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
5.2%? I call BuLlShit! “Future revision to near zero to appear in tiny font near bottom of p17.”
But rather convenient timing, less than 2 months ahead of the election, isn’t it?
Perhaps the best bullshit-or-not test: If the geniuses at the Fed gave any more credence to the BLS numbers here than I do, they will hike rates ASAP, based on this extremely strong household-income growth. Yet in today’s (or I guess yesterday’s, now) 2PMWC we read
The Fed: “Federal Reserve officials have gone out of their way to push for interest rate hikes sooner rather than later. Unfortunately, they have continued to be data dependent, and the underlying economic data is hardly strong enough to merit much on the tightening front.”
it’s not bullshit, grandma and grandpa can’t afford their own place on a fixed income, and the kids can’t find full time work so they move back in. 4-6 shitty incomes in 1 house will help the household income a lot.
In the report, HHs grew 1.0% from 124.6M in 2014 to 125.8M in 2015.
An interesting data point, though, is the growth of HHs by “Age of Householder”. 65 year+ HHs grew 3.5% in 2015 versus growth of just 0.2% for under 65 year HHs. So people are moving in with the grandparents or there is some demographic, “pig in the python” Boomer shift.
According to the survey, 35-44 year olds had the largest median income increase of 7.0%(!), going from $66,770 to $71,417. Seems like an unusually large gain to me.
Also, we can compare the Census survey to the IRS _population_ data for 2015 here:
Looking at adjusted gross income (AGI) data through the end of July for Tax Years 2014 and 2015, average or mean AGI grew 3.3%. Of course, AGI includes all types of incomes including capital gains, dividends, etc and gains are generally going to the upper income brackets.
The “skewed right” nature of income distributions probably would cause the mean AGI increase of 3.3% to be a fair amount higher than the median increase.
(I’m cut-&-pasting below, forgive any footnote numbers. Shared households are defined as households that include at least one “additional” adult, a person aged 18 or older, who is not the householder, spouse, or cohabiting partner of the householder. Particularly relevant: Adults aged 18 to 24 who are enrolled in school are not counted as additional adults.)
In 2016, the percentage and number
of shared households remained
higher than in 2007, the year before
the most recent recession. In 2007,
17.0 percent of all households were
shared households, totaling 19.7 million
shared households. In 2016, 19.1
percent of all households were shared
households, totaling 24.1 million
From 2015 to 2016, changes in the
percentage and number of shared
households were not significant.
Changes in the percentage and
number of additional adults residing
in shared households were also not
In 2016, an estimated 27.2 percent
(11.9 million) of adults aged 25 to 34
were additional adults in someone
else’s household, representing an
increase from 25.8 percent (11.1 million)
in 2015. Of young adults aged
25 to 34, 16.0 percent (7.0 million)
lived with their parents in 2016, an
increase from 15.1 percent (6.5 million)
(If anyone finds a table with “number of people per household”, please post.)
That the rents and dividends are not split off and analyzed separately shows a skewed picture. Dividends, in today’s negative interest rate environment for bank accounts suggests that a very small set of people are having an outsized effect on these figures through possession of commercial paper. I know that bank returns of under one half of one percent on our ‘parked’ money is constraining our spending. The other bug in the ointment is the rise in medical costs. Being older, Phyl and I are expending much more on medical issues than most younger people seem to be. Phyl has Medicare, and even so, out of pocket expenses are rising sharply. (We had to buy a generic antibiotic for her that cost five dollars per pill.) Medicare premia are slated to increase next year, cost of living adjustments for Social Security are slated to be near static, and ‘donut hole’ Medicare supplemental policy fees seem to rise monthly now.
Fun with numbers.
The headline results are for median income, not mean. Median is robust to outliers; a very small number of high-dividend households will not affect the median in any meaningful way.
Rents and medical expenses are another matter though. I also wonder how med subsidies fit into the picture.
Median is robust, and a much better statistic for removing outliers.
The problem is using median Household income with no indication of how many incomes per household. The report gives summary results, so the data is there, but apparently does not have that information in the tables.
Wolf richter can always find a reason to complain. If numbers are down its told u so, up numbers are bad data.
Well done evisceration.
Lest we forget: Civilian Employment-Population Ratio. Woo-Hoo, back up to 1985! (That drop off 2008..09 still whacks my enteric nervous system like I was going off a ski jump.)
I agree with ewmayer — some timely election propaganda. With no basis in fact, I would say.
Frankly, I do not believe anything that comes from any of our federal agencies — not BLS, or SEC, or FCC, or FDA, or EPA, etc. They have become corporate protectorates and lie factories designed to bullshit us at every opportunity. I consider the BLS’s unemployment finagling a total mendacity scene, from which “data” emanates that smells an awful lot like road apples. And when they don’t outright lie, they maneuver — witness NC’s top story at the moment about how the SEC drops the ball on REAL executive pay. It’s Orwellian. By design.
I think it disingenuous to compare men’s 1974 wages with the present day without pointing out that benefits are not included. If you included benefits, wages would have grown significantly. The rise in healthcare costs has been largely picked up by employers.
