*Note – I wrote this post just before the Census Bureau released the official 2017 Median Household Income Numbers. I may update these numbers in the future to reflect the 2017 data. You can find my post on the new 2017 Median Household Income here.

I heard Born In The U.S.A. the other day while working in my office. I sang out loud. That album came out in June of 1984, when I was an impressionable youth. It launched the Boss back into the Stratosphere of popularity, where he had previously been launched nine years prior with Born To Run.

The man should definitely title his next album something starting in “Born”.

I remember the first time I heard that opening line coming out of my Emerson boom-box….

“Born down in a dead-man’s town, the first kick I took was when I hit the ground”.

Being in Baltimore, a dead-man’s town (literally), I thought “Now this I can identify with”.

Ok, ok, enough diversion. Hearing it recently mainly reminded me that I was sitting on a cool set of data from the Census Department about median incomes from 1984 – 2016. 🙂

Yes, “1984” was the memory trigger. I’m a music junkie, so when I hear something from the past that I like, it often makes me think of the year it came out and what I was doing then.

In 1984 I was wearing O.P. corduroy shorts, muscle shirts, and wearing colorful rubber bracelets. And I had a massive crush on Heather Locklear, who was on T.J. Hooker.

The 80’s were really strange weren’t they?

Back on topic… Springsteen is known for being the working man’s musician, and he’s written countless songs about the plight of the blue-collar working class. About factories closing, no jobs. Unions. Poor wages.

So, after hearing the song again, and looking at my data set, I decided to analyze real wage growth from 1984 to 2016.

Inspiration comes in many forms.

Have Incomes Gone Up?

I’ll get right to it. Here’s a map of the median income of each state in 1984, but with the numbers adjusted to 2016 dollars.

The Census Bureau published this data and ran the numbers to adjust the actual median incomes of 1984 for 32 years of inflation. So imagine yourself two years ago in 2016 making these salaries, and basically that was your equivalent salary as far as purchasing power in 1984. Make sense?

Now here’s the 2016 Median Income By State.

Pretty big difference. Notice all states are now over $40,000 but I left the legend category in for effect. Remember, these are in equivalent, inflation adjusted dollars. Now let’s take a look at the difference in percentage between the two for each state.

Here’s the percentage change for each state in the 1984 median income (adjusted to 2016 dollars), and the 2016 median income.

A popular rallying cry for along time now has been that “real wages” haven’t increased, and the middle class actually makes less than they used to.

But as we can see above, every state except one, Nevada, has a higher inflation-adjusted median income than they did in 1984. Nevada dropped from $56,733 to $55,431.

Here are states with the five lowest increases (or decrease) over the 32 year period.

Nevada 98% Louisiana 101% Delaware 102% Kansas 105% Alaska 106% Ohio 106%



Here are states with the five highest increases over the 32 year period.

Washington D.C. 158% Tennessee 139% Pennsylvania 136% Iowa 135% New Hampshire 134% South Dakota 134%

It doesn’t surprise me at all that Washington D.C. is at the top here. Coming from Baltimore I was aware during my younger years that D.C. wasn’t a whole lot better than Baltimore. Tons of crime and murders, and large swaths of urban blight.

Well Washington D.C. has been undergoing a massive transformation for a long time now, with an influx of young and highly educated professionals. Entire sections of the city have been gentrified, and the process only seems to be accelerating.

Washington D.C. saw a 158% increase in inflation adjusted median income between 1984 – 2016. That’s huge.

Lies, Damned Lies, And Statistics

This article from CNBC challenges the often repeated ‘fact’ of wage stagnation by noting that most employees increasingly get large parts of their income from benefits such as health care, paid vacation time, flex hours, improved work environments, and daycare.

The author further cites our increasing purchasing power as compared to the 1950’s or 60’s with items such as washing machines and TV’s being much cheaper now.

This piece from the Pew Research Center takes a different view. It claims that after adjusting for inflation, today’s average hourly wage has just about the same purchasing power it did in 1978.

The author is using some of the same statistics about wage growth, inflation, and the consumer price index as the CNBC author.

So what’s the truth? Well, like anything in life, it’s probably not on either extreme and somewhere in between. While I’ve clearly shown in the maps above that incomes have gone up when adjusted for inflation (since 1984 at least), the purchasing power side of things is entirely different.

Some things such as consumer durable goods are indeed way cheaper than they were 30 years ago. But of course other things, like a house, are more expensive.

Aha, on that latter note the plot thickens……

The average home size in has increased tremendously over time. So yeah, a 2600 square foot house is going to cost more than a 1600 square foot one.

Why are houses so much bigger?

Partly because we have more stuff, which we buy.

But wait, I thought purchasing power has stayed about the same over time, according the Pew article?

Well, we buy more types of things today don’t we?

Think about it. If you’re reading this you likely have a smartphone, a laptop, possibly also a full desktop computer, and a video game system. And maybe a tablet too. You also likely have 2.3 televisions.

In the 1970’s you had none of these, except possibly a TV. But it was very unlikely your household had more than one TV in 1970.

Most middle class families now have things like webcams and bluetooth speakers, dehumidifiers and garbage disposals. Look around your house and life and consider all of things you have that either weren’t yet invented in say, the 1970’s, or that were far too expensive for the middle class.

So has our purchasing power stayed the same, or are we just purchasing more things, and more “classes” of things that never existed before?

Of course some things like the cost of college have undeniably gone crazy, there’s no question about that. But not everyone has kids, and not every kid goes to college.

There’s no denying Americans have more stuff than ever, per capita. The growth of the self-storage industry has rivaled college tuition, and shows no signs of slowing.

We’ve increased home sizes from 1600 square feet to 2600 square feet over 30 years, and yet it’s not enough. We still need more storage.

I find this disturbing.

And I also find it a very complex and under looked piece of the puzzle when I hear the cry that “middle class incomes have been stagnant”. Hmmm…

Be A Skeptic

I know, it’s a complex issue. Anecdotally, a few clicks on the web will show certain things that are more expensive than they were years ago. And others that are way cheaper. There’s college costs, and of course the big one, heath care costs.

If anything, I think we should all have a skeptical mindset when we hear that middle class incomes have been stagnant. Or that they’ve gone way up. It’s clearly not as simple as citing income data and inflation or CPI data. It’s a lifestyle issue, and we’re living very differently than we were even 20 years ago.

Any detailed analysis would require a painstaking analysis of consumer expenditures across the board – including the cost of things that didn’t exist 30 years ago, and how much of them we have.

It would be immensely complex, and still not applicable to everyone since we live very different lives, even when in the same income category.

Your turn readers – What’s your take on wage growth or stagnation? Am I totally off base in some of my analysis? Fire away!