Source: Advisor Perspectives

 

Courtesy of Doug Short, we see from the above that the past decade has seen no gains in real median household incomes. Indeed, the free fall began in earnest in 2008, and now reflects an 8.1% decrease in real  buying power.

This is for the median household — we know from Fed and IRS data that the past decade has seen a modest gains in the top 30% of all earners, bigger gains in the top 10%, very significant increases in the top 1.0%, and enormous gains in the top 0.1%.

If you combine the real median income chart above with knowledge of an  how US income distribution is skewed, you get a much into starker context for median income changes. It implies that the bottom 70% has done far worse than the minus 8% of this chart.

Category: Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

27 Responses to “Real Median Household Income in the 21st Century”

  1. dougc says:

    The people that work at Walmart can’t afford to shop at Walmart.

  2. Conan says:

    I like to read the data driven commentary that Doug does. Here is the chart that I look at that even breaks this down more, by Quintile. You will notice that on an inflation adjusted basis the first 4 quintiles are flat, only the top one has growth. This is a 44 year chart so compounded growth can be impressive. However almost all this growth was from 1966 to 2000. From 2000 on even the top quintile has not been growing.

    http://advisorperspectives.com/dshort/updates/Household-Income-Distribution.php

    The above noted chart for real earnings taking into account of inflation is great, the only remaining question would be what if taxes were taken into account? Would the top earners then have kept growing???

  3. Jafo says:

    “If you combine the real median income chart above with knowledge of an how US income distribution is skewed, you get a much into starker context for median income changes. It implies that the bottom 70% has done far worse than the minus 8% of this chart.”

    In the absence of other information, the upward skew of the high-earners does not necessarily suggest to me that there is a further downward skew of the low-earners, since this is the median (as opposed to the mean).

    ~~~

    BR: Its the median — if the top group is skewed upwards, what happens to the rest. . . ?

  4. Fjames3 says:

    combined with this who do you think they should be talking about raising taxes on?

    http://www.businessinsider.com/corporate-profits-hit-new-record-high-2012-11

  5. wally says:

    “The people that work at Walmart can’t afford to shop at Walmart.”

    Nor housing nor health insurance.

  6. BennyProfane says:

    And some people think that housing prices will “recover” to pre crash levels somehow.

  7. DeDude says:

    The part that puzzle me is that demand has not been hurt that much and that debt is easing up a bit. In a simple model, increases in demand (and economic growth) would require either increased income or increased debt. And it would have to affect the consumer class since they spend rather than invest additional income/debt.

    The answer may be in who caused the increased demand and who have paid (or increased) their debt.

    Under Bush II the plutocrats created a housing bubble to allow consumer to increase consumption (via home equity withdrawal) without plutocrats needing to share their wealth. Has all the QE under Obama served the same purpose – by allowing the newly printed money to find ways into consumption or debt repayment for certain groups?

  8. rd says:

    The Bush tax cuts were a grand experiment of trickle down economics. We then had massive deficit spending since the Iraq invasion which should theoretically improve income (although it was not spent in the areas that would really generate jobs and investment in infrastructure).

    The data clearly show that trickle-down economic theory has failed miserably in the real world. Can we put a stake in its heart and move onto a real discussion of how to advance the economy? I think even a majority of Republicans in Congress understand this now but are politically bound by Grover’s “Pledge of Allegiance to the Bush Tax Cuts” that they are required to recite daily.

  9. techy says:

    40% of the households have income less than $30k/month, WOW, this is worst than I used to think, I am not even sure how they can make ends meet(public housing/trailer park, PBJ sandwich 6 times a week, potatoes, chicken leg quarters, food stamps, no other protein, no other vegetables or fruits)

    http://advisorperspectives.com/dshort/updates/Household-Income-Distribution.php

  10. menglish says:

    It turns out the “median” doesn’t tell us anything about how bad the bottom 70% have it.

    All we know is that the bottom 50% of people were at or below the -8.1% level (we know nothing about how much below…they could _all_ be at -8.1%). We also know that the 20% from 50-70% are at or _above_ -8.1%.

  11. sellstop says:

    All of the “experts” on the financial channels insist that lowering corporate profits is the way to stimulate job growth. As if just due to the fact that someone has a few extra bucks in their pocket they will be incentivized to start a new business or hire more workers into their existing business. I don’t buy it. No business hires more workers unless they have a demand for the products or services they are in business to sell.

    However, business owners are keen on not paying taxes. From a personal wealth standpoint as well as just from a philisophical perspective. So it seems to me that the way to incentivize business to invest in production would be to have high taxes on corporate profits. Eliminate the safe-haven loopholes as best as possible so money can’t be hidden. And of course the business deductions for capital investment/improvement and labor/pension cost stay in place. This incentivizes a business owner to put the profits back into the business instead of putting them in a US Treasury bond or in a Bahamian offshore tax shelter.

