Tuesday, September 13, 2011

Real Median Household Incomes at 1996 Levels

The WSJ details:

The income of the average American worker—long the envy of much of the world—has dropped for the third year in a row and is now roughly where it was in 1996, adjusted for inflation.

The U.S. poverty rate, meanwhile, has continued to rise. America's median household income—what the statistical middle of the pack earns in a year—fell 2.3% to $49,445, adjusted for inflation, according to the Census Bureau's annual snapshot of living standards. The figure has fallen each year since 2007 as high unemployment and a tougher job market has made it harder for working Americans to get bigger paychecks.

This downdraft is part of a longer trend that has wiped out the wage gains of the last decade. Inflation-adjusted household income is now down 7.1% from its peak in 1999, and 2010 is the first time since 1997 that American households made less than a median of $50,000.

As the chart below shows, even upper incomes have been affected by the sluggish economy.

A large factor driving the have / have nots has to do with education. In the past (i.e. a long time ago), an individual could use either their hands or their minds and make a "livable" salary. As EconomPic has detailed multiple times, education matters and labor intensive jobs are no longer a viable means for most.

The issue has been amplified because individuals didn't act as if incomes were stagnant. Back to the WSJ.
"The past decade was just a mirage," says Justin Wolfers, an economics professor now visiting at Princeton University. That's because wage gains earlier in the decade were never that robust, yet people were able to take advantage of surging housing values and easy credit to spend more than they earned.
Source: Census


  1. Would be interesting to see different inflation measurements too.

    I'd suspect that the bottom is more affected by real (un-gamed) inflation than the top. The price of food and energy (the stuff not included) isn't probably noticed as much by the top as the bottom (assuming the yacht isn't THAT big).

  2. this is the main cause of the economic distress. we tried to make up for loss income growth by using debt. and wall street actually liked this cause they had gamed the system to make it work for them. and they pushed companies to actually encourage job loss. and low incomes. even though that means they will have fewer customers in the end. its what the offshoring plan was all about. it didn't lower the price of goods or services enough to make up for lower incomes. because it lowered them incomes faster than prices. and then there is the deregulation of electricity scam, which actually raises prices. and exports more jobs too

  3. It would be interesting to see how poor/wealthy people feel today compared to 1996.