Real median income rose 5.2%

by on September 14, 2016 at 3:25 am in Economics | Permalink

That is great news of course.  Do note however the following (NYT):

The median household income is still 1.6 percent lower than in 2007, before the recession. It also remains 2.4 percent lower than the all-time peak reached during the economic boom of the late 1990s.

Even with this unexpected and quite remarkable income gain, America is close to having gone twenty years without a significant money pay hike for its middle class category.

And do note this: two days ago, everyone was saying things felt OK but still sluggish, and they were citing mounds of evidence on behalf of this view.  Maybe they still are right, don’t overreact to a single number.  You don’t have to be a “negative Nellie” to think it doesn’t feel like a world of five percent wage growth.

As a separate point, note that essentially none of those income gains went to rural areas.  That meant a 7.4% wage gain for larger cities — does the raise the import of the case for deregulating building?

Returning to the main story, I often hear it said that the wage stagnation problem is simply the result of a deep and debt-ridden recession.  No doubt that is one factor, but it does not explain why the bad wage data go back to 1999-2000, before the real estate bubble much less the Great Recession.  Something structural has gone badly wrong in the American economy, and let’s hope this data point stands as a major relevant sign in seeing its repair.  I am not yet so optimistic, I am sorry to say.

Addendum: I was and still am agnostic on what and when the Fed should do next.  But those of you who cite lack of rising wages as a good short-run indicator (not my view, by the way see the post directly below) of inflationary pressures — does this change your mind?

1 Ray Lopez September 14, 2016 at 4:50 am

This post deserves a substantive comment.

2 Ray Lopez September 14, 2016 at 4:53 am

TC: ” No doubt that is one factor, but it does not explain why the bad wage data go back to 1999-2000, before the real estate bubble much less the Great Recession. ” – based on US wages per capita growth rates, I believe there’s been stagnation if not decline since 1972. You can (IMO) blame the lack of innovation in the US economy, from indifferent patent laws. In other words, blame people like Alex Tabarrok. That’s right, I’m looking at you college professor! 🙂 If we believed in Econ 101 textbooks, the ideal Pareto-optimal production possibilities frontier is perfect competition, meaning everybody produces commodities, lives with zero profit, and in theory, everybody makes the same wage, Marxist style if you will.

3 chuck martel September 14, 2016 at 8:11 am

For the first time in 40 years, the USA team won the gold medal at the Chess Olympiad, confirming the ascendancy of the United States as a chess powerhouse. The U.S. victory was due in large part to Wesley So’s unblemished performance — play that earned him an individual gold medal to go along with his team gold. Team USA’s steadiest player was So, 22, a Filipino-born grandmaster who moved to Minnetonka nearly two years ago. So played in 10 of the 11 rounds and did not lose a single game, notching seven wins and three draws. But the most inspiring performance of the Olympiad was turned in by So’s mentor, Filipino Grandmaster Eugene Torre. The first grandmaster from Asia, he’s 64 and was playing in his 23rd Olympiad. He went undefeated with nine wins and two draws and won an individual bronze medal for his play.

4 Anon September 14, 2016 at 12:36 pm

Thanks for this post.Impressive of the US (despite a lower average rating compared to Russia) and of Torre.
For Men , the order seems to have been US,Ukraine(tied with Us but second on tie-break), Russia, India, Norway.

5 Ray Lopez September 14, 2016 at 1:28 pm

Indeed. I thought Peru also played well (GM Cori), as did Canada, and Greece actually, like the USA, played the entire Olympiad without losing a team match (but they drew a lot and finished out of the top 10, still they did better than expected). As for Torre, who I have seen in person, he always plays well in Olympiads.

6 Cliff September 14, 2016 at 9:34 am

No mention of the fact that the statistic is bogus? “Money” pay hike- i.e. excluding benefits etc.? “Household” income i.e. something that has changed in composition over the time series. “Median” income i.e. not measuring the same people at all when the labor force composition is changing. Maybe everyone in the labor market has had a huge wage gain but many new people have been added at the lower end?

Why can’t we use a statistic like per capita total compensation for the average wage earner over that time period? Would it not give the result we want?

