For years, the standard blow to this economic expansion has been twofold: Growth has been slow, and large corporations and wealthy investors have been its primary beneficiaries, rather than middle-class wage earners.
And that was a fair review. At least until recently.
The growth rate is still disappointingly slow, but this second part no longer seems true. After all these years, the fruits of the recovery are now more widely delivered. While all attention is focused on the new census data confirming the change, it’s actually a wide range of evidence that makes the case compelling.
The most decisive evidence of improving fortunes can be found in new census data released on Tuesday, showing median household income rose 5.2% in 2015, to around $ 56,500. According to this data, incomes increased for black families, white families, Hispanic families, and Asian-American families. It has increased for young people and in households headed by middle-aged adults and the elderly. In short, the improvement has been widespread to a remarkable degree.
These new census figures are not a complete shock. And there is little reason to believe that this is a statistical aberration. On the contrary, they are broadly consistent with a body of evidence that shows that inflation-adjusted incomes for the mass of Americans have finally started to increase significantly.
A dirty secret of economic analysis is that there is no perfect way to measure the financial well-being of 320 million Americans. Each measure of income is imperfect in its own way. So the best we can do is look at how people fare from a range of measurements, understand the differences between them and what they are showing.
For example, the median household income figures released on Tuesday are not adjusted for changes in the size of a typical household. Two people earning $ 50,000 and living separately form two middle-income households; if they move in together, they form one high income household. Changes in the number of people who marry, divorce, or cohabit can alter the apparent median household income without altering the underlying economic well-being of the middle class.
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You can look at measures of income per person rather than per household, such as the per capita personal disposable income data compiled by the Commerce Department. But because this is an average, it can mask changes in the distribution. If a billionaire like Bill Gates walks into a bar, the average wealth of its people will be astronomical, but that doesn’t mean the typical customer can now afford to switch from Miller Lite champagne to Dom Perignon champagne.
Flaws acknowledged that the measure has shown consistent annual growth in real per capita after-tax income since the start of 2014, and that number is up 10.3% since the expansion began in mid-2009.
Or maybe you want to focus more on salary status rather than broader measures of income. After all, it is income from a job, rather than a pension or investments, that reflects the underlying economic conditions. One way to look at this is Ministry of Labor data on average hourly earnings of non-supervisory employees, a long-standing data series on what rigid workers report in wages.
It also increased, at a rate of around 2.5% before taking inflation into account, which was low enough that that extra 2.5% of hourly wages translated into a gain in purchasing power. . Part of the story behind the good median income figures for 2015 is that oil prices fell sharply that year, lowering inflation and helping the post-inflation income gain appear higher.
Or maybe you want to adjust income changes for things like the value of tax credits and social benefits, and the value of health care and other benefits received. The Congressional Budget Office does this calculation, but with lags so long that the 2013 figures were only released recently.
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So how does the current economic expansion compare to some of the more readily available income measures? How did Americans behave over the 2010-2015 period, for example, compared to the five-year periods following the end of the two previous recessions (that would be 1992-1997 and 2002-2007)?
The 5.6% increase in median household income from 2010 to 2015 is much better than during the expansion of the mid-2000s and a little worse than during the recovery of the mid-1990s. inflation-adjusted average hours for non-supervisory workers, the mid-1990s and the current expansion are about the same, compared to no gain in the mid-2000s. richer did better in the 1990s, but worse in the mid-2000s.
Interestingly, this trend is reversed when looking at personal income per capita. This metric was strongest in the mid-2000s, perhaps reflecting solid earnings gains at the top of the ladder (there’s Bill Gates walking into a bar again).
The good news, then, is that this expansion is generating stronger income growth for typical American families than they experienced at the turn of this century. The bad news is that it falls short of the mid-1990s results. The five-year time horizon used here – 1992-1997 – underestimates the strength of this expansion, as the economy was booming. 1998 to 2000. The median household still earns 1.6% less in inflation-adjusted terms than it did in 2007, before the global financial crisis.
It is worth celebrating the real progress that is finally being made in ensuring that the benefits of the expansion spread more widely. But we’ll need the caveat that it’s not hard to find evidence that the payoffs could be even bigger.