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Why Growth Will Fall

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The last three columns show how the growth was divided between the bottom fifth, the middle fifth, and the top 1 percent of the income distribution. The first subperiod was one of shared prosperity; indeed, the bottom groups fared slightly better than the top. However, in the most recent years, particularly since 2000, the decline in average income growth was further exacerbated for the lowest income groups by a declining share of the total. So, for the bottom fifth, the growth in real income declined from 3 percent at the end of the special century to essentially zero in the last fifteen years. Of this catastrophic decline, about half was due to the slower overall growth, while half was due to rising inequality. Gordon has an extensive review of the sources of rising inequality, but his emphasis on the role of declining productivity growth is an important and durable part of the story of stagnant incomes.

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