7 John Thacker September 14, 2016 at 2:48 pm

Well, doesn’t “average wage earner” suffer from some of the same measurement problems? Are grad students who get some stipend pay for teaching class (on the University payroll system) in addition to tuition waivers wage earners? Should the tuition waivers be counted? What about work study, part-timers, and others? What if many part-timers switch from 32 hours to 29 hours in order to avoid employer mandates?

Surely “average wage earner” has the same issue when new people (immigrants or not) have been added at the bottom of the distribution, or when people enter and leave the workforce. Does your “average wage earner” include people who aren’t in the workforce? What about voluntarily so, such as housewives and others? (Do you treat women who claim to be staying at home voluntarily different than men, for that matter?) If you restrict to an industry, do you care if the industry is switching to a more capital-intensive model that pays more but employs fewer people?

There are statistics that show per capita compensation as well. Unfortunately, all statistics suffer from measurement issues. I certainly too am skeptical of this very positive result after a number of years of decline; perhaps we should change our estimates for previous years as well.

8 John Thacker September 15, 2016 at 2:00 pm

Note, for example, that on average households are getting smaller, so per capita total compensation would look better than household, due to that factor. OTOH, since people who live together do economize on expenses, perhaps the “right” value for measuring how people are doing is in that middle?

9 Recursive Representation September 17, 2016 at 12:13 pm

It’s not the same thing as “wage rates” as TC seems to think, based on what he has written here. Earnings is wages times hours. And it’s family earnings, not individual. The data for compensation per hour say that hourly compensation for all workers in the non-farm business sector rose 3.1 percent in 2015, while the employment cost index says total compensation for private sector workers rose only 1.9 percent in 2015. Those are averages, not medians, but still they suggest that it is not the wage rate, but the number of working hours that is driving the 5.2 percent gain. And that’s probably secondary workers increasing their hours, rather than overtime by primary workers. If so, it would explain why there were scant gains in rural areas: must lower propensity for married females with children to enter the work force. Still good news, but not so much about wages.

10 Jan September 14, 2016 at 5:34 am

1) Did they slightly underestimate income gains in 2014 year and are those showing up now? 2) Isn’t a significant bump in income exactly what you’d expect after slow and steady tightening of the labor market–basically reaching a breaking point?

11 Pensans September 14, 2016 at 5:55 am

Who trusts this convenient data in this political environment?

12 dearieme September 14, 2016 at 7:53 am

Happy news just before a Presidential election? You’d have to be a cynic to doubt it.

At the moment anyone who isn’t a cynic is a bloody fool.

13 Phil September 14, 2016 at 9:39 am

Have to admit that this was also my first thought

would love to have some insight into how these numbers are counted,

and exactly how tin hatted that first thought was


(have a little first hand experience with how “make sure you don’t miss X” gets changed to “nevermind, now make sure you don’t miss Y”, winds up as “Interesting news!!!”

14 mavery September 14, 2016 at 10:46 am

Folks unfamiliar with the processes and institutions that do this type of thing.

15 Gabe September 14, 2016 at 12:08 pm

Sounds like a conspiracy theory. Next you’ll tell me the Gulf of Tonkein resolution was a lie to get America into war and Hillary Clinton is sick when we all know she is perfectly healthy.

16 RobertP123 September 14, 2016 at 4:34 pm

I trust it because I understand it. Using averages is flawed, median is superior.

17 rayward September 14, 2016 at 6:03 am

The Fed has proposed a ban on merchant banking because it creates too much risk for banks. Of course the ban is opposed by banks. Here’s an article in the NYT by Steven Davidoff Solomon opposing the ban. Solomon defends merchant banking as historically being just another way for banks to fund start-ups, providing the fuel for new businesses to grow and increase employment and wages. “Bank holding companies,” a trade group said in response [to the proposed ban], “have successfully used the merchant banking authority granted to them by law to finance start-ups and growing companies, fueling jobs and economic growth.” Has the Fed gone daft: who would oppose funding new businesses and increasing employment and wages, especially given the stagnant wages of the middle class. Solomon then inadvertently provides the answer: merchant banking today, by banks such as Goldman Sachs, isn’t about funding start-ups, but buying and selling nonfinancial companies. Buy an undervalued company, sell off some assets or divisions, cut costs mainly by cutting employees, and then take what’s left public and cash out. Of course, that’s the business model of hedge funds and private equity funds. But banks? The financial sector is supposed to feed the growth of business, not feed itself. I suspect that the Fed’s proposed ban is as much about the financial sector losing its way than about “risk”. But that’s speculation on my part, something Goldman Sachs can appreciate.

