Friday, September 16, 2016

Some charts from the Census data released this week on US household income

From Mark Perry.
"The Census Bureau released its annual report this week on “Income and Poverty in the United States” with lots of new updated data on household income and household demographics. Based on those new data, I presented my annual CD post “Explaining Income Inequality by Household Demographics” a few days ago. Below are four charts that are also based on the new Census data on household income through 2015.

1. Median and Average Household Income, and Average Household Size. The chart above shows: a) average annual household income in 2015 dollars (dark blue line), b) median household income in 2015 dollars (light blue line), and c) average household size (brown line), all from 1967 to 2015. What received the most attention in the last few days was the 5.2% increase in real median household income last year, from $53,718 in 2014 to $56,516 in 2015. That was the largest annual increase in real median household income since the Census began tracking these data in 1967.

Median household income last year of $56,516 was slightly below the pre-recession peak of $57,423 in 2007, and also below the all-time high of $57,909 in 1999. And the fact that median household income last year was below the 1999 level received a lot of media attention. But notice what’s been happening to the average household size over time — it’s been gradually declining over time, from a high of 3.28 persons in 1967 to a record low 2.54 persons in each of the last three years (2013-2015).

Income adjusted for household size is calculated and presented below, but it should be obvious that it’s not really fair to compare median household income in 1999 at its peak when the average household had 2.61 persons to median income in 2015 when the average household size had fallen to 2.54 person. While median household income has been flat in recent years, it’s important to note that the gains over a longer period of time are quite impressive. The typical US household in 2015 had annual income of $12,000 more (in 2015 dollars) than the typical household in 1967 – that’s $1,000 in additional income every month.

Although it doesn’t get as much attention because it’s influenced by outliers on the high end, average income per US household increased to a new record high in 2015 of nearly $80,000.

2. Average and Median Income per Household Member. The chart above displays average and median household income adjusted for household size. While the average income per person reached an all-time high in 2015 of $31,206 (in 2015 dollars), the median income per household member last year of $22,250 was slightly below the $22,430 figure in 2007, but was higher than $22,187 in 1999 (all in 2015 dollars). Compared to 1967, the average household income per household member has more than doubled, while the the median household income per person has increased by 65%.

3. Married 2-Earner Households. The chart above shows annual median income from 1949 to 2015 for families headed by married couples with both spouses working. Income for a typical family in this group reached an all-time high last year of $104,000. The 3.6% increase in income last year for married, 2-earner families was the highest annual income gain for this group in nearly 20 years.

4. The Disappearing Middle Class. This chart represents what might be one the most important findings in the new Census data and confirms a trend I’ve highlighted many times before. Yes, the “middle-class is disappearing” as we hear all the time, but it’s because middle-income households in the US are gradually moving up to higher income groups, and not down. In 1967, only 8.1% of US households (fewer than 1 in 12) earned $100,000 of more (in 2015 dollars). Last year, more than 1 in 4 US household (26.4%) were in that high-income category, a new record high. In other words, over the last half-century, the share of US households earning incomes of $100,000 or more (in 2015 dollars) has more than tripled! At the same time, the share of middle-income households earning $35,000 to $100,000 (in 2015 dollars) has decreased over time, from more than half of US households in 1967 (53.2%) to less than half (only 41.5%) in 2015. Likewise, the share of low-income households earning $35,000 or less has decreased from more than one-third of households in 1967 (38.7%) to below one-third of US households last year (32.1%).

Bottom Line: Some of the key takeaways from the new Census report on US income are:
  • the 5.2% increase in real median household income last year was the largest annual gain on record
  • adjusted for household size, which has been falling, median household income per household member last year of $22,250 was the highest in history except for 2007 when the figure was $22,431
  • c) the median income for married couples with both spouses working reached a new all-time record high last year of $104,000
  • the share of US households with incomes of $100,000 or more (in 2015 dollars) reached a record high of 26.4% last year, which is more than triple the share of households in 1967 with that level of income. At the same time, the shares of US households in both middle-income ($35,000 to $100,000) and low-income (below $35,000) groups fell.
  • America’s middle-class is disappearing, but into higher, not lower, income categories"

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