It’s a fact that no one seems to question: incomes of Americans who are not rich have stagnated. The time frame is flexible: 20 years, 40 years, whatever.
Except that you may have noticed that there’s a lot of flexibility in how we measure prices and calculate real values.
There’s new research on this:
The finding of zero growth in American real wages since the 1970s is driven in part by the choice of the CPI-U as the price deflator …
Intermediate students know that the CPI is calculated using the Laspeyres method. This results in substitution bias that makes inflation appear higher than it is and the resulting real values appear lower than they are.
An additional twist here is the U in CPI-U. This is the most popular measure of CPI, but it applies best to urban consumers in only the largest urban areas. If you apply it elsewhere, you are adding a second source of upward bias to inflation. It’s sort of like asserting that “Gee … apartments are getting more expensive in San Francisco, that must really hurt the people living in Beaver.”. Not so.
This is just not that hard to figure out when there’s readily observable evidence like this just laying around:
The number of cars per household with below median income has doubled since 1980 …
Here’s the conclusion:
Meaningful growth in consumption for below median income families has occurred even in a prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor.
Do note that those are the big three explanations given on the campaign trail by Clinton, Sanders (and Trump) last year: income ienquality, consumption inequality, and decreasing labor share.