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.”