Real wage growth for the lowest-earning quarter of American workers turned negative by late 2024, according to a study published by the Federal Reserve Bank of Chicago in 2026. The research examines how a technical change in how the government caps reported wages—called "topcoding"—affects measures of wage growth, and reveals that how researchers calculate wage gains can lead to starkly different conclusions about which workers are keeping up with rising prices.
From January 2010 through March 2023, the share of workers whose wages hit the topcode threshold climbed steadily, reaching roughly 7.5% by 2022. In April 2023, the Census Bureau switched from a fixed cap of $2,885 in weekly earnings to a dynamic method that assigns the top 3% of earners the weighted average of earnings among that top group each month—jumping the topcode value to $9,334.70. When researchers measured wage growth using average wages by quartile, the highest earners showed a sharp increase starting in 2023, largely mechanical because topcoded weekly earnings rose from $2,885 to over $9,000. But when the study used median wages instead—which are less sensitive to extreme values—the pattern shifted dramatically. Growth in median real wages for the top quartile stayed flat from mid-2023 to mid-2025, then began declining, turning negative by the end of 2025.
The authors note that using a measure accounting for extreme values and technical adjustments like topcoding changes is crucial for understanding economic trends. The report states that well-known wage trackers, including the Atlanta Fed's Wage Growth Tracker, discard all topcoded values to sidestep these distortions. The study also points out that median wage growth has its own limitations: people tend to report rounded wages, creating "heaping" and "bunching" in the data that can make growth rates at the median look quite different from percentiles just slightly higher or lower.
The report explains that topcoding exists to protect individual privacy in the Current Population Survey, jointly sponsored by the Census Bureau and Bureau of Labor Statistics. When wages grow but the topcode threshold stays fixed, more workers' actual earnings get masked, mechanically lowering average wage growth measures. When the threshold changes suddenly, average wage growth can shift dramatically even if underlying earnings haven't moved. The authors also highlight that the choice of price deflator matters: recent research suggests prices for less well-off groups have been rising faster, though one Cleveland Fed study found the bottom 40% of earners also saw faster wage growth from 2019 to 2024, resulting in the highest real wage gains. Still, using alternative price measures, the Chicago Fed researchers found similar results to their main findings—the lowest-earning group had the weakest real wage growth in 2025.
The report concludes that grasping how the economy evolves for different groups is vital both for spotting macroeconomic vulnerabilities and for understanding consumer sentiment. Real wage growth slipped into negative territory for the second, third, and fourth quartiles of earners by early 2026, following the bottom quartile's decline in late 2024. The bottom line: technical decisions about how wage data are measured can obscure or reveal which workers are truly gaining ground—and right now, the lowest earners are falling behind.