The Census Bureau report Income and Poverty in the US 2016 shows real household income in the US hit a new record high of $59,039 in 2016 thanks to a methodology change and rising incomes of women.
Real, inflation adjusted, earnings of men are below where they were in 1973.
Men vs Women
Methodology Change Impact on Earnings
Methodology Change Impact on Poverty
The Wall Street Journal reports U.S. Household Incomes Rose in 2016 to New Record.
Slightly more than half of US households are now back to where they were in 2000.
“For income, there were statistically significant differences for many key measures between the redesigned and traditional questions. For example, median household income calculated by using the redesigned questions was 3.2 percent higher than the median income found using the traditional questions.”
When all else fails, change the methodology.
Mike “Mish” Shedlock
Tony Bennett said:
“When all else fails, change the methodology.”
Thank you for bringing this up.
I’ll wager you will be in the tiny minority of bloggers who did.
“For income, there were statistically significant differences for many key measures
between the redesigned and traditional questions. For example, median household
income calculated by using the redesigned questions was 3.2 percent higher than the
median income found using the traditional questions. ”
I will all that blurb
When in doubt, change the methodology and lie if necessary. This was already done to unemployment statistics, which would be at least double if the traditional method were used, and more than triple if full employment were the standard. John Hussman’s analysis has the singular problem that he accepts 4.3% unemployment as real….
Tony Bennett said:
ANY discussion of the UE rate needs to include the participation rate, which has fallen precipitously since The Recession. Bullz like to blow it off as just change in demographics – Aging population leaving the workforce.
The facts say otherwise.
Paucity of good jobs the likely culprit.
Record numbers not in the workforce while record low unemployment and record job openings.
How can this be?
Government subsidization of people who CHOOSE to not work, and those costs, be they immediate budgetary costs or long term debt, fall upon those remaining in the workforce.
We have 95 million capable workers…not, yet they still eat, still consume, still vote (even after death), and they are growing. And we see our future prosperity in automation that will render even more people redundant and DESERVING of subsidization.
On another subject related, I just got my health insurance renewal for my employees (of which I pay 100%) and my premiums increased 28%. I’m now paying approximately$850/month per person, and most think it sucks, given it had a $6500 deductible and NO CO-PAY. My socialist employee requested I drop his insurance so he can use the cash to buy a hopefully government subsidized plan. He earns about $50k a year. This is our reality. Participate and struggle, or surrender to state dependency and demand those still participating contribute even more.
Rising insurance costs for diminishing value consumes any hope of pay increase.
Is there any reason to work?
Can any economy survive a significant percentage of their population as demanding useless eaters?
Who are these useless eaters? I think that “everyone is on welfare” thing is from back in the 70s and 80s. In Michigan there is a 5-year lifetime welfare limit because it was such a welfare state back in the cay. In the PNW, I don’t think people can just get on welfare and not work. In fact, I had a student that was homeless and all she could get was 20.00 a month in food stamps. Also, there are so many elderly people living in camp trailers down in the deep South and all over the US, for that matter. These people are hardly living large on the welfare rolls. They are malnourished and in poor health. Also, strangely, when they present to the doctor after having a stroke or some other acute event, they report no past medical history because they haven’t seen a doctor in decades, if ever. Not to mention the bums, homeless, mentally-ill, drug-addicted people that obviously aren’t working, but aren’t exactly the good life off the government.
Remember: “Blessed be the merciful, for they will be shown mercy”.
Stephen Reiss said:
THIS IS CRAZY!!! I was an average income earner in 1973. I can tell you that today is way better!!!!! Shame on you Mish. You should know better – that inflation adjusted income is immeasurable and the data does not reflect reality.
I posted a chart straight from the Census Bureau.
Most of my readers think it is worse, and so do I.
I do not believe you understand the meaning of “Real Income”
What did a house cost in 1973? A Car? Tuition?
I will answer the latter for you. Tuition at the University of Illinois was about $250 a semester for an engineering degree.
