Household Income

Newspapers and media yesterday reported that median household income has dropped again as of June 2011. The New York Times headline was, “Recession Officially Over, U.S. Incomes Kept Falling.” The number actually cited was $49,909 in real dollars produced in a special study. That number is somewhat higher than the value I have from the Bureau of Labor Statistics’ Current Population Survey for 2010, but never mind small details. The BLS values are based on 2010 constant dollars. The inflation adjustments used by the Sentier Research study (link) cited by the NYT are not explicitly stated. I thought I’d put up some history here. The data are from this BLS facility (Table H-6, All Races).

Along with the median household income (half earn more, half less), I am also providing average household income (mean income). Beginning and end values are shown in numbers along with the highest points and the lowest—if the lowest are not at the beginning. I’ve also provided a bar graph at the bottom showing the difference between average and median.

After at least two previous jobless recoveries, it should not surprise us that incomes lag the ends of recessions. Indeed the divergence between GDP- and Jobs-performance has become, for me, an economic indicator. One way to read it is that economic well-being as measured by the GDP is no longer a reliable measure for human well-being measured by full employment and consequent quality of life. Another way to read this is that wealth no long trickles down as it once did—thus that the distribution of gross national wealth is no longer quite as even as once it was.

This last point is illustrated by the difference between average and median income. It has been growing. And since these data show constant dollars, that difference is absolute. The movement of the Gini Index, which charts income inequality, is shown in the next graphic for the same period of time.

Some notes. If you want to understand how the Gini Coefficient is calculated, here are two posts on the Old LaMarotte (one, two). The data for this graphic are from this BLS facility; select Income Inequality and then Table H-4. The larger the Gini, the greater the inequality.

Notice that on this chart the Gini advanced during the Great Recession while both jobs and income dropped. We are slowly entering a very different era, but we think that things should follow patterns as in the old days. They no longer do. That is what should concern us.