18 John Thacker September 14, 2016 at 6:53 am

I was and still am agnostic on what and when the Fed should do next.

I would think that the global stock markets’ strong negative reactions every time the Fed (or any other monetary authority) thinks about raising rates, ending QE, or otherwise limiting the money supply should be as strong a piece of evidence to you about what the Fed should do next as the market reaction to Brexit shocks are in the post and column before last. It does seem to me in the one case you’re explaining away the stock market reaction from first principles and being agnostic, whereas in the second case of Brexit you’re treating the stock market reaction as definitive and refusing to be agnostic.

19 Brian Donohue September 14, 2016 at 9:17 am


20 ladderff September 14, 2016 at 11:12 am

Also, a drunk’s cries for more whiskey should be heeded without question. What could go wrong?

21 Cliff September 14, 2016 at 11:42 am

Also, a dying man’s cry for medical care should be ignored. He’s probably on drugs or something, he should be cut off so he learns his lesson.

22 The other Jim September 14, 2016 at 11:57 am

Horrific analogy. You can only die once.

But thanks for trying!

23 John Snow (Targarian) September 14, 2016 at 1:26 pm

Some people(like some ideas) find it difficult to stay dead.

24 Ted Craig September 14, 2016 at 7:06 am

“does the raise the import of the case for deregulating building?” No, for two reasons.

One is that it would probably do little for rural poverty.

The second is that I would argue that the obsession with living in a handful of big, expensive cities is holding back growth. I know a tech exec in Birmingham, Ala., who said there are hundreds of jobs in his city that are difficult to fill. It’s not that salaries are too low, it’s that young people only want to live in about five places.

25 Jan September 14, 2016 at 7:30 am

I thought the data indicates that living in denser, higher output cities makes them more productive. So maybe this is actually contributing to growth.

Also, two things. People like what they like. And, incentives. You pay enough and people will come to those jobs in Alabama. Of course, that would go against the idea that Birmingham should be cheap for employers. So your tech exec friend learns a valuable lesson. Qualified people willing to take a good (not great) paying job in Alabama are the same folks who were probably already interested in living there anyway. Birmingham, it ain’t no Nashville.

26 Ted Craig September 14, 2016 at 7:47 am

Adjusting for cost of living, I’m not sure how much less they pay for comparable jobs.

27 Brian September 14, 2016 at 8:43 am

Cost of living adjustments are tricky, especially with younger workers. Middle age workers with kids mostly care about what their current cost of living is, as their main concern is paying the bills right now. Local school quality is probably the big adjustment that isn’t captured by cost of living.

If you’re in your 20s, unmarried with no kids, there are a lot of things that matter that make cost of living a bad baseline for comparison. Future job prospects and earnings power are frequently negatively impacted by taking a lower paying job in Birmingham (not always, but frequently). Additionally, at the high end of tech jobs, even in a high cost city, the upside affords enough money that you can save some of it for when you settle down in that nice low cost city. If much of your lifetime expenses are yet to come and you aren’t 100% sure what your endgame is, you probably care less about the cost of living in your current city.

We haven’t even gotten into mate selection, where Birmingham may be better or worse, depending on you’re preferences.

Full disclosure: I spend a lot of time trying to recruit young people to work with me in high cost cities.

28 Lord Action September 14, 2016 at 9:48 am

This is mostly it. Your young workers don’t care that the urban schools suck or that a four bedroom house is really expensive. The beer isn’t that much different, and in the city it’s easy to walk home after.

Plus, a big benefit of being in an area of concentrated employment in your industry is that you have options if things don’t work out at the first job.

29 Lord Action September 14, 2016 at 10:29 am

“Plus, a big benefit of being in an area of concentrated employment in your industry is that you have options if things don’t work out at the first job.”

Note that this part doesn’t imply urban, it implies being a center of something.

Silicon Valley is as suburban as it gets, but it has no problem attracting young people.