Please report back and tell us what tuition is now.
Stephen Reiss said:
Cherry picking a few items is disingenuous at best. I could talk about the amazing attributes of the smart phone. Medical technology was like the dark ages compared to today. In 1973 only a fraction of new homes were built with central air conditioning. My personal observation is that the standard of living for the median earner is far better today. This is what “real” income tries to guesstimate.
You have said measuring consumer inflation is not possible. This was also the position of von Mises who warned against indexing..
The world is going down the loo. One reason is the lack of fidelity to facts and logic. Census bureau indexing advances neither.
My father was a carpenter in 1970, built his own four bedroom suburban home for less than $20k and it had A/C and a two acre lot. I purchased a new 1975 Corvette convertible, fully loaded for $8000.
Today a new A/C system replacement for my home (4ton) was $12000….. almost what my dad paid for his house in 1970.
Further, in 1970, you had to put 20% down on a house. Today, not only are most things far more expensive relative to income, but personal, corporate and government debt are at record highs. Debt infers to me that we are spending what we have not earned, and our “modern” economy is addicted to debt as any opiate addict in the gutter.
Our economy is hopelessly broke and our level of debt PROVES IT.
We had a financial crisis because our economy was temporarily cut off from debt. They won’t let that happen again, but we are nonetheless circling the drain, piling on more and more debt to make up for our increasing shortfalls and picking up speed. We will be in the sewers before most realize what happened. No crash required.
Stephen Reiss said:
Cherry picking again! Median per capita living space has about doubled since 1973. We are also spending a significantly smaller percentage of income on food – better and more varied to boot.
The economy approaches von Mises predicted collapse of the currency regime. Yet not everything has to fit this narrative. We can spin the numbers all you want. I only make an observation as an old dog who experienced both 1973 and today. As bad as things are and about to become, the words of my father still ring true, “The best thing about the good old days is that they are gone.”
Off subject, but it links to the recent Hurricane economic effects. Lynette Zang (ITM Trading) did this, thought you’d want to see this:
The cost of a house in 1973 was the result of real demand as the baby boomers were demographically situated and economically able to form households. Today’s real estate market is driven by cheap money instead. We have little household formation because the millennial is not sufficiently positioned economically positioned.
Right Greg , millennials have been brainwashed to be gender neutral, barren by choice and demanding of ‘equality’ when their is none. So when will women realize that wage equality is shorthand for being a donkey and for reduced or no family formation.
Alex Spencer said:
Of course from household earnings should be subtracted the value of lost household labor due to second person at paid work. Household labor producing real food instead of junk food; Pick up and drop off for children; Daycare; School and homework supervision; Household facility maintenance; and Children’s medical care to name a few. Just illustrates the problem with most economic statistics, some of the most valuable things are often valued at zero dollars.
Stuki Moi said:
Medex Man said:
Medex Man said:
The value of “Dr Mom’s chicken soup” alone is more than the alleged income increase.
Add in real food instead of injecting corn-syrup directly into children’s veins… to say nothing of homework supervision, etc
James Greenberg said:
“Anything that is nonmaterial is immaterial to members of the institutional order.” — Butler Shaffer, 2010
Absolutely, and these costs are pretty large in my personal experience…
Alex Spencer said:
Just looking at the household income chart and subtracting my lowest estimate of unpaid annual spouse services value for family of 4 ($10K two kids after-school care + $2K extra fast food) brings income level all the way back to the 70’s . The entire increase shown could be representative of just increased dollar income from more two earner households rather than any increased standard of living. This lower standard of living is more highly taxed as well since it is obtained with increasing earned income to buy services previously unnecessary.
Totally agreed, as many others have. Also, when you factor in the cost of all things, which go up but never down, we really haven’t made any progress. Sure, those numbers might look good on paper, but it’s everything else that has also gone up, more than the income I might add, that still makes us not as wealthy as the statistics like to read.
