The Census just announced a historically rapid rise in median household income which is cause for celebration, but the reason why it rose is a bit less heartening. Basically, households are working more hours. The median earnings of individuals is still somewhat stagnant:
Median Earnings of Full-Time, Year-Round Workers 15 Years and Older
The report says that, “the 2015 real median earnings of men ($51,212) and women ($40,742) who worked full-time, year round increased 1.5 percent and 2.7 percent, respectively, between 2014 and 2015.” Median male earnings are particularly dismal having peaked in the early 1970s and being fairly stagnant ever since. That may help explain why the Trump revolution is much more popular among men than women although it is hard to see why men would suddenly be wanting a radical political change now since male earnings are finally rising again.
Household income rose at 5.3% which is more than double the rise in median individual income shown above because of more employment per household:
I’d rather see much higher earnings per person rather than just more people working, but hopefully our households feel good about the reasons they are working more hours.
Another reason the Census’ current estimate of household income is inflated is that they changed their survey methodology. The new method might be more accurate, but it makes comparisons with previous years less accurate because they were measuring two slightly different things and we cannot really say that increase in the measure is due to rising income because much of it is probably due to changing methodology. The new survey increased their measure of household median income by 3.2% so that could account for most of the apparent increase.
Since the mid 1970s, real mean income (blue line) has doubled in America, because America keeps getting more productive. But whereas American workers are producing about twice as much per hour compared to the 1970s, the average worker’s income has been stagnant because of rising inequality. Most of the income from our rising productivity has been going to wealthy elites.
Real median personal income (green) is only up about 25% and median wage/salary income (red) hasn’t changed at all. If the median American wage had kept up with mean income, average American workers would be making double their current salaries. That would put the median full-time male salary up at around $100k/year! Imagine how politics would look different in an America like that.
Stagnant median income is not inevitable. Median income used to progress better in the US. US inequality fell and median income rose dramatically from the 1930s until the 1970s, creating the golden age of middle-class America. That was a great accomplishment and it is one area where I’d like to Make America Great Again.
Because the median American lives in an age of diminished expectations, most of you probably think that it was completely unrealistic of me to suggest that real median income could have doubled to $100,000 since the mid 1970s, but it more than doubled in the UK from 1977 to 2014 (less than the time period on the above graph). The blue line on the following graph shows median income in the UK.
This is because the median income kept pace with mean income from 1990 to the present and almost kept up from 1977 until 1990:
Another way of showing what happened is to show that inequality did not increase much. It (the blue line) rose a bit from 1977 until 1990, but has remained steady since then.
The UK’s accomplishment of doubling median income probably seems like a miracle to the average American, and some Americans probably put it in the same unfathomable category as the unbelievable economic growth in China during this period. But the UK doubled median income without miraculous economic growth. Their per-capita income rose at about the same rate as in the US.