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Hey, Incomes Surged Last Year. It’s OK to Be Happy!
Well that’s more like it — even if it is just one year. US median household income, adjusted for inflation, was $56,500 in 2015, 5.2% above its 2014 level. It was the largest jump in incomes since 1967 when the Census Bureau started releasing such data.
What’s more, the gain was the first statistically significant increase since 2007 — although incomes still remain 1.6% below that pre-recession level. Job growth and rising real earnings growth (a combo of higher hourly earnings and hours worked) is finally paying off.
And the gains were broadly based, at least as measured by percentage gain rather than absolute gain. There was a big drop in the official poverty rate, too. As the Obama economic team noted on the White House blog, “gains were even larger in the lower half of the income distribution, ranging from an increase of 5.5 percent for households at the 40th percentile to an increase of nearly 8 percent for households at the 10th percentile.” They clearly liked this chart with its “shared prosperity” message:
And things might even be a bit better than these numbers suggest. Some economists would prefer a different inflation measure. As the Manhattan Institute’s Scott Winship tweeted: “Using PCE, 2015’s median hh income was 0.3% lower than in 2007 and higher than in any other year (2.1% higher than ’00, 2.8% vs. ’99).” And also keep in mind that the Census “money income” numbers don’t include lots of stuff, as Winship has noted in the past:
Noncash benefits are not included, which means that money income does not reflect the value of food stamps, Medicaid and Medicare, housing subsidies, or free or reduced-price school lunches and breakfasts. Nor does it include employer fringe benefits like health insurance or retirement contributions. Finally, money income is a “pre-tax” measure—it does not reflect the disposable incomes of households because most people pay taxes on at least some of their money income.
But how can it be that incomes are surging and Americans seem consistently gloomy, with 60% or more still thinking the country headed in the wrong direction? How can both be true? Well, as former Fed boss Ben Bernanke noted in a recent blog post, other sentiment indicators — particularly those about personal finances — are far more positive. Bernanke blames the split on political polarization: “In a highly polarized environment, with echo-chamber media, political debates often become shrill, and commentators and advocates have strong incentives to argue that the country’s future is bleak unless their party gains control.”
Published in Economics
While government spending can be considered part of the “Economy” it seems foolish to me that it should be included in “growth” numbers since the government is essentially a drain on the producers.
Well, household income ≠ The Economy, and as far as I know it isn’t considered a measure of aggregate economic growth. There’s lotsa people out there earning income which is a drain on the economy rather than a reward for their contribution to the economy.
By contrast, GDP is a measure of aggregate economic activity but it doesn’t tell us much about how individual families are doing (and, of course, there’s still a portion of GDP that is made up of government spending).
Has individual income increased at the same rate as household income?
If household income has increased because more families need two incomes to get by, that might maybe go a long way to explaining why the individuals involved aren’t terribly happy about it.
http://www.nationalreview.com/corner/440046/median-incomes-rise-what-make-new-economic-figures
This expert differs:
September 14, 2016 3:51 PM The Census Bureau released new income figures yesterday. Two facts jumped out at almost every reporter covering the story:
(1) Median incomes grew substantially, rising almost $3,000 in 2015; and
(2) median household incomes are still below where they stood in 2000 and 2007. On this basis many have concluded Americans have suffered a lost decade and a half. This conclusion is premature. The Census Bureau figures have several problems well known to economic researchers. All these problems tend to make Americans look poorer than they are. Specifically, the Census Bureau figures: Ignore both employer provided benefits (such as health coverage) and government benefits (such as food stamps); Do not adjust household incomes for changing household sizes; Use a measure of inflation (the Consumer Price Index) that is less accurate than other inflation estimates; Conflates the aging of the population and the rising number of retirees with lower earnings for workers with jobs.
Simply don’t believe it. At this point I’ve seen nothing to indicate this is true. Just like my own lying eyes tells me there is inflation, even if the governments says there isn’t.