    And raise the depreciation rates on capital equipment purchases that are manufactured in the U.S.
    Give a little extra deduction for labor expenses. This puts more money in the hands of Mr. Ford’s factory workers who can then purchase a new Model T.

    And as an added incentive, and I know this is patently unfair, put in place a tax on wealth. Maybe 2% on wealth over 5 million or so. Assessed yearly. With a deduction for business expenses for investment in this country of course. Get these super rich cats to stop sitting on a pile of money and put it to good use. That is what money is for! We printed all this money over the last 30 years, we need it put to some good use now!

    And finally, raise the Medicare payroll tax as well as the Social Security tax and make those programs solvent. Put some safety in the future of workers and they will go about spending the money they make instead of saving it for the calamity that they know is coming because that is all the talking financial heads are talking about! Talk about the future of all the citizens of this country. Young as well as old. If you want to rant about “uncertainty” as a reason that business is not investing, keep in mind that that same uncertainty is a sure killer of consumer demand.

    Getting the most out of capitalism and capitalists is a lot like herding cats. They all have an independant streak and like to go on their own. If there is a mouse to catch they will only rarely co-operate, and the one who catches the mouse will not share willingly. This is the role of government of the people. Herding the capitalists, keeping them in mice, and making them share in the catch.
    Get going. Don’t just sit there!

  12. ellsworth says:

    How about taking Total Income and dividing it by Total Employed…rather than Total Households. Otherwise, changes in the unemployment rate skew the results, yes?

    Average household income could drop while average income/employed person actually rises. Tells a very different story…

  13. James Cameron says:

    “If you combine the real median income chart above with knowledge of an how US income distribution is skewed, you get a much into starker context for median income changes. It implies that the bottom 70% has done far worse than the minus 8% of this chart.”

    The chart is based on this report:

    http://www.sentierresearch.com/reports/Sentier_Household_Income_Trends_Report_October2012_11_26_12.pdf

    which in turn relies on U.S. Census Bureau data. Using the same data, this chart:

    http://goo.gl/P6PPO

    shows income limits for each fifth of households and top 5 percent from 1967 thru 2011 (Sentier relies on CB data from the Current Population Survey to obtain its results through October 2012). At the top of the chart the change in these limits since 2000 and 1967 is shown. For example, since 2000 the income limit for the first quintile has fallen over 15%. Note, across all income groups there has been a decline of 8.73% since 2000 . . . matching more or less the number above. See:

    http://goo.gl/Y8kb5

    for a graphic. Similar numbers are obtained if the income limit is replaced with the mean.

  14. Josh Barro says:

    Liberals talk about booming incomes at the top while lower-income households barely see benefits from economic growth. Conservatives talk about a rising share of the population that depends on government benefits and a shrinking share that pays income tax.

    Though the frames are different, these are descriptions of the same economic phenomenon: rising inequality of pre-tax incomes. But only liberals are advancing a semblance of an agenda to address it.

    The main liberal reaction to this phenomenon is to call for more progressive fiscal policy: higher taxes on the rich people who have benefited most from the last 30 years’ gains in gross domestic product to pay for programs that raise low- and middle-income people’s after-tax incomes. Obamacare, which raised taxes on the rich to fund a new health-care entitlement for the poor and middle class, is a key example of this agenda.

    Liberals also advocate policies that are aimed at reducing pre-tax inequality: more subsidies for education, trade protection, industrial policy to support medium-skill jobs in manufacturing, easier unionization, minimum-wage increases, rent control.

    All of these policies have a trade-off: in exchange for reducing income inequality, they are likely to reduce GDP growth. But some are better than others. Minimum-wage increases in the range being discussed in today’s political debates don’t seem to have significant negative impacts on employment or output. There is room for a significant increase in tax progressivity without (much of) a negative impact on GDP growth, especially if the reform is well-designed.

    But the key problem in this debate isn’t that liberals’ ideas are bad, though many of them (especially on trade) are. It’s that conservatives have no serious proposals of their own on rising inequality.

    -Why Conservatives Must Surrender on ‘Redistribution

  15. Joe Friday says:

    ellsworth,

    Average household income could drop while average income/employed person actually rises. Tells a very different story…

    Indeed, but the reverse is what occurred.

    Even though real “household income” (median, mean, average) indicated a rise both early on and later during the Chimpy Bush administration, real (inflation-adjusted) wages actually declined the entire period.

    “Household Income”, of any variation, is simply not a measure of anything, which is why the ‘Housing and Household Economic Statistics Division‘ at the Census Bureau stopped relying upon it.

  16. Christopher says:

    Liberals believe that government solves problems.

    Conservatives believe that government creates problems.

