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Raw data: Middle-class incomes have done better than you probably think

I mentioned in an earlier post that conventional wisdom remains stuck in the belief that middle-class incomes have tanked, and this belief hasn't really changed even though it no longer fits the facts of the past few years of strong income growth.

But things are more complicated than that, and I thought you might be interested in seeing a few different ways of measuring middle incomes. None of these is "right." They're just measuring similar but different things.

First up is your basic measure of median income from the Census Bureau:

With a judicious choice of starting point, it was easy at the end of Great Recession to say that incomes had been stagnant since the '70s. However, even this chart can't avoid the fact that since 2012 the median income for prime-age workers has increased by nearly 20%. The stagnant income story, whether for Millennials or anyone else, just doesn't wash anymore.

But there are other ways to measure income. Here's one:

This is a measure of "nonsupervisory" wages, which is basically blue-collar wages. In this case, it looks like wages are stagnant or down all the way through the late '90s, but have grown nearly 30% since the year 2000. The timeframe is different, but it once again shows that the conventional wisdom of stagnant wages has passed its sell-by date.

Finally, here's a third way of measuring income:

This is an unusual measure of income. It's after-tax income adjusted for benefits from government programs. It covers the middle 60% of the population, which is basically the bottom of working class to the top of middle class. What it shows is that middle incomes have been steadily rising for the past 40 years and are now 65% higher than in 1980.

There's a flat spot from the start of the Great Recession through about 2014, but that's hardly surprising. Since then, incomes have risen 15%.

In addition, consumer debt has declined by a third over the past few years; bankruptcies are almost down to nothing; and delinquent loans have plummeted for practically every age group.

Depending on which of these income metrics you believe, the conventional wisdom of stagnant middle-class incomes has been obsolete since 2015, since 2000, or was never really true at all. But one way or another, it's obsolete now.


None of this is meant to suggest that the economy has been great for the middle class. Both the rich and the poor have done better, and over the past few decades the growth in middle-class incomes has been a weak 0.5-1.5% per year depending on which measure you use.

Still, at the very least middle incomes have grown over the past six or seven years, and it's no longer accurate to talk about stagnant wages no matter what measure you prefer. Too many people seem to have ignored this.

POSTSCRIPT: It's worth noting that this is merely raw data, as the headline says. You should use it if you care about accuracy.

However, it remains the case that income growth has been worse for the middle class than for anyone else, thanks to massive growth among the rich and big growth in government assistance among the poor. If you wonder why the middle class feels squeezed, this is part of the answer. They feel like everyone else is doing better, and they're right.

23 thoughts on “Raw data: Middle-class incomes have done better than you probably think

  1. bbleh

    Translated to real annual growth rates, however, these don't look very good at all.

    Median income 2012-2020: 2.1% annual real growth
    Hourly wages 1998-2020: 1.2% real annual growth
    Household income 1980-2020: 1.3% real annual growth

    Those are pretty damn low, especially the latter two! Put into English, it means that people have worked for almost decade -- or two, or FOUR! -- and have stayed ahead of inflation by only a penny or two per dollar each year on average.

    It may not be the "stagnation" of the 70s and 80s, but it's not a whole lot better.

    1. bbleh

      And just for comparison, US real GDP has grown by an average 2.6% rate since 1980. That is, the "middle 60%" have seen HALF what the country as a whole has seen. No wonder they're annoyed ...

  2. Yikes

    Again Kevin, yikes!

    No one reading your blog doubts the existence of growth. But this is one case where you are consistently failing to post the obvious follow up question: if the overall numbers are as you post (and they are) why the angst?

    You keep suggesting that the angst is misplaced, as if its the result of some sort of Fox news propaganda campaign.

    Oddly, and for me, it is oddly, because I am not feeling especially sanguine about the Trumpists who walk around pissed off all day, I think the answer is obvious.

    You have to rank the degree of "growth" by what people care about.

    They care about:

    1. Where they live
    2. What major expenses they can expect along the way, and
    3. Everything else.

    Number 1, for Americans, continues to be worse year on year for those who are not the winners in the economy.

    You keep trying, like its the scales of justice or something, to lump "3 Everything else" in there with number 1, as if the unbelievable availability of cheap stuff and iPhones makes up for living with your parents in their huge house until you are 30 and then scraping together a down payment on a place with a 55 minute commute.

    Or worse, you have stagnating housing prices. You know exactly what parts of the country have that - the parts where no one wants to live.

    This would be all just another chart, if it were not for the fact that there are millions of people who are angry, and are looking for someone to blame, and the right wing gives them "liberals" and they are absolutely buying what the right wing is selling.

    Ah well. Never mind. I'm not even going to get into the fact that point 2 involves health care and education costs, and that those are hardly just the domain of the chattering classes. And no, Kevin, college is not friggen free for those below middle class.

