
Labels: Inferred, Low, known
The Business Roundtable, formed between 1972 and 1974, coordinated CEO lobbying against the 1978 labor law re…
The Business Roundtable, formed between 1972 and 1974, coordinated CEO lobbying against the 1978 labor law reform bill, which included transporting small-business owners to Washington on corporate aircraft.
Labels: Source-linked, Low, known
Returning to 1940s absolute mobility rates through economic growth alone would require real GDP growth rates…
Returning to 1940s absolute mobility rates through economic growth alone would require real GDP growth rates exceeding 6% per year.
Labels: Source-linked, Low, known
SEC Chairman John Shad, a former E.F.
SEC Chairman John Shad, a former E.F. Hutton vice chairman and the first Wall Street executive to lead the agency in nearly 40 years, oversaw the adoption of Rule 10b-18.
Labels: Inferred, Low, known
Ted Benna implemented the first salary-reduction 401(k) plan at The Johnson Companies in 1980, leading to 198…
Ted Benna implemented the first salary-reduction 401(k) plan at The Johnson Companies in 1980, leading to 1981 IRS regulations allowing pre-tax contributions and employer matches, followed by corporate adoptions in 1982 by firms including PepsiCo, Honeywell, and Johnson & Johnson.
Labels: Inferred, Low, known
Rule 10b-18's safe harbor conditions require using a single broker, avoiding trades at the open or close of t…
Rule 10b-18's safe harbor conditions require using a single broker, avoiding trades at the open or close of the day, buying at the prevailing market price, and capping volume at 25% of average daily trading volume over the preceding four weeks.
Labels: Inferred, Low, known
The Revenue Act of 1978 emerged after President Carter's comprehensive tax-reform initiative collapsed, resul…
The Revenue Act of 1978 emerged after President Carter's comprehensive tax-reform initiative collapsed, resulting in simultaneous capital-gains tax reductions and the establishment of the 401(k).
Labels: Inferred, Low, known
Using the same price index to deflate both net productivity and median hourly compensation yields a 43 percen…
Using the same price index to deflate both net productivity and median hourly compensation yields a 43 percentage point divergence between 1979 and 2017.
Labels: Inferred, Low, known
Former SEC Chair Mary Jo White conceded in a response to Senator Tammy Baldwin that issuers cannot legally vi…
Former SEC Chair Mary Jo White conceded in a response to Senator Tammy Baldwin that issuers cannot legally violate Rule 10b-18 because it is a voluntary safe harbor.
Labels: Inferred, Low, known
Lobbyist and former Nixon Treasury official Charls E.
Lobbyist and former Nixon Treasury official Charls E. Walker headed the 1978 campaign that replaced Jimmy Carter's proposal to equalize capital gains and ordinary income tax rates with capital gains tax cuts and new tax shelters.
Labels: Inferred, Low, known
Mishel and Bivens calculated that identifiable policy factors account for three-fourths of the divergence bet…
Mishel and Bivens calculated that identifiable policy factors account for three-fourths of the divergence between net productivity and median hourly compensation from 1979 to 2017.
Labels: Inferred, Low, known
Bureau of Labor Statistics nonfarm business sector data shows cumulative hourly compensation growth of 147% b…
Bureau of Labor Statistics nonfarm business sector data shows cumulative hourly compensation growth of 147% between 1979 and 2019, obscuring the ~17.5% growth for median workers.
Labels: Inferred, Low, known
AEI researchers Aparna Mathur and Cody Kallen argue the decline in mobility between 1940 and 1980 was concent…
AEI researchers Aparna Mathur and Cody Kallen argue the decline in mobility between 1940 and 1980 was concentrated among children of wealthier parents.
Labels: Contested, Low, known