Medex Man said:
Yet another reason (beyond cultural issues) why consumers aren’t buying the most expensive cell phone — never mind self-driving cars.
The EV market died last week when Daimler-Benz admitted the EV market is 100% dependent on tax subsidies just to be able to sell as rich people toys…. And given the massive competition for spending money in all G20 countries, and massive existing deficits, the prospects for expanded tax subsidies is very very limited.
‘Lectric cars aren’t that far out of line in middle class price range,,,
Medex Man said:
You didn’t pay attention. That price is AFTER tax subsidies. The actual cost is twice that price.
The middle class are not running out buying $65,000 mid/small size cars. They just aren’t.
But they MUST!
EV is a necessary badge of progressivism. It PROVES you care about your climate and as such makes you immune from prosecution of the hate crime of “denial” of climate change…and most other hate type crimes (as defined by progressive interpretation of current “living documents”.
You just can’t put a cost on that…especially if you can force someone else to pay for it.
Resilience is gone too.
The backup of finding a job for a 2nd earner to help cope.
Dad/Mom maxed out, mortgage maxed out, credit card maxed out.
No spare capacity when shtf.
The US is a very different country than it was in 1973. In the spring of 1973, I was earning over $14,200 a year as a financial analyst at one of the Big Four Detroit automakers. In the western suburbs of Detroit, regular gas was 30 cents a gallon, my modern one bedroom apartment was only $175 per month and my employee benefits were very generous, thanks to the bargaining strength of the UAW. These days, US companies face a lot more foreign competition, industrial unions have a lot less power than they used to have and the gap between high achievers and low achievers has widened.
Boomers who weren’t very careful with their money over the years or were just unlucky are facing a very hard time these days. Their children will inherit the national debt and face even tougher times. Two of my doctor friends in their late 60’s cannot afford to retire.
i think it’s called living beyond one’s mean. credit cards made it possible
Tony Bennett said:
The one thing I’ve learned the past 10 years (which I’ve had to keep reminding myself) is that A LOT of folks not only live beyond their means, but will try and maintain that lifestyle come hell or high water.
Serial refinancing, reverse mortgages, tapping retirement funds before retirement, massive debt loads, etc.
Like Buffet likes to say – when the tide goes out (eventually) we’ll see who is wearing what.
Ron J said:
We gave free food to the mental defectives and they raised a bumper crop of Dimocrats.
There is no solution to rising income inequality unless employee unions make a comeback. All the tax and regulation abracadabra proposed and enacted over the last 40 years have not only not solved the problem but in fact, have made it worse. The definition of insanity being what it is, more and more of the same will be tried in the coming years and the situation will get worse.
But everything has a breaking point. We just don’t know when and where it is.
Bring back all the Unions you want but all they will do is destroy what employment possibility there is. Perhaps they disappeared because their power to protect labour evaporated under globalisation.
Tariffs won’t help protect the home market either to give labour pricing power.
Look to globalisation and future robotisation/AI as causes.
Commoditisation of labour did it, not weak Unions or lack of them.
New industries are needed and better education.
If people don’t care enough about their neighbors jobs, or even their own, to buy domestic production we are doomed. You might believe protectionism won’t work, but I will PROMISE YOU that taxing our own labor, our own production, while taxing imports not all all, will DESTROY our economy.
“There is no solution to rising income inequality unless employee unions make a comeback.”
It’s mostly about the financialization of EVERYTHING:
Why We’re Doomed: Our Economy’s Toxic Inequality
August 16, 2017
“There is no solution to rising income inequality”
Seems obvious from the statistics. Force marriage between Asians and Blacks. Problem solved!
“Real, inflation adjusted, earnings of men are below where they were in 1973”
And considering that the official inflation figures are undoubtedly understated BS thanks to the below, the real situation is likely far worse:
The Boskin Commission, formally called the “Advisory Commission to Study the Consumer Price Index”, was appointed by the United States Senate in 1995 to study possible bias in the computation of the Consumer Price Index (CPI), which is used to measure inflation in the United States. Its final report, titled “Toward A More Accurate Measure Of The Cost Of Living” and issued on December 4, 1996, concluded that the CPI overstated inflation by about 1.1 percentage points per year in 1996 and about 1.3 percentage points prior to 1996.
