Tuesday, 22 January 2019

New Economic Data Shows Financial Life Is Stagnant Or Getting Worse For Many

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The overall numbers you see in reports on new federal income and poverty data seem positive. Median household income of $61,400 was up 1.8% in real terms between 2016 and 2017, according to the Census Bureau. The official poverty rate was down from 12.7% to 12.3%.

However, single point numbers can be next to meaningless without context. That surrounding information, also available from the Census Bureau, is less cheery. Here are some graphs that show the issues.

It does look at though median household income has improved over the years, as this graph shows.

Real median household incomeU.S. Census Bureau

But a footnote indicates that data for 2013 and past reflect redesigned income questions and a redesigned definition of median income. The graph below shows median income retroactively revised from 1999 onward for consistency with current measurement

Revised median household incomeU.S. Census Bureau

In the last 18 years, real median household income dropped by 1%. Although the median household income improvement over the last several years is good, the country is still trying to catch up to a time years before the Great Recession.

Look at the 1999-to-2007 portion of the curve. It represents the dot com era on one end and the insane heights of risky financial manipulations and final days of the housing boom on the other. Even as money accumulates in the accounts of the wealthy, during periods of supposed good economic activity, regular people increasingly get left behind.

Here’s a picture by race:

Median income by raceU.S. Census Bureau

If you’re black, the median income is 34% lower than the overall median. If you’re Hispanic, it’s 18% lower.

The next graph shows real median income from 1967 to 2017 by select income percentiles.

Median income by select income groupsU.S. Census Bureau

If you’re in the middle or at the bottom of the economic ladder, median household income has gone up since 1967 by $3,700 at the 10th percentile and by $15,400 at the 50th percentile.

For the top 5th percentile of the country, the increase has been 94%. The top 10th percentile saw 85% growth.

In this fuller context, a tiny addition to overall median income means next to nothing. Most people still can’t easily afford a college education for their kids. The median 1967 home price was around $22,500, according to the Census Bureau, versus the median income at the time in 1967 dollars of $7,200. The house was 3.1 times as much as the annual household income.

In 2017, the median home price was about $330,000, while median household income was, as we just saw, $61,400. That makes the house 5.4 times as large as the income.

A year of tuition, room, and board was $9,915 in 2015-2016 dollars. That was 21.6% of the household income in current dollars. Now it’s $22,432 (numbers from 2015-2016, which are the most recent available), which is 36.5% of income.

Even with insurance, healthcare costs have ballooned beyond recognition. Some in academia want to redefine poverty based on consumption and claim that only 3% of the population is poor. And yet, the burdens that housing and education, necessary to live, work, and advance, place in relative weight suggest that those changes make little to no practical sense.

The official poverty rate is at 12.3%, which is better than the $22.4% in 1959. But we still have 39.7 million who are poor, which is a bit more in absolute numbers than in 1959. Poverty rates by race vary significantly.

Poverty rates by raceU.S. Census Bureau

The percentage of people whose income is below half of the poverty level has actually increased since 1975. Back then, 30.1% of the poor lived with incomes under half of the poverty level. Today, it’s 46.7%. So even as the poverty level seems to be somewhat stable, people are getting poorer.

The assumption that things are improving economically for most people is like saying that you can go home to get better now that the emergency room visit is over. Although, for many, the more apt analogy might be moving up to the intensive care unit.

Source: https://www.forbes.com/sites/eriksherman/2018/09/12/new-economic-data-shows-financial-life-is-stagnant-or-getting-worse-for-many/

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