Casual observation might make the claim that incomes have been stagnant for decades seem implausible. After all, just look at what a typical household consumes in 2022 compared to, say, 1992. Advances in medical care, safer automobiles, the spread of smartphones, video conferencing with friends and family, and higher-quality home appliances are just a few examples of the significant consumption gains over those decades. Could this material progress really have coincided with stagnating incomes?

Relying on anecdotes and intuition to compute economic trends can work sometimes, but it can just as easily lead one astray. Fortunately, we can find clarity in statistics released last month by the nonpartisan Congressional Budget Office - the referee in US economic policy debates - which confirm that the conventional wisdom is off-base.

According to the CBO, median household income from market activities - labor, business, and capital income, as well as retirement income from past services - was not stagnant from 1990 to 2019. Instead, after adjusting for inflation, it grew by 26%. This is in line with wage growth. By my calculations using Bureau of Labor Statistics (BLS) data, inflation-adjusted average wages for nonsupervisory workers grew by around one-third over this period.

Moreover, a more comprehensive measure of the flow of financial resources available to households for consumption and savings helps to account for the non-market income they received and for the taxes they paid. After factoring in social insurance benefits (from Social Security and unemployment insurance, for example), government safety-net benefits (such as food stamps), and federal taxes, the CBO finds that median household income increased by 55% from 1990 to 2019, which is significantly faster than wage growth and certainly not stagnate. The bottom 20% of households enjoyed even greater gains, with market income growth of 51% and after-tax-and-transfer income growth of 74%.