I think it’s disingenuous to pretend that 1974 insurance plans were anything like today’s catastrophic-only plans.
Yes! And even for people with good policies that cover routine care, it’s misleading to say that higher amounts of money allocated to insurance premiums is extra income. It’s like eating more food while one has a tapeworm. That extra food is just going to nourish the tapeworm, not the person.
My point is that the increased cost of health insurance to employers has meant there was less money available to pay wages.
Huh? If anything, benefits have declined. In another generation or two, the word “pension” will be an anachronism. And, as others have noted, while health insurance premiums leveled off a bit this year, the insurance companies have made up the difference by adding and/or increasing deductibles. Employers, like mine (a Fortune 15 no less), have “picked up the cost” and handed it over to their employees.
I am sorry, Anonymous, but employers have most certainly NOT picked up the rise in healthcare costs. In my 38-year working history, I can remember the 1980s when my ENTIRE insurance premium (no such thing as copays or large deductibles back then) was picked up by my employer. Then the cost-sharing started in the late ’80s and began to ramp up during the 1990s. And now, my small employer can only offer a crappy “health insurance” policy with an enormous $3,000 deductible, basically catastrophic coverage only, and I’m paying 35% of the premium (a blessing, to be sure, but I do not expect it to last much longer). This is for a single person, and if you are married with children, the deductible is out of reach. Any 1% or 2% raises I’ve gotten over the past 35 years is eaten up, and then some, by increases in rent, food, fuel, utilities, phone, and the other two kinds of insurance we all must have–homeowners/renters and auto. There has not been, nor is there “significant wage growth including benefits,” dear.
“Household income” isn’t just what the amount that income earners in that household bring home from their jobs.
watching yesterday Thom H: this would also include anyone in the house: Parents, grandparents or kids living the the household/basement. Same trick years ago when the mom when to work.
A retirement income and working still.
Just so many funding sources can make up a household income; just increase the family unit.
Yep, that’s right. Households are an aggregate of earners and earnings. So the increase in household income here may be real, but not salutary as it may indicate household strategies to house more earners (e.g., the kids, grandparents, etc.). Just as married women went to work in ever greater numbers once male earnings hit a wall in the 1970s. While that’s a great leap for feminism, it had real costs on household organization, often placing the care of young children in the care of paid strangers — adding fruther stress to household incomes (and possibly fulmenting child abduction panics and other forms of culturally elaborated anxieties). Of course, this is not to say that men shouldn’t stay home and women should, (of course not!) it’s just that this choice is not an option for many households in increasing numbers from 1970s until the recessions of 2000s.
Yeah, if the kid moves and rents a place the kid has a low household income and brings down the average. Kid moves in with parents and if kid makes any money at all, the household income goes up! Presto, we’re richer.
Interesting that he doesn’t mention the change in survey methodology that was phased in recently:
Sometimes I really hate WP….makes me feel like a monkey being experimented on when it just swallows my comments…grrrrr….
Ok, the Census Bureau changed the survey questions which, by their own admission, increased reported incomes by 3.2%:
Hmm…1974, about the time that oil production peaked in the US, at least until recent years. And neo-liberal economics and union busting really started to gain a foothold in this country.
I just drove across the Midwest and the West from the Great Lakes. After reading N.C. since the beginning, I am on the lookout for street level economic indicators.
Judging from the number of properties for sale, one of every three in rural Wisconsin, the number of boats, boat trailers, newer cars, wheels, tractors, jackets and clothes lined up on fences, people are desperate for cash.
I no longer think Cultural Marxism is an implied threat to our country. I think the main problem is Caloric Maxism.
Practically every single man and woman I saw in Iowa, South Dakota and Nebraska, was overweight, sometimes hideously so. Not just adults, but young women were ballooning out. It’s not a character defect; it’s the only food available to them I guess.
The ballyhooed free “breakfasts” in the hotels were a chemical carnival of Phase butter flavoring, GMO waffle batter oozing out of self serve dispensers, do-it-yourself Teflon waffle makers, powdered eggs and sizzling sausages straight out of the industrial microwave, placed on skimpy softening Styrofoam plates, donuts and pathetic attempts at caloric restriction in the form of non-fat blue milk. The whole process is almost totally self serve except for the one employee in charge of the microwave and opening the boxes in a back room.
Typical scenario seen while gassing up. Local young woman greets clerks of the gas station convenience store by name. The stores accept EBT of course. Massive-gulp plastic cup filled with soda and then paid for with a credit or debit card.
America is a giant corn field. Pivot irrigators hundreds of feet long swing in an arc on tires from a central well, sprinklers watering the fields. I stood in the window of my room and watched pesticide tanks being hooked up to the same devices. Curious, I went downstairs and talked to the men who were working next to the hotel parking lot. I admired the crop and asked if it were fertilizer they were adding to the water.
“No, it’s Roundup. Sometimes we use Atrazine and other crop protection chemicals.”
Many fields are parched light brown even after heavy rains. Apparently, Roundup is used to kill the crops which allows more harvest to be extracted from them.
