Apr 5, 2017

Study: Your income is growing faster than you think

We've heard so often and for so long about wage stagnation that you'd think the data underlying the claim that workers haven't gotten a raise since the 1970s are widely agreed upon, but they're not. In a working paper published this week by the National Bureau of Economics, Dartmouth University's Bruce Sacerdote points out that when using alternative measures of inflation, income growth among middle and lower class Americans looks much more robust than media reports claim.

Data: National Bureau of Economic Research; Chart: Lazaro Gamio / Axios

The results: It's impossible to measure real income growth without an accurate measure of inflation, but accurately measuring inflation is difficult and is a major point of disagreement among economists. Sacerdote uses an alternative measure of inflation that shows median wages have grown by 1% per year between 1975 and 2015.

Why it matters: Free market advocates argued for years that rising income inequality and wage stagnation wasn't actually a problem, but now even the Republican Party uses slow wage growth as a talking point. But free market policies are an awkward fit for an economy that is suffering from runaway growth in income inequality and stagnant worker pay. Those who want to shrink government and income redistribution may want to take another look at research like Sacerdote's.

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