From AEI:
1. Gains in Median Income for Households and Workers Was Better Than Reported. The Census Bureau report provides data in its press release and in Table A-1 and Figure 1 showing the following:
a. US median household income increased by only 0.9% in 2018 from the previous year and that increase was not statistically significant.
b. Median income for family households (65% of all households) increased by 1.2% and median income for nonfamily households (35% of households) increased by 2.4%, and both of those increases are statistically significant.
Since all Americans live in either a family household or a nonfamily household, the median income for all US households rose last year, and the increases were statistically significant. The only reason the median income for all households was stagnant has to be because of the changing mix and size of US households, a point I highlighted yesterday in this CD post.
c. The Census Bureau also reported that real median income increased for all workers by 3.4% last year and by 3.4% for full-time, year-round male workers and 3.3% for full-time year-round female workers; and all of those increases were statistically significant (see top chart above).
Bottom Line 1: Despite the media’s sober story of stagnation for Americans, all US households and all US workers experienced significant increases in their incomes last year, see top chart above for a summary.
2. Comparing 2018 Median Household Income to 1999 is Distorted by Declining Average Household Size. Between 1999 and 2018, it’s true that real median household income increased by only 2.7%. But adjusting for the ongoing decline in average household size, which fell to an all-time low last year of 2.52 persons, the increase in median household income per household member increased by 5.9% over that period, or more than twice the increase in unadjusted household income (see bottom chart). One way to overcome the evolving and changing nature and size of US households is to compare the real median household incomes over time for households with a fixed, constant number of earners. For households with one earner, their real median income increased by 7.6% between 1999 and 2018 (nearly 3 times the increase of 2.7% for all households) and the increase for two-earner households over that period was 12% (more than four times the increase for all households), see bottom chart above.
Bottom Line 2: Because of the declining size and changing composition of US households over time, comparisons of median household income in two different years (like 1999 and 2018) is an apples-to-oranges comparison and will understate the household income gains on a per-person basis over time, and significantly understate the income gains for a households that have a constant number of earners over time (e.g., one-earner and two-earner households).
Via MJP