<p>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. </p>

<p><a href="https://i.sstatic.net/tl9UM.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/tl9UM.png" alt="enter image description here"></a></p>

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

<p><a href="https://i.sstatic.net/PgG9k.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/PgG9k.png" alt="enter image description here"></a></p>

<p>(Source of image <a href="https://www.bls.gov/opub/mlr/2011/01/art3full.pdf" rel="nofollow noreferrer">here</a>)</p>

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

<p><a href="https://i.sstatic.net/qgDiG.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/qgDiG.png" alt="enter image description here"></a> </p>

<p>(Source of image <a href="http://www.keepeek.com/Digital-Asset-Management/oecd/social-issues-migration-health/redistribution-policy-and-inequality-reduction-in-oecd-countries_5kg5dlkhjq0x-en#page16" rel="nofollow noreferrer">here</a>)</p>

<p>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.</p>

CC BY-SA 3.0
2017-09-27T18:57:48.250Z
Could you please clarify what your first graph shows? It is not clear to me.
rapt
CC BY-SA 3.0
2017-09-27T19:45:41.077Z
@rapt It is the proportion of all income paid as salary, instead of paid as profits and interest. See more about it [here](https://en.wikipedia.org/wiki/Wage_share).
luchonacho
CC BY-SA 3.0
2017-09-27T06:21:48.093Z
2017-09-27T06:46:53.980Z
2017-09-27T06:46:53.980Z
luchonacho
<p>This is referring to an earlier question: <a href="https://economics.stackexchange.com/questions/10511/why-are-real-median-household-incomes-stagnant">Why are real median household incomes stagnant?</a></p>

<p>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?</p>

<ol>
<li><a href="https://fred.stlouisfed.org/series/MEPAINUSA672N" rel="noreferrer">Real Median Personal Income in the United States</a></li>
</ol>

<p><a href="https://i.sstatic.net/DtWrj.png" rel="noreferrer"><img src="https://i.sstatic.net/DtWrj.png" alt="enter image description here"></a></p>

<ol start="2">
<li><a href="https://fred.stlouisfed.org/series/MEHOINUSA672N" rel="noreferrer">Real Median Household Income in the United States</a></li>
</ol>

<p><a href="https://i.sstatic.net/3n7lF.png" rel="noreferrer"><img src="https://i.sstatic.net/3n7lF.png" alt="enter image description here"></a></p>

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

<ol start="3">
<li><a href="http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/" rel="noreferrer">For most workers, real wages have barely budged for decades</a></li>
</ol>

<p><a href="https://i.sstatic.net/BW1kj.png" rel="noreferrer"><img src="https://i.sstatic.net/BW1kj.png" alt="enter image description here"></a></p>

<p>as well with the following graph which also seems to show stagnant wages:</p>

<ol start="4">
<li><a href="http://www.epi.org/publication/charting-wage-stagnation/" rel="noreferrer">Wage Stagnation in Nine Charts</a></li>
</ol>

<p><a href="https://i.sstatic.net/m7EXP.jpg" rel="noreferrer"><img src="https://i.sstatic.net/m7EXP.jpg" alt="enter image description here"></a></p>

CC BY-SA 3.0
2017-09-26T23:59:18.483Z
Try https://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".
Henry
CC BY-SA 3.0
2017-09-27T00:18:25.863Z
@Henry Your comment is too short. Could you expand?
rapt
CC BY-SA 3.0
2017-09-27T02:27:24.800Z
[This question](https://economics.stackexchange.com/questions/15558/productivity-vs-real-earnings-in-the-us-what-happened-ca-1974) covers much of the same territory.  Wages did stagnate beginning in the mid-70s.
Hot Licks
CC BY-SA 3.0
2017-09-27T03:44:50.880Z
@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.
rapt
CC BY-SA 3.0
2017-09-27T05:29:03.573Z
Your first two graphs are "household income" rather than "wages". This might happen if say perhaps pensions have increased faster than wages
Henry
CC BY-SA 3.0
2017-09-27T11:38:13.800Z
If you look at the detailed charts (I don't recall what's included in my question), there is no obvious "wage" stagnation if you look at all incomes taken together.  But when you break it down to income categories the lower ranks have been hit very hard.  What happened is that CEO and boardroom income rose dramatically as "worker" income flat-lined.  CEO income is now 300-700 times "worker" income, whereas ca 1970 it was only 30 times or so.
Hot Licks
CC BY-SA 3.0
2017-09-27T19:03:39.160Z
The earlier question I linked to states "real median household incomes [not wages] have been stagnant" - is it wrongly phrased then?
rapt
CC BY-SA 3.0
2017-09-29T00:13:05.933Z
The FRED charts you present conveniently don't go back to before 1974, so it's hard to compare pre-Reaganomics numbers to post-Reaganomics numbers.  And keep in mind that the stagnation in the lower wage ranges was "compensated" for by the incredible growth in the highest income brackets.  So, depending on how the "median" or whatever is calculated, the stagnation can be concealed.
Hot Licks
CC BY-SA 4.0
2018-08-23T16:26:25.467Z
Don't these trends have different populations too? I think wages are for earners, while personal income includes everyone. Given the rise of prime-age LFPR (mostly due to women), incomes could rise even as wages fall. https://fred.stlouisfed.org/series/LNS11300060
Max Ghenis
<labor-economics><economic-growth><inequality><wages>
Has US real median personal/household income been stagnant since the late 1970's/early 1980's?
rapt
# Has US real median personal/household income been stagnant since the late 1970's/early 1980's?

