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It's a sure thing! Can't lose!
For the Pessimists:
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It's a sure thing! Can't win!
I sure wish there was a way to break the tie between the optimists and the pessimists. I could probably start by pointing out that the optimists have at least one thing wrong. Constant growth really should be using an exponential trend and not just a linear one. Here's the problem with a linear trend. If it takes roughly 20 years for median income to double once (as seen in the first chart for the most part), then it will take an additional 40 years for it to double again. See why linear trends kind of stink when it comes to growth?
That's what makes the pessimist case slightly more believable. Growth is definitely slowing. Both charts clearly show it. It's just that the first chart shows it in a much more subtle way. What would happen if the growth continues to slow?
September 9, 2013
Study: Demographics to Drag Down Median Income
Americans who expect wages to rise as the nation recovers from the recession may be in for disappointment. A new report suggests incomes may be headed downhill for decades.
Oh oh. Why?
Pointing to past decades, the economists say median household incomes rose 9 percent between 1979 and 1989 and jumped 13 percent between 1989 and 2000. They say the primary driver of this growth was women, The Wall Street Journal notes.
Women! I knew it! The *real* men among us will just need to convince women to each work 2 jobs! That seems totally doable in this increasingly automated and outsourced world with chronically high unemployment. I suggest, "I bet you can't work *two* jobs! You're just a woman!" That's sure to be a big hit in any household!
And when I say big hit, I mean that the future's so bright I gotta prepare a cold compress for my eye. I'll have quite the shiner! Although optimism means that I can expect the best possible outcome, I just don't have it in me. I'm clearly planning for more of a pessimistic worst-case bodily injury type of outcome, lol.
In all seriousness, we're so @#$%ed long-term. This is not investment advice.
This post inspired by Revolting as seen at Retirement Blues.
Update:
I originally stated that this data was in inflation adjusted dollars. It was pointed out to me in the comments by mab that this data didn't look inflation adjusted though. After further review, he was absolutely right. Although the data source used inflation adjusted data for the 2-year and 3-year median income averages, it did not use it for the single year averages (which I was using). I have added the "my personal blunders" tag to this post. I should have spotted it. All the conclusions here remain valid. In inflation adjusted terms, things are much, much worse.
Source Data:
U.S. Census: Income
11 comments:
Hey, mabye long-term ZIRP will increase real household median income from here. I bet the study isn't even planning for that!
And maybe, just maybe, unicorns will take us all to Candy Mountain!
Women already work two jobs; just one is the unpaid child care/cook/cleaning/chauffeuring/homework helper/lawn care service/emotional support staff job. Just for starters.
Then again some of us figured out way early on that even a well-paid career only netted about $1.50 an hour after paying everyone else to do the unpaid jobs.
Guess that means I won't be going back to the paid career.
thanks for the call out.
Is the data from table H-8?
Why did you chose a 7 year avg?
Cheers!
JzB
dd,
You are right of course. I stand corrected. Three 8-hour jobs then! That still fits within the 24 hour day! Whew!
JzB,
Why did you chose a 7 year avg?
As seen in the first chart, it seemed to do a fairly good job of removing most of the short-term cyclical ups and downs caused by recessions (the signal noise). I'm much more interested in the underlying long-term structural trend.
The data is from "Median Household Income by State - Single-Year Estimates". I'm not at my computer right now but table H-8 sounds right.
Looks like nominal, not real, income to me.
I'm skeptical that median household real income doubled in the past 20 years.
mab,
You are absolutely right. I'm going to have to restart this post.
In its infinite wisdom:
"Median Household Income by State - 3-Year Averages" - Inflation Adjusted
"Median Household Income by State - 2-Year Averages" - Inflation Adjusted
"Median Household Income by State - Single-Year Estimates" - NOT Inflation Adjusted
Mark,
After looking at you chart, I suddenly found myself siding with the optimists.
I've plotted that data before. If memory serves, households haven't seen a rise in real median incomes in over 20 years!
To borrow one of your phrases: Pessimism for the win(ce)!
mab,
I really appreciate you pointing that error out to me. The post has been corrected. Thanks for that!
I should have noticed myself. I rationalized it away thinking that income wasn't just wages and more people in households were working (women).
Who was I kidding though? There is no way that the median household isn't twice as well off as it was 20 years ago.
Now that I see that it is in nominal dollars and not inflation adjusted dollars, pessimism for the win(ce) is right!!
Good grief. We're in seriously big trouble long-term.
There is no way that the median household isn't twice as well off as it was 20 years ago.
Yet another correction needed? Good grief. Not my day.
There is no way that the median household *is* twice as well off as it was 20 years ago.
I'm clearly suffering from "Post" Traumatic Stress Disorder. This post was very stressful, lol.
That felt better. Puns always help. :)
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