From that Boskin Commission Report entitled we find the REAL reason for wanting “a more accurate measure” of inflation:
“CBO estimates that if the change in the CPI overstated the change in the cost of living by an average of 1.1 percentage points per year over the next decade, this bias would contribute about $148 billion to the deficit in 2006 and $691 billion to the national debt by then. The bias alone would be the fourth largest federal program, after social security, health care and defense. By 2008, these totals reach $202 billion and $1.07 trillion, respectively.”
Isn’t it convenient how it just so happened that inflation was found to be overstated instead of the 50% chance it had to be UNDERSTATED. Has ANY outside expert agency EVER done a technical analysis of the report to check the validity of its methodology and conclusions? Doubtful…
The BLS has every incentive to understate inflation. Lower COLA increases for Social Security. Social Security payments went up 0.3% this year. Does that seem like a reasonable COLA? It also makes GDP growth look better. Not to mention, it makes the article being discussed here look better. It also makes buying gov’t debt not seem so bad.
Mission Accomplished said:
Sounds about right
I’ve spent my entire career running a gauntlet of departments responsible for not hiring white males.
There are programs designed just for YOU.
Ever felt male?
Come on guys, you ever looked in the mirror and thought maybe you needed a shave ( pubes don’t count) , or do you speak with a deeper than average voice from time to time?
Well we have put together expert guidance to help YOU understand just how it feels for normal complex sensitive feminine people to turn round and find YOU standing there.
“We’re here and its your fault, always. Come join in.”
As many on this site point out, you can’t depend on government, or unions, or anyone to “give you a good, well paid, job”.
Plus you can’t change the world, you can only adapt to it.
What that means is that each individual has to acquire the necessary skills, and then apply them, in order to have some degree of personal success.
You can’t be waiting for Trump, or anyone else for that matter, to bring back the jobs in the coal mines, steel mills, or factories, because those jobs have all been automated.
Make sure you keep acquiring skills throughout your life and make sure your children do as well.
We should take a page from the climate change “believers” in that they concur that change is inevitable, but claim our risk lies in rate of change, change occurring faster than civilization can adapt to without human suffering.
This is my point on our economic change, and how globalization and technology is advancing at rates that will cause great harm to PEOPLE.
We can embrace the notion of extended life spans due to technological advances in medicine and how many lives might be made longer or easier due to technology, but how and where does the math of reduced incomes and prosperity due to job loss and dislocations come into consideration.
Rates of change are more important than absolute change.
The reality is that change “is inevitable”. Those who choose to ignore it, often suffer the consequences.
Technological change, which many people choose to ignore or fight, is nothing more than human ingenuity. You can’t stop human ingenuity. Nor do you want to.
Human ingenuity has given you electricity, indoor plumbing, transportation, communication, medicines, etc.
Human ingenuity has given humanity a standard of living that is amazing compared to any time in the past.
Human ingenuity is what we use to solve our problems.
Human ingenuity causes both minor and major changes. Not all of these changes are positive, but, since an individual cannot prevent these changes, they must adapt to them.
“We can embrace the notion of extended life spans due to technological advances in medicine and how many lives might be made longer or easier due to technology, but how and where does the math of reduced incomes and prosperity due to job loss and dislocations come into consideration.”
This argument has been made by many for the last hundred years, as a reason to justify fighting technological change. It encourages people to fight change, which only worsens their situation.
The reality is that in spite of the dislocations that happen in the job market, we end up with more jobs, better jobs, more productive jobs, which results in higher standards of living in the long run. (ie fire the guy digging the ditch with a shovel and hire the guy with the backhoe)
This is what happens when you embrace free market capitalism. There will be winners and losers. You must be a big supporter of socialism, Madashellohwell, because you want to interfere with the free market and keep the ditch diggers employed at wages that can’t be justified.