    This data only reinforces my hunch that there will be a strengthening trend of “dressing down”.
    Those that display their wealth may find themselves not so welcome in some areas.

    If I really like trains….and I don’t mind carrying my silver in a bindle….
    Does that make me a hobosexual?

  17. DeDude says:

    “Liberals believe that government solves problems”
    “Conservatives believe that government creates problems”

    Which is why those who want government to solve problems should vote for liberals and those who want government to create problems should vote for conservatives.

  18. dsawy says:

    An interesting paper on the decline in household net worth and divergence in incomes and net worth across the income/asset spectrum is here:

    http://appam.confex.com/appam/2012/webprogram/Paper2134.html

    Bottom line: Much of the middle class was highly leveraged on real estate. It doesn’t matter whether you’re a TBTF bank or a homeowner: When you are highly leveraged on any asset class position, and the market value of that asset class goes down… you lose.

  19. ellsworth says:

    Joe Friday — allow me to clarify my comments.

    My point is that it is a nice chart, but it takes more digging to gain anything meaningful. It is simple math that if real income per *employed* person remains the same, but the unemployment rate increases from 4-5% to 9-10%…like it did from 2007 to 2010, you will see real income per household of ~5%.

    Since the denominator includes employed and unemployed, it remains the same. However, if more people shift from being employed to unemployed, the nominator decreases.

    I suspect the remaining 3% decline can be chalked up to nominal wage increases not keeping up with inflation….which translates to less spending power as a result of a squeeze on wages. The full 8.1% drop is not a result of wage pressure. Most of it is unemployment pressure.

  20. danm says:

    Liberals believe that government solves problems.

    Conservatives believe that government creates problems.
    ————

    With 300 million people, I think it’s fair to say that some form of government is here to stay. Therefore our true goal should be to set ûp a system that workls efficiently.

    I will never vote for someone who thinks government creates problems because this person’s incentive will be to PROVE government does not work.

    I will always vote for someone who thinks government can fix problems because there is at least some smidge of hope that he/she will at least try to improve the efficiency of government.

  21. James Cameron says:

    It is simple math that if real income per *employed* person remains the same, but the unemployment rate increases from 4-5% to 9-10%…like it did from 2007 to 2010, you will see real income per household of ~5%.

    The chart is from this report:

    http://goo.gl/AVBhf

    See the discussion at the bottom of page 4 and especially Figures 1, 2 and 3.

  22. gkm says:

    http://tinyurl.com/dy4pzq6

    My chart compiled back in July. I only had income data to 2010 so of course this would look a fair bit worse since then if updated for current prices.

    Note the intersection of the level of 2010 to that of 1982. I think they had a term for what this is. T’ain’t good for anyone who eats or who buys anything from anyone who eats. I’m really surprised things aren’t booming given these prices. Strange really. Yawn.

  23. algernon says:

    The picture is different for individuals.

    The household data are affected by the disproportionate growth of fatherless households, which are almost always poorer.

    ~~~

    BR: Are you referring to fatherless households as in single mothers, or as in lesbian marriages?
    (Census)

  24. Lukey says:

    We have also reached a 43 year low in household net worth:

    http://washington.cbslocal.com/2012/11/30/study-american-households-hit-43-year-low-in-net-worth/

    While Federal debt per household is up 50% since 2009:

    http://nation.foxnews.com/federal-debt/2012/11/01/federal-debt-household-43000

    But not to worry – just a small increase in taxes on “the rich,” eliminate the need for Congressional approval of future debt increases, indefinitely extend the extension of UE compensation and (of course) free health care for all, and we’ll be golden. Right?

  25. constantnormal says:

    Any successful approach to solving these problems must be implemented (phased in) over a decade (at least), and must persist for at least a generation …

    … anything less, and they will be reversed before they had had their desired effect.

    What are the odds of anything like that emanating from our present form of government?

    That’s why I think that the only hope that the US has of sliding into a Greek/Japanese debacle (with attributes from each situation, not intending to suggest that they are similar), is for us to have our own Bananamerican Spring uprising, with the entirety of our government being replaced with something different. Odds are, “something different” will not be substantively better than the mess we have today, but that is the only path I can see that brings within the realm of the possible things like:
    * Publicly-financed elections, with private contributions becoming criminal attempts to bribe legislators
    * Term limits for ALL elected federal offices
    * A return to a regulated capitalism, coupled with an emphasis on simpler-and-better regulations (Glass-Steagall strikes me as a remarkably simple and effective bit of legislation)
    * A tax rate schedule that treats all forms of income equally, and elimination of the vast majority of the deductions and credits that exist today
    * an absolute prohibition of unsecured leverage, and a prohibition of more than 10X leverage by any publicly owned corporations, in both credit extended and received. This is probably the most extreme of my desires.

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