30 TMC September 14, 2016 at 8:46 am

Wait until they want to raise a family, Birmingham will look a lot more reasonable to them.

31 Brian September 14, 2016 at 8:52 am

+1, although by then their wage expectations may be higher!

32 Benjamin Cole September 14, 2016 at 8:53 am


Are you suggesting we prevent construction where people want to live so that young people are forced to stay in or migrate to Birmingham?

The best economic policy that could happen to the US is a Supreme Court ruling that property zoning is not constitutional.

The Supremes ruled in 1926, by a split decision in an industry zoning case, that local zoning was legal. They gratuitously asserted that apartment buildings had no place in single-family detached neighborhoods. Little bit of class warfare, from the top down.

So now the entire West Coast has housing shortages.

33 mpowell September 14, 2016 at 10:10 am

There is a fascinating argument that the current housing squeeze in the bay area is pushing tech jobs elsewhere and will create a new equilibrium that is better than an alternative world where skyscrapers go up in San Jose and 5-10 story condos fill the rest of silicon valley, housing costs in the bay area avoids going completely crazy but all the tech jobs stay there. In this first scenario it’s not small cities like Birmingham benefiting, it’s cities that are already 1M+ like Austin or Phoenix. And that’s fine. 100 tech hubs doesn’t make sense and you won’t get the network effects you need. But 10 tech hubs is probably a much better long term equilibrium for managing housing costs than 1 or 2. It’s just a bad idea to take a tech job in Birmingham. If your job doesn’t work out for whatever reason you it’s a much bigger negative when you don’t have alternate employers in the same town.

That said, I still think that development limitations in big, liberal-controlled cities are substantially impeding real income growth by driving housing cost inflation. We live in a country of state/national politics dominated by Republicans and big-city politics dominated by Democrats (relatively). We would be better off with Republicans influence increasing in cities and decreasing at the state/national level.

34 JWatts September 14, 2016 at 4:10 pm

“I know a tech exec in Birmingham, Ala., who said there are hundreds of jobs in his city that are difficult to fill. It’s not that salaries are too low, it’s that young people only want to live in about five places.”

No, it’s really that the salaries are too low.

Mechanical Engineer I (entry level)

Birmingham, AL $61K Atlanta, GA $66K

Mechanical Engineer Manager

Birmingham, AL $127K Atlanta, GA $137K

That’s enough of a gap to encourage many of the best young graduates to leave and the area isn’t exciting enough to encourage mediocre talent to relocate.

35 Lord Action September 15, 2016 at 9:28 am

In my experience, the difference in salary for the exact same job between locations is usually quite small, and people get upset about small differences.

The reason places like NYC and Palo Alto have reputations for high pay is not so much that people get paid more there for the same work, it’s that different kinds of jobs exist there in greater numbers, and those different jobs pay more. For example, in a tech center, there will be more senior manager tech jobs, and more highly-paid but obscure specialties.

36 Jack Deal September 14, 2016 at 7:46 am

Well duh, the US economy bottomed in 2012 as the global economy was at the early stages of its decline. Now the global economy has bottomed and imo, is reaccelerating, which like the US will be slow and probably won’t hit its real stride to 2019. By 2019, I suspect RMI to be back on trend in the US. Typical post-crisis cycle. US from 2008-12. Internationally from 2012-16.

37 dwb September 14, 2016 at 7:50 am

” Something structural has gone badly wrong in the American economy”

Trade deficit, duh.The Treasury’s “strong dollar policy” is partly responsible.

Trade deficit was a feature when inflation was running high and FOMC was looking to disinflate the economy. Now we are just importing the world unemployment. At home growth is anemic, partly because of massive expansion of federal regulations, especially those that curb land use.

Large trade deficits are simply unsustainable and suck the soul from the US economy. Something has to give: Either depreciate the dollar to correct it, smash regulations that lead to anemic growth, or tariffs.

38 Lurker September 14, 2016 at 2:00 pm

Depreciate the dollar: All in good time, my friend. It will be a result of past policy prescriptions, not future ones.

39 RobertP123 September 14, 2016 at 4:37 pm

In the long run, trade deficits do not matter.

