Here’s How Much Income Has Changed for Low, Middle and High Earners

There’s been a lot of talk about U.S. wages over the years. It’s no secret that there are disparities between income groups and that wages have struggled to keep up with inflation . But it’s not always immediately clear how significant these disparities are, nor how much wages have changed over time.

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Using data from the Economic Policy Institute, Visual Capitalist recently created a graphic depicting the changes in real wages from 1979 to 2023 across all major income groups. These are the main results, as well as some key factors for why wages have changed over time .

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Growth of US Real Wages Over the Years

As per the data, here’s how real wages in the U.S. have changed from 1979 to 2023 by wage group:

• High-wage (90th percentile): Wages have risen by 46.2% since 1979. This is a little over 1% annual growth rate — roughly twice that of any other group. Those in this income group earn around $57.81 an hour on average.
• Upper-middle-wage (60th to 80th percentile): Real hourly wages have gone up by 23.4%, or 0.54% annually. The average hourly wage is $33.93.
• Middle-wage (40th to 60th percentile): The U.S. real hourly wage rose by 17.4% for a 0.4% annual growth rate. Those in this group earn an average of $23.79 an hour.
• Lower-middle-wage (20th to 40th percentile): Wages have gone up by 20.8%, or 0.48% per year. The average hourly wage is $18.
• Low-wage (10th percentile): The U.S. real hourly wage increased by 17%, which is an annual growth rate of just 0.4%. The average hourly wage is $13.51.

In just a little over four decades, only the high-wage income group has seen a decent hike in income. The low-wage and middle-wage — 10th and 40th-60th percentiles, respectively — saw the least amount of growth.

Notably, wage growth outpaced inflation from 2019 to 2023 — during the COVID-19 pandemic. This could be attributed to a number of factors, not least of which is high labor demand within the lower-income group.

Here’s how real hourly wages changed specifically and cumulatively during those four years:

• High-wage group: Wages rose by 0.9%.
• Upper-middle-wage group: Wages rose by 2.0%.
• Middle-wage group: U.S. real wages went up by 3.0%.
• Lower-middle-wage group: Wages increased by 5.0%.
• Low-wage group: Wages rose by 12.1%.

While wages have continued to rise since the pandemic, growth has become somewhat stunted. To illustrate this further, the average YoY (year-over-year) real wage growth was 7.7% in April 2020. It was just 0.8% in June 2024.

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Slower Wage Growth and Changes to the Lower, Middle and Upper Class

Slower wage growth has had a direct impact on the U.S. “class” system. Here’s how it has affected the lower, middle and upper classes specifically, according to the Pew Research Center :

• Lower class: This income group grew from 27% in 1971 to 30% in 2023.
• Middle class: Due to the widening gap between classes, this group — which is anyone who earns between two-thirds and double the U.S. median household income — has fallen from 61% to 51%.
• Upper class: These households rose from 11% in 1971 to 19% in 2023.

Now, let’s take a closer look at incomes within each of these groups — today vs. roughly four decades ago (from 1970 to 2022). All incomes are based on three-person households and shown in 2023 U.S. dollars:

• Lower income: The median income increased somewhat slowly — from $22,800 to $35,300. That’s a 55% cumulative increase.
• Middle income: The median household income rose from $66,400 to $106,100. That’s a 60% cumulative increase.
• Upper income: For these households, the median income went from $144,100 to $256,900. This is a 78% increase, the highest by far.

As a result of these changes in incomes, there’s a bigger gap between upper-income households and everyone else.

Reasons for These Changes

Many factors can be attributed to these income changes, including:

• Inflation: Nominal wages may rise, but they don’t always keep up with inflation rates. As the cost of living rises — particularly in areas like healthcare and housing — U.S. real wages can stagnate or decrease.
• Pandemic-related changes: As you can see from the data, wage growth was at its strongest during the pandemic. The annual rate of wage growth was 2.9% during this time — higher than it was during any of the previous 40 or so years.
• Technological changes: Advancement in technology — like automation — have also affected wage growth. Industries that rely heavily on these advancements generally require more skilled workers, who in turn demand higher wages. A 2022 study published by The Econometric Society found that between 50% and 70% of changes in U.S. wages from 1973 to 2016 were directly related to automation technologies and their implementation in the workforce.

Tax policies and new regulations also play a role in wages. One of the big ones was the Fair Labor Standards Act (FLSA).

“The FLSA is what establishes important compensation standards such as minimum wage, overtime pay and prohibiting child labor. However, there are some exceptions here and there,” said Ben Michael, attorney at Michael & Associates .

One example of this is overtime pay rights and how they’re not equally applicable to all workers.

“On one hand, temporary employees are subject to overtime pay just like full-time employees. This is meant to ensure that temporary employees aren’t unfairly taken advantage of — being asked/forced more than 40 hours per week without receiving the same additional compensation other workers receive,” said Michael. “However, there are a handful of particular professions which simply don’t fall under those protections. These include lawyers, teachers, doctors, some outside sales professionals and some computer professionals.”

This article originally appeared on GOBankingRates.com : Here’s How Much Income Has Changed for Low, Middle and High Earners