One more thing about the new Census Bureau’s Income and
Poverty report for 2016, which found to the great excitement
in the media that median household income, adjusted for inflation
(via CPI), rose 3.2% in 2016 to $59,039 – finally a tad above
where it had been 17 years ago.
We already found buried in it that inflation-adjusted earnings
from wages, salaries, etc. for full-time
employed men have fallen 4.4% since 1973.
So now, we’ll look at another data set buried in the Census
which is based on respondents at 98,000 addresses across the US.
We want to know which households were the lucky ones – and turns
out, there weren’t very many.
“Earnings” in this report are the fruits of labor – so wages,
salaries, and the like. “Household income” includes not only
“earnings” but also money from other sources during the year.
These are the sources of “household income” in the report:
- 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
This is critical when looking at the income distribution as to
which households had the most income because proceeds from
investment (#10, 11, 12, and 13 in the list above) play a big
role in households with large investments.
This chart shows the top 5% of households (red line), whose
inflation-adjusted household income has soared by nearly $200,000
(112%) since 1967. Compare this to the bottom 60% of households
(three lines at the bottom), whose incomes have booked tiny
gains, with the bottom 20% gaining just $2,900 in household
income over the past 50 years:
For the bottom 40% on the income scale of the households (the
bottom two lines in the chart): Household income adjusted for
inflation for the lowest quintile has dropped 9.5% since 1999;
and for the second lowest quintile, household income has dropped
2.4% since 2000.
Households in the third lowest quintile (40% to 60% on the income
scale, purple line) have now finally squeaked past their prior
income peak in 2000, but by less than 0.5%.
Households in the fourth quintile (60% to 80% on the income
scale, green line) have done reasonably well, gaining $33,000 in
annual household income (53%) over the past 50 years, and $4,000
since their prior income peak in 2000.
The top 20% of households (dark blue line) have gained $101,000
in annual household income (91%) since 1967 and are up $15,000
from their prior peak in 2000.
This group includes the top 5%, where the music plays. Their
prior income peak was in 2001 at $353,000. In 2016, they booked
$375,000. These households now make nearly $200K more on an
inflation adjusted basis than they did in 1967, a 112% jump.
Also note how household income in this top 5% category fell
sharply during the Financial Crisis, and how the Fed’s monetary
policies, designed to create what Bernanke called the “Wealth
Effect,” effectively created wealth and income for them,
benefiting the most those households with the most assets. Hence,
incomes from their investments began to surge in 2010. For them,
the Fed, personified by Bernanke, was the guardian angel — while
the middle class was getting further hollowed out, with the
bottom 60% getting shafted.
Thankfully, the Census Bureau did not provide data on the top 1%
or the top 0.1%. It would have made that chart look absurd.
And on second thought, for an economy based on consumer spending,
strangling the incomes of 80% of those very consumers on whom the
economy relies for growth, while bailing out and enriching a tiny
group at the top, doesn’t quite appear to be an effective
economic model over the longer term.
Buried in the annual income data from the Census Bureau are some
facts that the media silenced to death. Men, sit down.
Read… The Terrible Facts about Real Earnings of Men