By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.
We’ll be hearing and reading about this for a long time, in all kinds of iterations: “Americans last year reaped the largest economic gains in nearly a generation,” the New York Times gushed. “Household incomes surged 5.2% in 2015, first gain since 2007,” the Wall Street Journal raved. Everyone was happy. Poverty rates dropped 1.2 percentage points. Finally, some good data in that beleaguered sector! The middle class and those below had been getting hammered for too long.
The impetus of these happy moments in the US economy is the Census Bureau’s Income and Poverty survey for 2015. It reported that median household income – 50% of households earn more, 50% earn less – rose 5.2% to $56,516, adjusted for inflation via the Consumer Price Index.
Median household income had been declining in fits and starts since the peak in 1999. But even after this phenomenal rise in 2015, it was still 1.6% lower than in 2007 and 2.4% lower than in 1999.
Nevertheless, it was welcome news, after years of dreary data points on this topic – though it left me scratching my head. Something didn’t quite add up, given other data we have on wage increases, which have remained a dreary topic. Then I checked with Lee Adler at The Wall Street Examiner, and he sent me back to the drawing board.
The 70-page report was based on survey data on a sample of 95,000 addresses across the US. The sample is very large for a survey, which makes the results more reliable and allows plenty of room to drill down into the details, and split the numbers by age, race, gender, and so on, and still have a sufficiently large sample size in each group.
To show some aspects of the range of the data: The median income of “family households” was $72,165. Within that group, “married couple households” made $84,626. “Non-family households” – a single person, for example – made only $33,805.
And then there were the crucial data points that explained the bout of head-scratching earlier. People are not suddenly getting big-fat paychecks:
- “Men with earnings” saw their income rise only 1.5%
- “Women with earnings” saw their income rise 2.7%.
Women have come a long way since the 1980s, in terms of median income, though not nearly far enough. Adjusted for inflation, it went from $30,000 in 1980 to $40,742 in 2015. And I hope women will make more progress going forward.
But men? Good grief! Their earnings in 2015, at $51,212, were lower on an inflation adjusted basis than they’d been in 1974!
Check it out. The chart is interactive. Hover over the lines to get the data points for each year:
If soothsayers want to know why men are frustrated, and more than frustrated, they can just look at the chart above: no improvement in real wages since 1974! For the median middle-class man in the workforce today, that boils down to no improvement in his entire working life!
So with men’s median income inching up only 1.5% and women’s income 2.7% in 2015, how could household income have jumped 5.2%? Something else must have been at play. Here are some thoughts.
1. Quirks in the data either for 2014 and/or 2015. Quirks in statistical data aren’t that unheard of, even in large surveys.
2. The number of men working full-time rose by 1.4 million in 2015, according to the report. The number of women rose by 1 million. Hence, with more people finding full-time work, some part-time workers became full-time workers, and that benefits median household incomes.
3. Then there are the millennials. They’re now entering the workforce in large numbers. Some of the live-at-home millennials have found a job finally, or a better job, and that benefits household incomes. Other millennials, upon graduating from college with a good job, moved back in with mom and dad because housing is too expensive. And that would benefit household incomes.
4. “Household income” isn’t just what the amount that income earners in that household bring home from their jobs. The survey also asks questions about the amount of “money income” each person 15 years and older in the household has received from these 18 sources, which include income from government benefits from investments:
- Unemployment compensation
- Workers’ compensation
- Social security
- Supplemental security income
- Public assistance
- Veterans’ payments
- Survivor benefits
- Disability benefits
- Pension or retirement income
- Rents, royalties, and estates and trusts
- Educational assistance
- Child support
- Financial assistance from outside of the household
- Other income
The Census report sheds no light on how much of role each of these 18 sources of income played in the household total, and how much other factors were involved. We know that dividend payments have surged, and so has dividend income. Rents have surged too, and so has rental income. “Educational assistance” might include student loans, which have soared also. The possibilities are endless.
All we know is that the median income from wages has ticked up at a frustratingly slow rate: 1.5% for men and 2.7% for women. And that is no reason to celebrate.
And now CEOs have the “unfortunate new normal.” Read… The Chilling Thing CEOs of Corporate America Said about Jobs