  3. skeptonomist

    Here (again) is the average blue-collar wage (annualized), this time corrected for inflation with the more usual CPI instead of the PCE.

    http://www.skeptometrics.org/BLS_B8_Min_Pov.png

    This shows essentially no improvement since 1973, which is one basis of the claim of no improvement in income. But what I emphasize this time is that in 1973 the annual wage was about $7000 *above* GDP/cap, while in 2020 it was about $21000 *below* GDP/cap (in 2013 dollars). Wage-earners have fallen far behind the growth of GDP, and it is the highest-income people who have benefited from this.

    And again wages had been keeping up with GDP all through US history until 1973:

    http://www.skeptometrics.org/WageIndex.png

    (wage index from Economic History Project).
    Cost-of-living indexes are arbitrary and subjective and (again) do not necessarily capture changes in quality of life. Why do some people prefer the PCE over the CPI? It generally gives lower inflation so that 1) using it for Social Security would give lower payouts; 2) It makes the failure of the Fed to prevent inflation in the 70's and 80's look less bad; and 3) it makes wage growth look better. But the way that inequality has grown is independent of the choice of index. Kevin ignores inequality. He keeps cherry-picking data to make it look like things have been just fine for lower-income people.

  4. Solar

    Kevin continues to miss the forest for the trees. Not sure if that is intentional as he has a terrible blind spot when it comes to assessing the severity of things that don't affect him directly, or because on many issues he seems to be a Republican light, but he is still not looking at the full picture.

    No one doubts that incomes today in actual dollars taken home are greater than in previous generations, but merely now looking at those who default on their debt isn't adding much from what was presented in the prior write up. The debt figure doesn't say much because it only refers to those who were unable to keep paying their debt. A person may be able to never miss a debt payment, but by doing so, that is money that is not going to pay for other needs, so that figure doesn't really help much for the debate (amount of total debt would be more helpful).

    What Kevin continues to miss is that the cost of three out of the four basic economic needs every family has: house, healthcare, and education. All of these are completely out of whack today relative to previous generations.

    For example median income has grown by 20% according to the first figure, which without context seems good. Same thing for blue collar wages, which have grown by 30%. Yes, people make more money today, the issue is what can they afford with that money, and that is wherein the problem lies.

    In the same time span (mid 70's to today), median house sale prices have grown by close to 1000%, going from $39,000 back in 1975, up to $375,000 today.

    Same thing for education, from 1973 to 2012, 4-year college tuition costs rose by 500%.

    And the same for personal healthcare expenses, which have grown by around 600% since the 70's.

    That is why people feel stuck today, because the basic needs that people not just in the USA, but all over the world consider essential to live a good life (economically speaking), and which in the past where attainable for most even with blue collar jobs and a single household income, are now very hard to come by.

    When income grow rates are increasing in double digits, but the basic needs are growing in triple digits people are not probably better than you think Kevin.

  5. Dee Znutz

    I’m curious to know how blogging for a living gets one a European sports car. Lol. Knowing this about Mr. Drum has really ruined my ability to take his “people are actually doing better than you think” schtick seriously.

    1. HokieAnnie

      Kevin was able to get out of the Dot.com blowup in pretty good shape including ownership of that Porsche. I have a buddy that was smart enough to diversify his AOL stock as soon as it vested so when he got laid off he could take an early retirement job as a school bus driver until his health declined a decade later.

  6. rational thought

    One big issue is education, costs of that , time you start work, and expectations.

    Decades ago , the median income earner would be a high school graduate or maybe someone who went to a few years of community college .

    So they would be working and making money and maybe even accumulating little savings from 20 to 25 , even starting at a lower salary and never moving into a real high paying job later. And the smaller minority of college graduates took the upper middle income and upper income jobs which their education and intelligence and skills made them capable of doing. Those college graduates started earning money later and started out in debt from college but made up for that with much higher paying jobs.

    Today, the majority go to college and delay their working life to maybe age 22 to 25. And start out in debt from college. But there are not enough high paying jobs requiring a college education to employ all of them ( plus with more going to college, there are more there who are less intelligent and skilled). The middle person is now becoming a college graduate.

    So now you have middle class workers who are college graduates who delayed work for an extra 4 years ( with 4 years less earnings) and starting with college debt . But some end up in traditional middle class jobs like retail and not really earning enough to make up for those four years. So of course they are not as happy.

    And , even if they did get a job which made up for college costs, they have college level expectations of income and are not satisfied with old middle class incomes.

    Too many people today go to college. Especially when they major in some social science thing for which the economy has only a fraction of jobs for those skills .

    1. galanx

      Once again rational thought explains that it's all the fault of those shiftless lazy liberals studying all those woke subjects and demanding good jobs, instead of gratefully accepting whatever their benevolent bosses choose to trickle down on them.