Visited a friend in a small Nebraska town. 8 out of eight of her family members have had breast cancer or other serious maladies. Every family in the neighborhood has the same story. Cornfields surround the town.
Health care and funeral homes are going to become a bigger percentage of GDP in the future.
I’ve also noted overweight issues with those who are poor.
I suspect some of it is caused by what’s available at the food banks, which are often high-calorie items.
I’ve been to them myself, and often what is offered is not the most nutritious food, with fresh vegetables or fruit being scarce or usually, nonexistent.
But it’s free.
As one of those SD ballooning people, I can tell you what it is: stress, limited access to healthy food, decreasing income in real terms, increased chemical use, and hideously terrible “health care.” My “health care prover” recently spent half of what was supposed to be my checkup lecturing me that I need to do water aerobics and that walking was not recommended due to bad knees. When I asked him how I was going to do that when the nearest class was over 2 hours of driving, he lectured me about “noncompliance with doctor recommendations.”
Meanwhile, the largest hospital conglomerate in the state has bought the largest insurer and just sent notices that they wouldn’t cover treatment by the second largest hospital conglomerate in the state: the one with clinics in small town as so if you live in many small towns, it’s 100 miles to see a doctor that insurance will pay for. My employer pays for what was a good plan, until monopolies started throwing their weight around. Did I mention stress?
I think I can offer an income view I have yet to see on here, but is yet another indication of a crappy economy.
Those who do crafts, selling our creations online or at craft shows.
Sales have steadily declined in recent years. This has been the worst year yet, from personal experience as well as from talking to other crafters.
I had items starting at under $10, with most under $20, up to $80. Days prior spent packing items.
Driving anywhere from 20-40 miles to the shows. An hour or more spent setting up. Sales beginning at 9. Staying until 5-7 at night. Then packing it all up again. (There’s LOTS of work involved in doing shows).
Having to give deep discounts to get any sales, sometimes resulting in only $30 in sales the entire day. (Small shows used to yield closer to $400 in sales).
With the cost of gas, booth space and materials taken out—not including all the hours spent making the items—I could move to China or Mexico and earn more per hour.
Friends who have had great success with their beautiful leather items for decades quit doing shows at least 6 years ago due to health problems (they used to average $800 a show, no problem), but had seen good sales on their website for over two decades until very recent years, as those steadily declined.
They just did a ‘big’ annual show for the first time in years out of necessity (money for heat, like me).
They didn’t say what their total sales were, but said they had to give deep discounts so they wouldn’t get skunked and that it wasn’t worth doing the show. They said other crafters didn’t do well, either, despite good crowds.
I’d given up doing shows almost 20 yrs ago due to the amount of work and time involved to do so, as well as having over 317,000 miles on my (now) only vehicle.
I had to start doing some again this year out of desperation, after 3 different places I had items for sale closed down and I found myself sitting on over $1,000 in stock.
Tomorrow I have an appointment with a lady who just opened a store, hoping to wholesale anything I’ve got, including displays, to try and raise money for firewood (my only heat) after a vet bill for my best friend (10 1/2 yr old dog) wiped me out.
On most items, I’ll do little more than get my materials cost out of them, with all my labor in creating them free.
The next project I’ve begun will take months to complete, but should sell for thousands if I can get it into a fine art gallery. (Of course, the finer galleries take 50% commission and are 4-6 hours drive away)
I’m ‘going for’ sales to the 1% now. One-of-a-kind high dollar items, since they seem to be the only ones with ‘money to burn’.
The materials cost will be very low and I have all that’s needed already.
My time spent creating it will be intense.
Meanwhile, I rely on reading NC each morning to warm me up, as my blood pressure rises with each new story of how 99% of us are struggling and getting screwed, while CEO’s who apparently ‘have no idea’ of the corruption among ‘their employees’ they’re paid millions to oversee, continues on. (yeah, right)
Oh yes. I testify to your tale. We lost money doing shows this year. One or two shows out of town we just viewed as “busmans holidays” and enjoyed the trip. Physically, doing craft shows is hard work. The only people making guaranteed money are the promoters. They get their cut no matter what. Gallery owners inhabit the same universe. We recently encountered a gallery that hinted at a “deposit” to ensure placement. We won’t be entering that store front again any time soon.
What I have noticed is that the “crap” crafts sell the best now. Cheap and trendy items are the ‘rage’ to a public that seems to have lost any idea of what creativity and art are. Craft shows have become the Carnival Sideshows of today. “Step right up! Step right up! See the trashy gee gaws! Smell the sugary, calorie loaded junque foode! Get what you saw on daytime TV talk shows! Be ultra cool! Pass the Jonse’s up! Etc. etc.”
Good luck in your high end art project!
Out of work people finally reaching retirement age to draw Social Security might also increase family income.
Interesting initial analysis, but a lot of work yet to do. Women as a group have made outstanding educational gains between 1970 and 2010 (compared to men). These data points should be adjusted for educational attainment. I suspect women have lost more economic ground than the raw data suggests.
Many recent greater than usual changes in economic figures have been driven by soaring healthcare costs.
That 5.2% number is most likely counting the Obamacare tax credits as ‘income’.