40 prior_test2 September 14, 2016 at 7:51 am

‘America is close to having gone twenty years without a significant money pay hike for its middle class category’

Mission accomplished, right? In part because in the 1960s, being middle class often involved being a member of a union, with the political clout to actually throw in some roadblocks to the modern economic freedom that ensures the rich getting richer.

‘does the raise the import of the case for deregulating building?’

Not really, considering that building new 60 story complexes, to use a recent example from the comments, actually requires building – and paying for – the necessary infrastructure along the lines of sewers, transport, electricity. Which one would think that a Mason econ prof. would understand, at least when looks at how much money the Hazel brothers made by bulldozering as much of NoVa as they could.

Though his brother only gets a short notice in what was a major transformation – ‘In the early and mid-1960s, Hazel helped steer a development company helmed by Isadore Guldesky, Theodore Lerner, and H. Max Ammerman through a legal maze of ordinances and regulations to construct Tysons Corner Center, at the time one the first super-regional enclosed malls in the country. After a controversial Fairfax County Board vote in favor of the Guldesky-Lerner-Ammerman group and, later, a lawsuit concerning a lease and zoning issue, the highly anticipated Tysons Corner Center was opened in 1968.

In 1971, Hazel formed a partnership with Northern Virginia-based developer Milton V. Peterson. The resulting Hazel/Peterson Companies went on to build some of the largest residential developments in Fairfax County, including, among others, Burke Centre, Franklin Farm, Fairfax Station, and Fair Lakes. The company also developed the Tysons-Mclean Office Park in Mclean. In 1990, the partnership ended its run and was amicably split.

Hazel estimated in 1987 that he was directly responsible for creating housing for 60,000 of Fairfax County’s then 600,000 residents. He has owned or controlled at one time or another thousands of acres of land in Northern Virginia. In 1978, Hazel was quoted that he and Peterson own “several hundred acres” of undeveloped land that might benefit from a proposed cross-county arterial road. It was reported in 1984 that Hazel had amassed 620 acres in the western Fairfax County. Hazel currently owns and lives on a more than 4000-acre working farm in Fauquier County, Virginia.

Hazel also was instrumental in garnering the rezoning needed for Lerner’s 117-acre Tysons II mixed-use development, considered by some the key in the urbanization of Tysons Corner. The project, which has opened in stages starting in 1988, currently contains the upscale, tri-level Tysons Galleria mall, a Ritz-Carlton hotel, and three high-rise office buildings. Other high-rise buildings are either under construction or are planned.

Working often in concert with Hazel was his brother William A. Hazel who owned and operated Chantilly, Virginia-based William A Hazel, Inc., which evolved to become one of the Washington area’s largest construction firms. At its zenith, the business was depicted as an “earthmoving empire of twelve hundred employees” with “more heavy equipment than many African nations.” William A. Hazel died in 2012 at the age of 77.’“Til”_Hazel

First, change the regulatory framework to your benefit – second, make sure that you have someone in place to benefit from the massive infrastructure requirements that the rezoned land will require. Hazel was never stupid enough to just imagine that massive real estate developments just appeared at the snap of the fingers of someone imagining them.

‘Something structural has gone badly wrong in the American economy’

Someone at the GMU econ dept., which played a not minor role in that structural deformation, is only now noticing what so many people (well, except for the rich poised to reap what others had sown) people pointed out after Ronald Reagan successfully earned the biggest role of his acting life?

41 Jeff R. September 14, 2016 at 9:42 am


42 Heorogar September 14, 2016 at 1:12 pm

The 5.2% increase in real income is good. Coincidentally, the housing prices rose 5.1%, year on year in the recent reporting month, down from 5.8% the previous month.

One quarter a trend does not make.

However, check how income increases were distributed among the top 5%, the top quintile, and the lower four quintiles.

What caused the incomes rise? Was it higher taxes, the ACA? Was it more regulations? Was it more infrastructure transfer payments? Was it increased minimum wage laws?

43 Jan September 14, 2016 at 1:58 pm

No, except for min wage, all of those reduce incomes, don’t you know?

44 Lord Action September 14, 2016 at 3:09 pm

The minimum wage also reduces income. Just not by reducing everyone’s income.

45 Horhe September 14, 2016 at 4:25 pm

Very interesting post. Thank you!