(Asked by: username_0 on 2017-09-26)

This is referring to an earlier question: [Why are real median household incomes stagnant?](https://economics.stackexchange.com/questions/10511/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](https://fred.stlouisfed.org/series/MEPAINUSA672N)

[![enter image description here](https://i.sstatic.net/DtWrj.png)](https://i.sstatic.net/DtWrj.png)

2. [Real Median Household Income in the United States](https://fred.stlouisfed.org/series/MEHOINUSA672N)

[![enter image description here](https://i.sstatic.net/3n7lF.png)](https://i.sstatic.net/3n7lF.png)

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

3. [For most workers, real wages have barely budged for decades](http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/)

[![enter image description here](https://i.sstatic.net/BW1kj.png)](https://i.sstatic.net/BW1kj.png)

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

4. [Wage Stagnation in Nine Charts](http://www.epi.org/publication/charting-wage-stagnation/)

[![enter image description here](https://i.sstatic.net/m7EXP.jpg)](https://i.sstatic.net/m7EXP.jpg)

**Tags:** labor-economics, economic-growth, inequality, wages

> **Comments:**
> **username_1**: Try https://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".  
> **username_0**: @username_1 Your comment is too short. Could you expand?  
> **username_2**: [This question](https://economics.stackexchange.com/questions/15558/productivity-vs-real-earnings-in-the-us-what-happened-ca-1974) covers much of the same territory.  Wages did stagnate beginning in the mid-70s.  
> **username_0**: @username_2 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.  
> **username_1**: Your first two graphs are "household income" rather than "wages". This might happen if say perhaps pensions have increased faster than wages  
> **username_2**: If you look at the detailed charts (I don't recall what's included in my question), there is no obvious "wage" stagnation if you look at all incomes taken together.  But when you break it down to income categories the lower ranks have been hit very hard.  What happened is that CEO and boardroom income rose dramatically as "worker" income flat-lined.  CEO income is now 300-700 times "worker" income, whereas ca 1970 it was only 30 times or so.  
> **username_0**: The earlier question I linked to states "real median household incomes [not wages] have been stagnant" - is it wrongly phrased then?  
> **username_2**: The FRED charts you present conveniently don't go back to before 1974, so it's hard to compare pre-Reaganomics numbers to post-Reaganomics numbers.  And keep in mind that the stagnation in the lower wage ranges was "compensated" for by the incredible growth in the highest income brackets.  So, depending on how the "median" or whatever is calculated, the stagnation can be concealed.  
> **username_3**: Don't these trends have different populations too? I think wages are for earners, while personal income includes everyone. Given the rise of prime-age LFPR (mostly due to women), incomes could rise even as wages fall. https://fred.stlouisfed.org/series/LNS11300060  

---

## 1 answers

### Answer by username_4 on 2017-09-27. Score: 4

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.

[![enter image description here](https://i.sstatic.net/tl9UM.png)](https://i.sstatic.net/tl9UM.png)

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

[![enter image description here](https://i.sstatic.net/PgG9k.png)](https://i.sstatic.net/PgG9k.png)

(Source of image [here](https://www.bls.gov/opub/mlr/2011/01/art3full.pdf))

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:

[![enter image description here](https://i.sstatic.net/qgDiG.png)](https://i.sstatic.net/qgDiG.png)

(Source of image [here](http://www.keepeek.com/Digital-Asset-Management/oecd/social-issues-migration-health/redistribution-policy-and-inequality-reduction-in-oecd-countries_5kg5dlkhjq0x-en#page16))

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.

> **Comments:**
> **username_0**: Could you please clarify what your first graph shows? It is not clear to me.  
> **username_4**: @username_0 It is the proportion of all income paid as salary, instead of paid as profits and interest. See more about it [here](https://en.wikipedia.org/wiki/Wage_share).  

---

