Household size and stagnant median income

One loyal MR reader writes to me:

However, census Bureau data show that the size of the average US household decreased from 3.1 to 2.6 from 1970 to 2007…

The underlying question is whether figures for the median household are underrating the true growth in average living standards.  A few points are in order.

1. Here is one passage from The Great Stagnation: "Since 1989, the size-adjusted and size – unadjusted measures have been rising at roughly the same rate, and post-1979 the difference between the size-adjusted and the size-unadjusted median income measures is never more than 0.3 percent."  For more on this, see Lawrence Mishel, Jared Bernstein, and Heidi Shierholz, The State of Working America 2008/2009, chapter one. 

2. David Leonhardt writes: "In fact, households were shrinking more quickly in the 1960s, ’70s and ’80s than they are now – and incomes were growing."  Read the rest of this post as well.

3. That households are smaller decreases the aid and assistance available to those living in them. 

4. There are an increasing number of women in the labor force, and that factor biases the household number to be higher than true productivity growth alone would dictate.  Unmeasured household production is a mix of "lower than it would have been" or more harried than it would have been.  I suspect this is a large effect, not a small effect.

5. On the issue of students and retirees, see the adjustments performed by Lane Kenworthy, pp.37-38.

Overall I do not see that changing household size allows one to dismiss the notion of relatively stagnant median income.


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