Sunday, October 28, 2007

Stagnant Incomes for the Middle Class?

. Sunday, October 28, 2007

Common wisdom tells us that incomes for "the rest" have failed to rise much in the last thirty years, while incomes for the lowest quintile have actually lost ground. Recent research by Terry J. Fitzgerald, senior economist at the Minneapolis Fed, questions this common wisdom and reaches some quite different conclusions.

In a nutshell, Fitzgerald finds that "labor income per hour for middle America has not stagnated. Rather, the economic compensation for work for middle Americans has risen significantly over the past 30 years."

It seems that the conclusion one reaches about real income growth rest heavily upon what price deflator one employs and how one treats non-wage benefits. If one uses a consistent deflator and includes non-wage fringe benefits as part of compensation, real hourly wages have risen by 25 to 30 percent since 1975. Not huge gains over thirty years, but also not consistent with the commonly-state claim that incomes are falling.


Stagnant Incomes for the Middle Class?
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