You are confused.
Do you honestly think that a government that has twenty trillion in debt and corporations with record debt and speculative markets creating companies like Amazon who can operate for decades without profits such that no other company can compete is NOT interference of “free markets”?
And do you understand the premise of my argument, NOT to fight change but that the RATE of change is a potential threat?
If you understand anything of math, science or simple physics, you would also understand what I am saying.
Change that occurs faster than society can absorb may still very well benefit SOME greatly, but may absolutely devastate others.
During WWII, having women do traditional ‘male’ jobs was necessary to produce what was needed to win the war.
At the end of the war the government propaganda machine tried to place these women back into ‘home-work’ and failed.
This ‘New’ labor force failed to go away and produced the economic growth of the 1950’s and 1960’s.
In 1960 a male wage earner could support a family of 4 largely due to wage gains from unionization.
By 1990 this was no longer possible.
Government thinks it can ‘steer’ the economy. It cannot. It can make things worse, but rarely can make things better.
Sorry but people were supporting families much larger than four long before unions came on the scene. Most people I knew in laboring trades never came close to unicorn union wages. The one friend who did work union was United Mine Workers, and by 1980 both he and his dad were out of a job. He has worked in a cardboard candy box factory ever since.
And I would dispute that government ever intended to put the woman workforce back in the nursery. Two earner families not only contributed to their beloved economic “growth” but massively increase their tax haul. Rather than on tax payer they now had two, and the once untaxed homemaker chores were now subcontracted out to yet another new taxpayer.
The net undesirable result is a population paying more taxes, in greater debt and more dependent than ever.
Both Government and unions can interfere in the job market for a short period of time, but in the long run, free market capitalism will determine the winners and losers. You can’t protect the workers who have become obsolete, whether they are male or female.
As individuals, all you can do is continue to acquire the skills that keep you relevant in today’s world. You can’t expect governments or unions to protect your job, or your wage.
That’s why I devote some of my time to a charity that provides training to those who have lost their jobs. Those that acquire the necessary skills get back into decent jobs.
And what of the 95 million not working?
Look at job metrics. Most jobs are low wage, jobs that can’t compete with gov entitlements.
We are training people NOT to work.
Look at the numbers on food stamps, look at poverty numbers, look at government entitlement payments, and then TELL ME how technology is making lives so much better. Just because you or I are winning does not mean society is winning.
Medex Man said:
@fedwatcher -“In 1960 a male wage earner could support a family of 4 largely due to LACK OF FOREIGN COMPETITION”
There… I fixed your erroneous comment. Most of the world was still rebuilding industry from WW2 destruction and posed little if any competition at the time.
By 1980, unions had messed everything up — insisting on paying good workers the same as bad workers (all for one, poor for all!). Unions extorted companies into keeping hundreds of useless dolts on the books, which further cheapened the workers who (gasp!) actually worked. Unions created an “us versus them” mentality was no match for foreign companies that worked together as a team. And rampant union corruption (not just the teamsters) meant the whole thing had become an extortion racket.
It seems to me there must have been a lot of discussions in foxholes during the war years over what would happen if “we get out of this alive.” I’m not a conspiracy theorist, but I could see that having a common tragedy in the lives of a very large number of people would lead to a certain camaraderie that crosses classes. Oh sure, I’m also certain a lot of rich people got out of front-line duty because they had “skills” that would be useful in the supply chain or whatever, but simply asking where you were stationed would be an instant shortcut to common ground. Not worth starting a world war to get that experience back though.
Or maybe the idea that you bought shares of the local power utility stock because it paid a nice dividend, or the local bank because it seemed like a good investment (and you got to go to the free shareholder’s lunch once a year) helped keep people in line. After all, when one of your most vocal shareholders is also a customer, attends the same church, is in the same lodge and might be your plumber, you tend to treat them with more respect.