Cleveland Fed researchers find that real incomes for today’s middle class are somewhat higher than previous decades, but less so when demographic shifts are taken into account
U.S. households today are smaller, older, more educated, and more racially and ethnically diverse on average than they were 40 years ago. In this Economic Commentary, Cleveland Fed researchers Emily Dohrman and Bruce Fallick, analyze how median real incomes in the United States have changed since 1980 under a definition of the middle class that adjusts for changes in demographics.
The researchers found housing, healthcare, and education are a much larger burden than they used to be for the middle class, with education prices increasing over 600 percentage points more than incomes, while prices in nearly every other category have decreased relative to middle-class incomes, making these items relatively cheaper and more accessible.
“We conclude that real incomes for today’s middle class are somewhat higher than they used to be in 1980, particularly for households headed by two adults,” say Dohrman and Fallick. “However, failing to adjust for demographic shifts in the population relating to age, race, and education can indicate a more positive outlook than is truly the case.”
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Doug Campbell, email@example.com, 513.455.4479