If you’re the sort of person who reads economics blogs, you’ve probably heard that the median US worker has enjoyed hardly any income gain over the past few decades. Here are the numbers behind the noise (all corrected for inflation):
A mere 3% increase over 25 years does indeed look pretty grim. And note that the year 2005 is pre-crash, so what we’re seeing is not an artifact of the recession.
Now let’s look a little deeper and ask which demographic groups account for all this stagnation. White men? Nope, their median income is up 15%. Nonwhite men? Up 16%. White women? Up 75%. Non-white women? Up 62%. That’s everybody:
What gives? How can the median income shoot up in every demographic sector while the overall median remains nearly unchanged?
Imagine a farmer with a few 100-pound goats and a bunch of 1000-pound cows. His median animal weighs 1000 pounds. A few years later, he’s acquired a whole lot more goats, all of which have grown to 200 pounds, while his cows have all grown to 2000. Now his median animal weighs 200 pounds.
A very silly person could point out to this farmer that his median animal seems to be a lot scrawnier these days. The farmer might well reply that both his goats and his cows seem to be doing just fine, at least relative to where they were.
That’s exactly what’s happened with median incomes. Each demographic group has progressed, but at the same time, there’s been a great influx of lower income groups — women and nonwhites — into the workforce. This creates the illusion that nobody’s progressing when in fact everybody’s progressing.
So let’s correct for that. Suppose the 1980 workforce had looked demographically just like today’s, with each group earning the incomes that were typical for that group in 1980. Then it turns out that the overall median income in 1980 would have been $19,600. Today’s $25,700 represents a 31% increase over that corrected figure. That 31% is for most purposes a far more meaningful number than the oft-quoted 3%.
Conard goes on to observe that things are even much better than you’d think from looking at this table because:
- The table shows only raw incomes, not the value of benefits, and benefits have grown substantially faster than incomes
- The table, because it only shows medians, does not show the explosion in income growth above the median. Fully half of the new jobs created since 1980 have been high-paying professional jobs; prior to 1980, only 23% of jobs were in that category.
One might also add that the table fails to account for the vast increases in leisure time over the past 40 years and the equally vast increases in the quality of the goods we buy. Those things matter too.