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Study Shows Middle-Class Wages Have Stagnated Over Time

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It’s getting harder for most American workers to get by.

Middle- and working-class workers’ earnings in the US have been stagnating or sinking in recent decades, according to a study conducted by a group of researchers that included the University of Minnesota’s Fatih Guvenen, Ph.D., Curtis L. Carlson professor of economics in the College of Liberal Arts. The team’s research, recently covered in a Washington Post article, explores how the lifetime income for men and women in the US has changed over six decades, from 1957 to 2013.

The study, which used records from the US Social Security Administration to track the individual income of millions of people over the course of their lives, was published as a working paper by the National Bureau of Economic Research in April. Guvenen collaborated with researchers from the University of Chicago, Princeton University and the Social Security Administration to conduct the research.

Despite the growth of the nation’s overall economy, the study notes that workers who entered the workforce in 1983 made about $283,000 less during their lifetimes—$243,000 less when factoring in employment benefits separate from pay—than workers who entered the workforce in 1967, when using the Consumer Price Index to account for inflation. Meanwhile, the wealthiest workers have benefited from more and more economic gains, increasing the gap between the rich and everyone else.

The study set out in part to shed more light on an economic trend that has persisted since the 1970s: stagnating average incomes. While many economic studies have tried to understand this trend by looking at income data from any given point in time, this study considered the total earnings an individual brings in during their lifetime.

Changes over the decades have decreased the earnings gap between genders, the study found, with men’s wages lowering and women’s generally rising, although women are still making less than men over their lifetimes. Men entering the workforce in 1983, for example, earned 10–19 percent less over their lifetime (depending on the measure of inflation used) than those who entered the workforce in 1967. The same timeline saw women’s income grow 22–33 percent, though the rise in women’s earnings has stalled more recently. Overall, growth in women’s wages did not offset the decrease men’s income across the population.

By comparing early-career earnings to lifetime income, the study found that workers’ average income at age of 25 (toward the beginning of their careers) can effectively forecast their lifetime earnings. The researchers believe that, moving forward, the key to understanding exactly why wages are stagnating or decreasing may lie in examining the beginning of their careers.

“In order to understand why the US income distribution has changed dramatically over the past 50 years,” the authors wrote, “we need to better understand the experiences of newer cohorts during their youth (and possibly earlier), and how those experiences differ from older cohorts.”

Moving forward, the study could set the stage for additional research that may shed light on the specific causes of the middle class’s decline—and possibly lead to recommendations that economists and policymakers can use to help prevent it.

Kevin Coss

Kevin Coss

Kevin is a writer and public relations associate with the Office of the Vice President for Research.

coss@umn.edu

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