A New Progressive Counterpoint About Median Income Over the Last Two Generations

I’m not going to offer any cites for this; it’s a commonplace for Democratic-oriented people to say that incomes have stagnated over the last two generations (say,back to somewhere in the 1973-1982 range). This is usually based on data from the Census Bureau, whose data is more favorable to that position.

This is countered by many economists, whose professional position gives more support to the  Republican-oriented parts of the public. The economists argue that the finding that incomes have stagnated is an artifact of using price indices that systematically overstate inflation, thus making real values lower than they should be. Former Senator and Texas A&M macroeconomist Phil Gramm had a piece with John F. Early (a former assistant commissioner of the Bureau of Labor Statistics — whose overstated inflation measures are at the core of this problem) in The Wall Street Journal just the other day, making this point (entitled “Americans Are Richer Than We Think”).

Mark Thoma (a macroeconomist at the University of Oregon), via Marginal Revolution, pointed me to the blog of Richard Green (a macroeconomist at USC). And he makes an interesting new point that tends to support the progressive side of this debate. Due note that he uses the Census Bureau data, so someone should apply the Gramm and Early critique to it at some point.

Phew … that’s a lot of background in a small space. Anyway, he asserts that the problem is a bit worse because we have a greater share of the population in the bins whose income has stagnated the most. He provides the following table:

	Share in Age Category		Median Earnings (2017 $)
	1980	2017	1980	2017
15-24	0.216	0.120	$13,057	$13,734
25-34	0.232	0.183	$44,252	$40,575
35-44	0.161	0.167	$56,911	$52,403
45-54	0.136	0.169	$56,732	$53,985
55-64	0.127	0.165	$45,200	$48,863
65+	0.127	0.196	$20,845	$32,654

Here’s what’s going on. The first row, people probably your age, have improved a bit from 1980 to 2017. That’s the two columns on the right. But there’s a lot less of them. That’s the second and third columns from the left.

The big problem is that there are 3 rows of people in their prime earning years, 35-54, who are both doing worse, and who are around in greater numbers.  These are somewhat offset by the two oldest rows (which correspond to baby boomers and older).

Personally, I hate most of the other names for generations (there’s a demographic reason to have labeled baby boomers with certain dates, but I feel the others are just random marketing choices). Anyway, other people do use them, and according to Green, it is Generation X and Millenials who are hurting, and that does correspond to general perceptions out in the public.