NCPA - National Center for Policy Analysis

New Index Shows Americans Struck Gold in Last Five Years

April 26, 2002

Business Week economists have developed a household prosperity index -- which is a weighted combination of real wage income per worker and real net worth per household, taking into consideration household debt.

  • Measured by this index, household prosperity has risen by 20 percent over the past five years -- compared to a 16 percent gain in the best five-year stretch of the 1960s.
  • Households gave back few of their gains in 2000 and 2001 -- as strong real estate prices and rising wages offset stock losses.
  • Real wage and salary income per worker was up a strong 16 percent since 1996.
  • The median sale price of existing single-family homes has increased by 18 percent, adjusted for inflation -- one of the strongest showings on record.
  • And the value of stocks held by households -- even after the meltdown -- is up 41 percent since the end of 1996.

The last time the prosperity index fell for an extended period was from 1973 to the early 1980s -- when productivity growth slowed to a crawl.

But the U.S. now seems to be enjoying an acceleration in productivity -- which bodes well for future wages. Productivity rose at a 5 percent pace in the fourth quarter, and the first quarter figure is expected to be strong also.

Source: Michael J. Mandel, "How Prosperous Are We?" Business Week, April 29, 2002.


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