The Faulty Rhetoric of Income Stagnation

"Both left- and right-wing attacks on liberalism (or “neo-liberalism”) highlight the claim that U.S. incomes have “stagnated” over the last generation for middle- and lower-income Americans. This ostensibly shows that the globalized market economy does not work for ordinary Americans. Politicians and groups advance a wide array of policies to respond to this problem. The thing is, though, that the data show wages have not stagnated but have increased significantly for all sectors of American workers over the last generation.

According to Congressional Budget Office data from 2016 (the most recent year available), incomes measured in constant dollars have increased by 33 percent for the poorest Americans—the bottom fifth—since 1979. Incomes have also increased by the same magnitude for the middle three-fifths of Americans. To be sure, incomes have increased by more than that for the top twenty percent of Americans. But the claim that the richer got richer while the poor and middle class also got richer has very different implications from the claim than that the richer got richer while the poor grew poorer and the middle class stagnated.

The news is even better, however, than the usual computations imply."