Median income is not falling

Scott Winship has a technical study finding all sorts of flaws in the Census data.  Here’s the punchline:

In short, while the middle class””and especially the poor””saw declines in market income after 2007, the safety net appears to have performed just as we would hope, mitigating the losses experienced by households. By 2011, the safety net had returned middle-class and poor households’ incomes to the highest levels ever seen. Since then, the situation has likely improved. Disposable income among the poor and middle class is probably at an all-time high.

And Matt Yglesias tells us why this should have been obvious, if you simply stop and think about living standards:

Consider that since 1989 houses have gotten bigger. We own more cars than we did in 1989, and the cars are better (safer, more fuel-efficient, etc.). Obviously our entertainment options have improved in terms of better televisions, MP3 players, on-demand video, messing around on the Internet. The murder rate is lowerelementary and high school students are doing better, and we are earning bachelor’s degrees at a slightly higher rate. There seems to have been a small increase in the share of the population that lacks health insurance since 1989. On the other hand, there are treatments for illness available in 2012 that weren’t around in 1989. And thanks to Obamacare, the uninsurance rate is falling and should continue falling for the next several years. The food (whether judging by what’s in supermarkets, by what’s in restaurants, or the spread of things like farmers markets) is better in 2012 than in 1989.

So where’s the offsetting decline? I suppose it is possible that the quantity and quality of apparel and furniture owned by the average American family has declined so rapidly as to offset the improvements in housing, transportation, and entertainment. But it doesn’t seem to me that you hear people waxing nostalgic about the great refrigerators they used to be able to afford in 1983 and how much better they are than the crap they have to settle for today.

But the Great Stagnation is real.  Living standards are rising much more slowly than in the early to mid-20th century.



18 Responses to “Median income is not falling”

  1. Gravatar of Justin Irving Justin Irving
    18. September 2013 at 09:05

    Challenges my bias. Thanks for sharing this.

  2. Gravatar of Bren Bren
    18. September 2013 at 09:21

    Also the “median family” has a fluid definition.

  3. Gravatar of Tommy Dorsett Tommy Dorsett
    18. September 2013 at 09:24

    Good insights. Regarding GS thesis — it would make sense that demographics and higher marginal tax rates/stiffer regulation would slow trend productivity some. Yet, in the 22 quarters after the business cycle peak in 1990 (where we are now in this cycle), average productivity growth was just 1.65%. Over the last 22 quarters (since the cycle peak in 2007), average labor productivity has been 1.60%. So I think it’s a difficult call based on the data we have so far.

  4. Gravatar of Edward Edward
    18. September 2013 at 09:27

    I have a theory about this.

    This is no way a condemnation of free trade!

    but here we go.
    With new markets opened all over the world, As well as the advent of cheap labor in the last thirty years, there is little incentive for companies to invest in labor saving devices. Except for the huge exception of the internet, we’ve thus experienced a slowdown in the rate of innovation in terms of “big bang disruptors.” (plenty of incremental improvements) We still use oil for God’s sake. We dont have flying cars, we don’t have Hal from Space Odyssey . I could go on.

  5. Gravatar of TravisV TravisV
    18. September 2013 at 09:43

    Morgan Warstler,

    Do you believe the State of Texas should try to make a bare-bones level of health insurance accessible / affordable for everyone in the state?

  6. Gravatar of Brett Brett
    18. September 2013 at 09:45

    The Yglesias essay wasn’t really a response. Simply saying, “We have better stuff!” isn’t an answer to possible decline in median household income – after all, who is buying, and how widespread is the new stuff?

    The Winship article was better.

  7. Gravatar of Krugtron Krugtron
    18. September 2013 at 09:59

    Guys, Scott is on Bloomberg radio right now

  8. Gravatar of TravisV TravisV
    18. September 2013 at 10:09

    No Taper!


  9. Gravatar of Morgan Warstler Morgan Warstler
    18. September 2013 at 10:11

    Travis, yes I think a state should via a $6K deposit yearly to HSA account for the poorest, and less as income increases. It can only be used for medical covered under the plan.

    The plan itself would cover out of patent drugs, lots more student doctors, lowest rated doctors, Xrays (not MRIs), scars down the middle of your chest heart surgery, etc.

    Basically, the functional utilitarian care you WOULD NOT WANT if you could afford it, unless you are truly motivated by penny pinching.

    As I mention over and over we should measure justice based on how quickly new tech evolves, and how quickly the cost of the tech disperses to the poorest and weakest.

    I’d do the same thing with Food Stamps and Housing Assistance, there should be a level of quality / luxury you can’t get access, if you are using a single subsidy dollar to get it.

    This is actually what I expect Obamacare becomes – already the lowest cost plans are shaping up for long queues with the worst doctors…

    Pretty soon a bunch of penny pinching Middle class folks are going to notice the pay more money and don’t get stuff as good as the subsidized poor, and all hell is going to beak loose.

  10. Gravatar of Morgan Warstler Morgan Warstler
    18. September 2013 at 10:14

    Its really pretty simple:

    While government has failed to deliver any improvements to people’s lives since 1989, the technologists have stepped up and made their lives SO MUCH BETTER, no one today would choose to be rich in the world of 1989.

    Without the foresight of the Internet, comparing two worlds side by side, 1989 is a dystopian nightmare.

  11. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    18. September 2013 at 10:18

    According to the BEA, the blue is where you find it (and don’t be Mean Mr. Mustard);

    And you can find it in the Pacific NW and deep in the heart of Texas, rather than in the northeast.

  12. Gravatar of TravisV TravisV
    18. September 2013 at 10:20


    Thanks! That sounds very reasonable. I totally agree with you about “bare bones.”

  13. Gravatar of benjamin cole benjamin cole
    18. September 2013 at 11:58

    Well…okay…but a typical couple works 100 hours a week now (the Sumners perhaps?) vs. 40 back in the 1960s…this is hyperbole but still…

  14. Gravatar of Don Don
    18. September 2013 at 12:09

    The Winship article is good and doesn’t include the MTR changes that were enacted in 2012. The MattY statements are wrong. It speaks more to productivity gains than income growth. Both articles fail to challenge the inflation measures, that allow us to have more stuff without more income.

  15. Gravatar of Don Don
    18. September 2013 at 12:13

    I should also add that the Winship article delves into free lunches, but does not address the value of a free public education. Since our taxes have gone up, we can say that the value of the education has probably gone up. Most parents get more value from that govt. freebee than they spend on housing. It should be included in the analysis.

  16. Gravatar of Cameron Cameron
    18. September 2013 at 13:29

    @Benjamin Cole

    If you include household labor, Americans work less now than in 1960. Men work less outside of the house, while women work more. Men work more inside of the house, but women work A LOT less.

    (page 56)


    I wonder if the mid 20th century wasn’t just a particularly fast period of growth, and we are back to normal growth.

  17. Gravatar of Benjamin Cole Benjamin Cole
    18. September 2013 at 19:57


    Women work a lot less in the house? I have never seen my wife work at all, inside or outside of the house….

  18. Gravatar of ssumner ssumner
    19. September 2013 at 06:10

    Everyone, Lots of good points.

    Tommy, Good point.

    Cameron, Early and mid-20th century.

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