Wealth and generations: by focusing on the growing riches of the "1 percent," we miss another form of inequality that is bigger, and arguably even more dangerous.

• Author: Longman, Phillip
• Position: Inequality

Today, the top 1 percent earn a higher share of our national income than any year since 1928." That's Tea Party champion Senator Ted Cruz talking. Other GOP presidential contenders, from Jeb Bush to Rand Paul, now trot out similar formulations. Yet even as Americans across the political spectrum find themselves agreeing that growing "inequality" is a big problem, most politicians, as well as most political journalists and the experts they quote, are not talking about the kind of inequality that most matters to most people.

That's because today's talk about inequality generally isn't about actual people. It's about disparities between different, abstractly drawn, arithmetically defined, statistical categories. And so we hear about how, say, the "top 1 percent" compares in income to the "bottom decile."

Of course, important truths are revealed by such comparisons. Mostly these have to do with the strong trend of super-rich people getting even richer--a trend that leads many people to worry, with reason, about rule by plutocrats and the coming of a new Gilded Age.

But, frankly, that kind of inequality is not the half of it. For one, most of us are much more concerned with how well we are doing compared to five or ten years ago, or compared to the life we remember our parents having at our age, or about whether our children will ever do as well. Those kinds of questions have a lot more emotional and practical personal import than whether the "1 percent" gobbled up another percentage point of the nation's income.

Nor, at least arguably, is the kind of inequality measured by such statistics the kind that has been growing the most over the last several decades. Worse, because of the habits of thought that build up from constant use of such statistical artifices in political discourse, our political conversations tend to minimize the full extent of inequality as it's experienced by most Americans.

Here's an example. How often have you heard it said that the average middle-class family is suffering from "stagnant" income? That's the kind of formulation that emerges if you look at, say, the middle three-fifths of the income distribution today and compare it to the middle three-fifths of the income distribution in, say, 1979. After adjusting for inflation, the picture shows middle-class households having basically the same income as they had thirty-six years ago.

Yet there is a big problem with that conclusion: these are not the same people! The heads of today's young households weren't even born in 1979. And those who were middle-aged in 1979 are now deep into their retirement years.

What happens when we use statistics that treat these very different people as if they were the same people? We come up with averages or medians that smooth over and obscure the vast differences in the economic trajectories that Americans of different generations have been on during the last several decades.

Specifically, we miss two huge trends. The first is positive.

We miss that those Americans who were middle-aged in 1979 have, as a whole, seen their standard of living rise sharply compared both to their own previous experience and to that of their counterparts in the previous generation. So, for example, when people who were fortysomething in the late 1970s became fifty something in the late 1980s, their income and net wealth were not only higher than they had been ten years before, they were also far better off than fiftysomethings had been in the 1970s. And as retired seventysomethings today, not only have most seen their personal income net worth hold even or even continue to rise, they are also way better off financially than were seventysomethings in the 1990s. For this birth cohort of Americans, dramatic upward mobility, not stagnation, has been the norm.

The other big trend is what has been happening to each subsequent younger cohort of Americans, which is basically the opposite. Start, for example, with the twentysomethings of 1979. They had a lower real income in 1979 than twentysomethings did in 1969. And as fiftysomethings now, they not only make less money than they did when they were fortysomething, they are also far worse off as a whole than were the fiftysomethings of 2005. This generalization applies to white members of this cohort and even more so to those who are African American or Hispanic.

Today's fiftysomethings may be part of the first generation in American history to experience this kind of lifetime downward mobility, in which at every stage of adult life, they have had less income and less net wealth than did people who were their age ten years before. Yet these mid-wave Baby Boomers shouldn't feel too sorry for themselves. That's because, as we shall see, they were far better off as twentysomethings than were subsequent cohorts of Generation X twentysomethings, and especially better off than today's Millennials.

These vastly different economic trajectories experienced by today's living generations are basically unprecedented. Throughout most of our history, inequality between generations was large and usually increasing, to be sure, but for the happy reason that most members of each new generation far surpassed their parents' material standard of living. Today, inequality between generations is increasing for the opposite reason. Though much more productive and generally better educated, most of today's workers are falling farther and farther behind their parents' generation in most measures of economic well-being.

If it were just a matter of the old getting richer while the young get poorer, it would not necessarily be so bad. Under that scenario, most of us might struggle financially until we grew old, but we could at least look forward to realizing a variant of the American Dream in retirement. But that's not how these trends are playing out. The downward mobility of today's younger Americans leads to the downward mobility of tomorrow's older Americans, making the problem of growing generational inequality truly dire. It's time to get clear about just what's been going on and what we can do about it.

Let's first get some predictable objections out of the way, starting with the problem of defining and measuring what we mean by a standard of living. Leave aside those philosophical questions we could all debate endlessly about whether and how, say, smartphones, gay marriage, and climate change make younger generations better or worse off. Other more straightforward challenges apply even when comparing the strictly material standard of living of different birth cohorts at different times in their lives.

Among the complicating factors are changes in family structure and size (more single-parent homes, fewer children overall), the rise in the number of working women, and the increasing proportion of the population drawn from historically disadvantaged groups. Other considerations include the true measure of inflation, the amount of financial and unemployment risk borne by individuals in different eras, and changes in educational attainment. Yet while no single metric is perfect, in combination they tell a dramatic and, by and large, depressing story.

The most straightforward apples-to-apples comparison is between the amount of income working-age men with a specific level of education make today compared to what their counterparts in the previous generation made. According to work done by the economists Michael Greenstone of the Massachusetts...