46 Boris September 14, 2016 at 8:31 am

When talking about 10-20 year timeframes like this and household incomes, you have to at least mention what household composition changes there have been, if any. Are there more single-earner (or single-person!) households now, for example? I bet there are, for the “single-person” case.

47 Swami September 15, 2016 at 1:54 pm

Not only household size, you also need to adjust for longer term changes in benefits and non cash payments, adjust for the movement of people to substantially lower cost areas (fleeing high cost of living blue states for red), and adjust for the thirty plus million immigrants who entered the country pulling down the average (statistically) while massively benefitting themselves.

We have demographic trends being presented as declining economic trends in support of political narratives.

48 Tom G September 14, 2016 at 9:16 am

This “increase in median wages” does NOT mean what it says. (2015 vs 2014)

The people who were median wage earners in 2014 are NOT 5% richer in 2015.

In the article, the truth is alluded to: “The gains, however, came mostly from job growth rather than wage growth. More people are working, but many of them are still struggling to maintain their standard of living.”
This truth comes after the hightlighted:
“Employers added more than three million jobs as the unemployment rate fell to 5 percent.”

So, more people are working at the below prior-median wage (on the left), which means the counted middle moves to the right, if these 3 million were not included in the year before.

What I would like to see is statistics about some 1000 workers near the median in 2014, and what has happened to those 1000 wages. My guess is less than 1% increase (excluding those who die/ retire; not sure if disabled should be excluded.) It would actually be very interesting to know this info for about 1000 households at each of the 10 deciles (or 11? counting 0% and 100%, as well as 10, 20 … 90%) There is always a lot of talk about the top 1% or 0.1% … the 2014 top 1000 and their changes in 2015 would be interesting; similarly with the bottom 1000, altho there may be hundreds of thousands tied for 0 at the bottom.

49 Cliff September 14, 2016 at 9:29 am

Isn’t it the exact opposite? If you add people at below median, that causes the median to move down, right?

50 TMC September 14, 2016 at 10:43 am

Households went up. The kid finally got a (crappy) job.

51 JWatts September 14, 2016 at 4:15 pm

“Households went up. The kid finally got a (crappy) job.”

Or the kid with the crappy job moved in. A 25 year old with a $20K per year job moving into his parents house with a household income of $60K increases the average household earning metric.

52 JWatts September 14, 2016 at 4:17 pm

No, that’s not the answer. Household median size was unchanged.

53 Tom G September 15, 2016 at 3:42 pm

Hmm: order folk from 1 to 100, median is 50.5.
Now add 20, 10 folk at 30, 10 folk at 35, for 120; median is 120-60, new median goes down to 40.
Like you say, exact opposite.
Sorry, simple math is too hard now with bad excel formula.

Instead 10 more at 55, 10 more at 60, new median up at 55.
So the 3 mill new jobs were higher than prior median.

54 Allie September 14, 2016 at 11:16 am

The sample size is large enough (about 125,000 households in each year) that there should be sufficient variation to capture these effects. However, I think the article is spot on in saying that this is likely from job growth, not wage growth.

From the report:
“The 2015 real median earnings of men and women who worked full time, year-round between 2014 and 2015 increased 1.5 percent and 2.7 percent, respectively. This is the first significant annual increase in median earnings for men and women since 2009. The difference between the 1.5 percent change and 2.7 percent change was not statistically significant.”

Earnings is part of income – along with 17 other categories like unemployment benefits, social security, disability etc. So, this reported increase in income doesn’t seem to be fully reflected in wages. Earnings have increased a bit for those working full time, but certainly not by more than 5%. From what I can see, they don’t report the break down by category so it’s hard to tell where the increases are coming from. More notably, the number of workers who work full time has increased by over 2 million. Anecdotally, people are working longer hours and possibly more jobs. If this is the case that would contribute as well without substantial wage growth.

55 Mike September 14, 2016 at 9:17 am

Doesn’t low-skill immigration explain the decline in median household income? If pre-existing households see a steady increase in wages, but the number of low-income households increases by enough, then the aggregate statistics may show a decline in household income. Eye-balling immigration data, it seems like a large increase began in the late-90s (around the time income hit its peak).

This isn’t necessarily an argument against immigration.