      1. Spadesofgrey

        Liberals, nope. Your first error. Biden, frankly agrees with him, which is the point of the community college plan. Get 2 years, then get to work. College doesn't help workers. It is anti-proletariat.

    2. HokieAnnie

      Don't poo-poo choice of degree. It's fools errand to figure out what is the hot degree five years after you apply for college. There aren't a ton of folks majoring in humanities degrees alone most folks do it as a dual major with something more career focused or do it and then go on to law school or business school.

      Ironically there's tech jobs where those degrees are useful - my seemingly esoteric degree gave me a great foundation for the hard and soft skills required for my job where I support the ERP my agency uses.

  7. D_Ohrk_E1

    0.5% annual income growth over a 45-year period is pretty dismal. Yeah, you're moving faster than inflation, but 0.5%?

    But, aren't you going to say anything about how inflation remained flat despite the larger growth of income at the median, in the last decade? You had a chance to critique economic dogma and didn't take it.

  8. Spadesofgrey

    The speed of growth has slowed down, but that is true of all income brackets including the top of the pyramid since 2008. Organic growth has slowed since the summer of 00. Much like 1974's slowdown back to normal.

  9. kkseattle

    I expect that household income has grown since 1980 largely because in so many households there are now two adults working.

    I also hesitate to cheer for modest gains in middle class incomes if they are all—as I suspect they are—wiped out by the skyrocketing cost of housing, health care, and higher education, expenses which are of no concern to the rich and are on a wide scale subsidized for the poor.

    1. Jasper_in_Boston

      >>I expect that household income has grown since 1980 largely because in so many households there are now two adults working.<<

      That tended to prop up household incomes after 1973 (when we entered a period of wage stagnation) but, according to my understanding, was a largely played-out trend by about 1990, after which female paid workforce participation plateaued.

  10. spatrick

    "However, it remains the case that income growth has been worse for the middle class than for anyone else, thanks to massive growth among the rich and big growth in government assistance among the poor. If you wonder why the middle class feels squeezed, this is part of the answer. They feel like everyone else is doing better, and they're right."

    And that growth isn't just among the rich but also that 10 percent "upper middle-class" (or better yet low rich even though they would lunge at you if called them rich) of high-earning professionals, the well-educated or the small-town gentry who have also done very well for themselves and can absorb the sticker shock of increased costs in health care, housing and higher education (although they don't like such increased costs either).

    There are a lot of reasons for people to feel status anxiety but lately that's the way a lot of people feel regardless of what the data would tell you. To simply say to them "You're making more money than ever before, what's the beef?" you'll get a litany of life's complaints from the pathetically petty to outright racist. Bottom line is very few people are happy and really haven't felt that way since the millenia began, all around the world.

    1. rational thought

      And this is part of what I was getting at with most people now going to college.

      Decades ago , those in the middle class just graduated high school or maybe a little community College. When they compared themselves to an intelligent friend who took four years off paying for college and got a higher paying job, they could understand that. It made sense that the college graduate ends up with a higher paying job. They had " paid for " it by working to get an education justifying it four years, both with time and money.

      So less jealousy.

      Now you might have someone who also did take four years going to college too. And yet they are stuck with a lower paying middle class job because there are just not enough " college level " jobs for everyone who goes to college today.

      And it is much harder for them to understand why their friend who went to the same college was able to get that higher paying upper middle or upper class job and not them .

      Decades ago, the difference could be explained by the life choice of going to college and that is easier to accept. " i could have gone to college and got that good job too but i chose instead to start my life and have a family or maybe not ask my parents to pay for college " . People can admit that.

      But now it has to be " I did go to college too but I did not get the good job because I am just plain stupider, or did not work as hard in college or fate or was cheated by the system, etc. ". Those are things nobody wants to admit or things they can say NOT FAIR too. So causes more jealousy.

      Someone said I was just blaming liberals. Not really. Those who go to college and choose a lower paying major for left wing political reasons, to be a political activist , social worker, etc. are making their own choice in life and that is more something they can accept. And their dissatisfaction will not really be due to their comparison to others who got the lucrative major but with societal structure overall.

      The issue with choosing dumb majors and later feeling it is unfair is more with those who do so stupidly or because of laziness ( the easy major so can party), not those who do so for politics.

  11. frankwilhoit

    These statistics are excessively aggregated.

    There are three economies.

    The first one trickles down from Government procurement, and is doing just fine.

    The second one is financialized; formerly it had only relatively few and elite participants, but more and more large corporations are deriving their operating revenue from financial instruments (this is why they are "sitting on cash", to some people's perplexity), so their employees must be considered as part of a trickle-down chain from that.

    The third one is what is left after eliminating the first two; it has been essentially dead since 2000, and there is no prospect that it will ever recover.

    In order for any statistics to tie back to anyone's lived experience, they have to be disaggregated to account for which economy is yours.

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