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This is referring to an earlier question: Why are real median household incomes stagnant?

How do the following graphs actually tell you that US real median personal/household income has been stagnant since the late 1970's/early 1980's?

  1. Real Median Personal Income in the United States

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  1. Real Median Household Income in the United States

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How are these graphs in line with the following graph, which does look more like stagnant wages (when comparing wages in constant dollar):

  1. For most workers, real wages have barely budged for decades

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as well with the following graph which also seems to show stagnant wages:

  1. Wage Stagnation in Nine Charts

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    $\begingroup$ Try fred.stlouisfed.org/series/LES1252881600Q for a FRED series which showed little real change in wages from 1979 to 2014. It all depends on which data you choose and which price index you deflate with. For example your first two FRED charts are "household income" rather than "workers' earnings". $\endgroup$
    – Henry
    Commented Sep 26, 2017 at 23:59
  • $\begingroup$ @Henry Your comment is too short. Could you expand? $\endgroup$
    – rapt
    Commented Sep 27, 2017 at 0:18
  • $\begingroup$ This question covers much of the same territory. Wages did stagnate beginning in the mid-70s. $\endgroup$
    – Hot Licks
    Commented Sep 27, 2017 at 2:27
  • $\begingroup$ @HotLicks I think that question accepts that there is stagnation and tries to explain why. I ask if there is indeed stagnation. The First two graphs show a certain increase in wages over those 40 years and are brought by people who claim that there is no stagnation of wages. $\endgroup$
    – rapt
    Commented Sep 27, 2017 at 3:44
  • $\begingroup$ Your first two graphs are "household income" rather than "wages". This might happen if say perhaps pensions have increased faster than wages $\endgroup$
    – Henry
    Commented Sep 27, 2017 at 5:29

1 Answer 1

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As said in the comments, there is an important difference between household income and wages. Household income includes income from capital. As a higher share of total income is going to capital than to labour (see below), you would expect a divergence between household and wages.

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Similarly, productivity increases are not being translated into higher wages, which means a higher distribution of gains toward capital (see below).

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(Source of image here)

Another important issue is that the median can be a misleading figure when distributional changes are occurring. For instance, below is the percentile level of household income for the US:

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(Source of image here)

As you can see, the median can mask quite an heterogeneous development for different percentiles. Since lower percentiles source their household income mainly from wages, a stable median wage but an increasing median income is entirely consistent with higher inequality plus lower labour share.

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  • $\begingroup$ Could you please clarify what your first graph shows? It is not clear to me. $\endgroup$
    – rapt
    Commented Sep 27, 2017 at 18:57
  • $\begingroup$ @rapt It is the proportion of all income paid as salary, instead of paid as profits and interest. See more about it here. $\endgroup$
    – luchonacho
    Commented Sep 27, 2017 at 19:45

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