56 Lord September 14, 2016 at 9:18 am

Recently it was the financial crisis, recession, diminished wealth, and debt. Before that it was China buying their way into the economy and greatly increasing available labor. (There was a time Trump was right.) Before this was the rise of capital, the Fed stamping out inflation on the backs of workers, and the crushing of unions.

A large increase in available labor increases investment in China to take advantage of it but devalues investment here to increase productivity where wages are already high since the former offers greater gain at much lower risk. As that vein becomes played out, and if further labor sources don’t materialize, investment will shift back to improving productivity.

57 XVO September 14, 2016 at 11:15 am

Came here to say almost the exact same thing. Maybe what’s changed is that we’re finally seeing the gains from China’s competitive advantage being reduced. Wages+Transport Costs+Other Costs for doing business in China have reached parity with US wages. There will not be a source of labor big enough to have the effect China did so wages should continue to rise.

58 Brian Donohue September 14, 2016 at 9:33 am

China is crashing, the UK is screwed, America hasn’t had a raise in 40 years, we need to beef up our military.

You are losing your grip.

59 Jan September 14, 2016 at 1:59 pm

Our military spending must be doubled if we want to even be in the same ballpark as China. Our navy, especially.

60 Jay September 14, 2016 at 9:45 am

How does household size stack up vs the past? We ain’t popping out babies like we used to and you have fewer people getting married.

61 collin September 14, 2016 at 10:57 am

In reality, how much of 2015 increase here is simply lower commodity and oil prices? That would explain a lot of fall in rural America drops as well.

For a libertarian economist, we should note the US/Obama policy that effected the oil price was the Iranian nuclear deal in summer 2015. That hurt Saudia Arabia dominance of the oil markets and after the deal they had to compete against both US & Iranian producers. Just view the fall in prices in the summer of 2015 which was unexpected.

I wish the media would call this a “Peace Dividend!” on the every front page.

62 Jay September 14, 2016 at 11:09 am

The media, Clinton, and Trump all want war. Team America: World Police!

63 Lord Action September 14, 2016 at 11:46 am

“For a libertarian economist, we should note the US/Obama policy that effected the oil price was the Iranian nuclear deal in summer 2015.”

The US “policy” that’s driven oil price is not strangling fracking in the crib. There’s been plenty of environmentalist pressure to do so. We all know the complaints against it are silly in the local sense, but fracking means cheap oil, and cheap oil has global effects.

Iranian oil and Iraqi oil have been nice to have, but it’s the US becoming the world’s marginal producer that’s really changed things.

64 TMC September 14, 2016 at 3:07 pm

The clown show Iranian deal has increased peace? You’re probably the first outside of the administration to believe that.

65 Boonton September 14, 2016 at 11:31 am

” I often hear it said that the wage stagnation problem is simply the result of a deep and debt-ridden recession. No doubt that is one factor…”

What exactly is the model for this? Say the economy is ‘debt-ridden’ (whatever that really means). Why would median income not rise? If anything wouldn’t people having to deal with lots of credit card bills make them more inclined to work overtime, take part-time jobs, do whatever to boost their income? Blaming recessions on debts provides a mental image of the recession as some type of ‘hard work’ to pay off the debit, but it isn’t. Being unemployed doesn’t make your debts go away, just get deeper. Why wouldn’t low unemployment be the hallmark of a ‘debt-ridden’ economy?

66 Yancey Ward September 14, 2016 at 11:48 am

What is the difference in household size over the different time periods? I looked at the data and can’t figure out where they get the 5.2% year over year. Neither the pay of men or women rose that much individually. The only hypothesis I have at this point is that household size has increased and, along with this, the number of people within a household earning pay. Can anyone tell me exactly where the 5.2% comes from?

67 The Anti-Gnostic September 14, 2016 at 12:27 pm

Right. It’s not like the country got a 5.2% pay raise. At least, I didn’t.

Are wages nominally rising or is a discrete and calculated basket of goods falling in price? Data based on funny-money is ever susceptible to manipulation.

68 collin September 14, 2016 at 12:35 pm

Why did jump up 5.2% in one year?

