Households

Household Statistics

Source: www.census.gov, quickfacts. 

Household Income

From the Congressional Budget Office Website: (CBO)

After-Tax Income Grew More for Highest-Income Households

After-tax income for the highest-income households grew more than it did for any other group. (After-tax income is income after federal taxes have been deducted and government transfers—which are payments to people through such programs as Social Security and Unemployment Insurance—have been added.)

CBO finds that, between 1979 and 2007, income grew by:

Pew research data shows that median household income has stagnated for the longest period since the government began collecting such data in 1967. The following graphic shows the change of median household income over time, and it compares the total group with households of people 65 years and older. The data shows that the income of older Americans doubled since 1967, whereas the median average of all households  is shrinking for the last 12 years. It also shows that people over 65 live on average with $17.000 less than the total average: older Americans are considerably poorer. 

In 2012 the median household income was $51,017, still below the pre-recession 2007 level ($55,627) and also below the all-time peak level reached in 1999 ($56,080). So the typical American household had 9% less income in 2012 than it did 13 years earlier (all figures adjusted for inflation). The 2012 level is just above where it had stood as of 1995 ($50,978).

(source: http://www.pewresearch.org/)

Income Distribution

We know that the gap between the poor and the rich is widening in the US, but how strong is this trend? And how does it affect households? The following quote from the Census.gov website explains some concepts and changes for the American middle class - a term that is itself already a kind of fiction. You find the graph showing the widening gap below the quote. 

"The Census Bureau does not have an official definition of the "middle class," but it does derive several measures related to the distribution of income and income inequality. Traditionally, the Census Bureau uses two of the more common measures of income inequality: the shares of aggregate income received by households (or other income recipient units such as families) and the Gini index (or index of income concentration). In the shares approach, we rank households from lowest to highest on the basis of income and then divide them into equal population groups, typically quintiles. We then divide the aggregate income of each group by the overall aggregate income to derive shares. The Gini index incorporates more detailed shares data into a single statistic which summarizes the dispersion of the income shares across the whole income distribution. The Gini index ranges from zero, indicating perfect equality (where everyone receives an equal share), to one, perfect inequality (where all the income is received by only one recipient).

Generally, the long-term trend has been toward increasing income inequality. Since 1969, the share of aggregate household income controlled by the lowest income quintile has decreased from 4.1 percent to 3.6 percent in 1997, while the share to the highest quintile increased from 43.0 percent to 49.4 percent. Most noticeably, the share of income controlled by the top 5 percent of households has increased from 16.6 percent to 21.7 percent. Over the same time period, the Gini index rose 17.4 percent to its 1997 level of .459.

Researchers believe that changes in the labor market and, to a certain extent, household composition affected the long-run increase in income inequality. The wage distribution has become considerably more unequal with workers at the top experiencing real wage gains and those at the bottom real wage losses. These changes reflect relative shifts in demand for labor differentiated on the basis of education and skill. At the same time, long-run changes in society's living arrangements have taken place also tending to exacerbate household income differences. For example, divorces, marital separations, births out of wedlock, and the increasing age at first marriage have led to a shift away from married-couple households to single-parent families and non-family households. Since non-married-couple households tend to have lower income and income that are less equally distributed than other types of households (partly because of the likelihood of fewer earners in them), changes in household composition have been associated with growing income inequality."

What are the explanations for this enormous gap? Hedrick Smith, for instance, asks if these changes are a result of technological change and globalization:

"The standard explanation offered by business leaders and political and economic conservatives is that these harsh realities of the New Economy are the unavoidable product of impersonal and irresistible market forces. America, they point out, was an unchallenged economic colossus at the end of World War II. It was easier then for the United States to generate middle-class prosperity. But as Europe, Japan, and Russia recovered, America’s share of world trade shrank from nearly 20 percent in 1950 to less than 1o percent in 1980. In the early 1970's, we began running trade deficits, and as Asia boomed, we imported much more than we sold abroad. As historian Charles Maier put it, the United States morphed from the “empire of production” into the “empire of consumption.” Today, we benefit as consumers, but we pay a heavy price in lost jobs, American jobs lost to foreign imports or because U.S. companies have moved them overseas.

Business leaders and free market economists tell us that this economic hemorrhaging is an unavoidable cost of progress. It is the price of the inexorable march of technology and free trade. But that seductive half-truth doesn't fully square with the facts. It ignores the political and economic story that this book tells—the impact of public policy and corporate strategy on how we became Two Americas. It fails to explain why such an overwhelming share of the fruits of technological change and globalization went to a privileged few while the majority of ordinary Americans got left out.

Few would dispute that technological change and the digital age have shaken up the U.S. economy, forcing change, creating new winners and losers, and disrupting many industries and millions of lives. But if technological change and globalization were the primary causes of America’s problems today, then we would see the same yawning income inequalities and middle-class losses in other advanced countries. But we don’t."

(He then goes on to use Germany as an example for a country that has adopted a smarter strategy, and avoided the splintering of the middle class.) 

(in: Smith, Hedrick. 2012. Who Stole the American Dream?)

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