Incomes are rising in America, especially for the poorest

Cardi B, better known for her punchy hip-hop than her economic analysis, recently observed that the price of a lettuce had soared to as much as $7. “If I think that shit is crazy, I can only imagine what middle-class people or people in the hood are mother [bleep] thinking,” she said. Ms B is right. Paying that much for a head of lettuce is indeed crazy. Inadvertently or not, she also opened a window onto a more fraught topic than the price of greens: are incomes in America going up or down?

Answering this question might seem easy. Hourly wages today are, on average, about 15% higher than on the eve of the pandemic—the biggest increase over any three-year period since the early 1980s. But soaring prices for everything from vegetables to vehicles has reminded consumers that what really matters is how much they can actually buy with their paycheques. When looking at real earnings—that is, accounting for inflation—the picture is more complex. If anything, low-income Americans appear to have fared the best in the upside-down post-pandemic period. In the longer run, the range of estimates is so vast that some economists argue that median incomes have stagnated for half a century whereas others insist that the American dream of upward mobility is alive and well. A closer look at the data points towards the more optimistic end of the spectrum, albeit with some big caveats.