1) 2014 data really should not have gone down and 2015 data got the benefit. We really should be 2% from 2012.
2) The increase in jobs is around second incomes in city and urban households.
3) Down commodity prices, especially oil, controlled a lot of prices for inflation.

69 Yancey Ward September 14, 2016 at 12:49 pm

You still didn’t answer the real question- how did the various components add up the 5.2% y.o.y? I don’t see how you get 5.2% from the individual components that are also measured y.o.y. The only thing I can think of is that the extra household income came from extra earners within said households- for example, young working people moving back in with their parents, or some other effect of household size moving the median.

I am just asking anyone to show a calculation that leads to 5.2% from the individual components.

70 Ricardo September 15, 2016 at 1:41 pm

What I think you mean is that Census is reporting that full-time, year-round earnings for men and women have both increased at much lower rates than 5.2%. My guess is that labor force participation, hours worked for part-time workers, and wages have all gone up which contribute to the 5.2% growth. Census notes that there has not been a significant change in “shared households” between 2015 and 2016. There are more adults living with their parents but this seems to be balanced out by a decline in other “shared household” scenarios (e.g. divorce or break-ups in cohabiting relationships, people leaving shared housing with roommates).

71 Steve Schow September 14, 2016 at 1:00 pm

“Something structural has gone badly wrong in the American economy…”

I thought we already determined this was mostly less educated males enjoying more leisure time (video games and TV) in exchange for lower pay/less ambition at work? Can’t find the link. This story fits my anecdotal data and narratives!

72 TA September 14, 2016 at 5:37 pm

So, looking at BEA data, DPI grew 5.1% from 2013 to 2014, then 3.8% from 2014 to 2015. “Earned” income (employee comp plus proprietors’ income plus asset income) grew 5.1% then 3.1%. Social welfare payments grew 4.5%, then 5.3%.

Turning to BLS date, employment grew 1.9%, then 2.1%. Wages of all employees (private sector) grew 2.1% then 2.3%. Wages of production and non supervisory workers grew 2.4 then 2.1%. (Presumably they live in the median household).

The one parameter that looks materially more favorable 2014 to 2015 than 2013 to 2014 is inflation. You want the BEA PCE version, it’s 1.5 then .3. The CPI version that the census bureau uses was 1.6 then .1.

Meanwhile, the number of households grew about 1% from 14 to 15. And I don’t see any significant shift in the Census Bureau data in the ratio of median to mean income.

The point is, I don’t see any way to reconcile the Census Bureau survey with BEA and BLS data, which say 2015 was nothing special. I never have trusted this census stuff, which over time has deviated significantly and irregularly from BEA and BLS. Nice gift to the Democrats, though.

73 Zack M September 14, 2016 at 9:11 pm

Good points. Looking a little closer at their state level medians, some of these numbers seem ridiculous. Take my home state of Pennsylvania. By every measure I’m aware of PA’s economy has been relatively sluggish for the past few years. Yet according to the Census Bureau surveys, the real median income in PA skyrocketed by more than $5000 in 2015.

74 andy weintraub September 14, 2016 at 8:38 pm

Please: “Wages” and “wage growth” is not the same thing as growth in “household income”.

75 Tom Warner September 14, 2016 at 11:00 pm

Since this is a different and smaller survey it’s never going to match BEA data exactly, but the gap is wider than usual. The oil price collapse would be the one big obvious reason for a real median or average income acceleration, and should help median somewhat more than average, as the guys earning a thousand times as much as the median usually don’t use a thousand times as much fuel.

As for Tyler’s question about inflation, it seems misplaced given this was an acceleration of real median income, not nominal.

76 Larry September 15, 2016 at 3:27 am

I read (lost link) that 94% of net US job growth since 2k has been in ed, health care, retail and hospitality. That suggest that a mix shift, rather than “stagnation” is to blame. Teacher and waiter productivity has not increased much.

77 George September 15, 2016 at 7:35 am

Tell me again why we are comparing our household income to unsustainable bubbles? Late 90s was the crest before the dot com burst and 2007 was the calm before the 2008 shit storm.

78 Lord Action September 15, 2016 at 9:29 am

They were both also a long time ago.

79 Zack M September 15, 2016 at 9:10 pm

Business cycle peaks. That’s long been the standard way to measure these things, no?

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