How Are People Getting By?

[mccreadj]

Exactly. My post said overtime did not apply to most white collar employees.

[Chris Alger]

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How could the higher median incomes be attributed to concentration of wealth in a few?

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By itself, it can't be, although that might be the cause. An increase in the median income could occur if the incomes at the higher range increased. If all people who made between $200,000 or more five years ago now make 20% more, and if the total number of incomes increased, the national median income would significantly increase even if 95% of the population was unaffected. Adding higher numbers to a set increase the value of whatever number is in the middle. The median would also go up if the lower incomes increased, or if all incomes did. The point is that changes in "median income" is just a facet that doesn't tell you much about the country as a whole. The better way of looking at how many people are getting their fair share is to look at the distribution of income following an increase in productivity -- whether workers are reaping the benefits of more output per worker hour. Recent data suggests they aren't.

[Ezcheeze]

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If all people who made between $200,000 or more five years ago now make 20% more, and if the total number of incomes increased , the national median income would significantly increase even if 95% of the population was unaffected

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This would only be true if you replaced "the total number of incomes increased" by "the total number of incomes above the current median increased"

In fact, any universal increase in salaries above the median has no effect on the median if the number of incomes stay the same. In order for the median to change there has to be a broad increase in the incomes below the median, or there has to be a lopsided increase or decrease in the number of incomes above or below the median.

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Recent data suggests they aren't.

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Could you provied a link or reference to this data when you get a chance?

[bobman0330]

Your application of the concept of the median is sorely lacking in quality. While it's true that the median income would increase if higher incomes were added to the top of the set, that doesn't make any sense. Are you suggesting that a lot rich Martians have entered US society in recent years? Or that newborn wealthy children and wealthy immigrants outweigh poor children and poor immigrants. In order for the median to increase, people have to go from the bottom half to the top half. And if the median is at a point where wealth is increasing gradually (which i believe is the case around the 50% mark, not sure), then the increase in the median will be proportional to the number of people going from the bottom half to the top.

[Wes ManTooth]

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Some other things to take into consideration:

4) More people are making due without health insurance and reitrement savings/pensions

5) Savings rates in the US have now touched 0%


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This is very misleading... even your own report(link) states this

"Commerce Department's savings rate does not adequately measure total household savings, as it does not reflect investment gains generated by real-estate holdings and stock portfolios"

The OP was comparing now to the 1970s. Now people are saving more in different ways now (stocks, 401k, real estate, money markets, etc).

Why save money in a normal bank account that has a return of less then 1%?

Granted overall debt has increased, but if an individual is making more interest off investments then paying interest in debt, this is +EV. Economicaly it is expected to see debt increase with lower interest rates.

[laserboy]

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The OP was comparing now to the 1970s. Now people are saving more in different ways now (stocks, 401k, real estate, money markets, etc).


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Are Americans investing their money in stocks and real estate? My understanding is that home equity is at an all time low and that that most Americans have less than $25,000 in their 401K account. In fact, the latest trend is to TAKE MONEY OUT of your house.

Average Homeowner Equity

Retirement savings lag in U.S.

Cash-out refis soar

You are correct in that times have changed significantly since the 1970's. In the 1970's, pensions were paid for by your employer. Now that responsibility falls into the hands of the American worker, and he is doing an extremely poor job at it.

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Granted overall debt has increased, but if an individual is making more interest off investments then paying interest in debt, this is +EV. Economicaly it is expected to see debt increase with lower interest rates.

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Credit markets are cyclical. When interest rates are held at artificially low rates for extended periods of time (as they have been for the past several years), the opportunities to earn superior returns dry up as the liquidity floods the markets. This is why you currently see such massive asset bubbles in the US real estate, stock, and bond markets. What happens when that credit dries up and billions of dollars in pretend money is sucked out of the system? Believe it or not, there are reasons that Americans are restricted from buying stocks on margin as they did in the 1920's. In my opinion, borrowing money at 6% today to "invest" in real estate is certainly not +EV.

[hetron]

Adios, see my repost in response to yours in the globablization thread. The article I linked should be an eye opener.

[tylerdurden]

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What happens when that credit dries up and billions of dollars in pretend money is sucked out of the system?

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This point cannot be emphasised enough.

[adios]

Thanks for pointing that response out to me. Actually it's not a surprise to me. I've stated many, many times that the distribution of income among quintiles has been skewed such that the upper 2 quintiles are getting more of the income. However, the top 50% of wage earners look like their doing ok to me. In another post about this subject recently I stated that I thought about 25% of the wage earners were doing a lot better, 50% about the same and 25% about a lot worse over the last 40 years or so. The median income has risen at a faster rate over the last 20 years. To sum it all up I fully concede and always have that some people are doing a lot better and some are doing a lot worse. I also have always fully conceded that the distribution of income has been skewed more heavily towards the upper two quintiles. Before I support tax increases to subsidize less skilled, lower paid wage earners I want to know the distribution of income that is being sought. Don't think I'll ever see a politician come out tell me.

I've stated repeatedly on this forum that the manufacturing sector in the U.S. has been in a long decline and that the demand for unskilled labor is waning. The effects of globalization have a lot to do with this but what's the alternative? Protectionism? At one time in the United States agriculture accounted for 90% of the jobs. The truth is that the economy changes alot over time and workers have to keep their skill levels up. I also stated that I believe that our educational system has failed us. Whatever measure you use for students from 4th grade to 12th grade, they're doing a lot worse than they were 40 years ago. At least that's my take. That's just one example. You may not believe this but I feel for people who don't have the skills required to obtain higher paying jobs. However, I'm not willing to endorse some heavy handed government measure to try and subsidize unskilled labor who basically have been priced out of a job. I read an article today about economic growth in China. Really unbelievable stuff and it's obvious that the standard of living is on the rise there. I've asked this question many times, why are people in the United States more deserving of a higher standard of living than people in 3rd world countries especially when the skills are roughly equal? I don't think that people in the U.S. are entitled to a higher standard of living just because they live here. So I guess the short answer is that globalization is good for some people and bad for others. In this case it's probably not good for a lot of U.S. workers that have skills that are common that can be obtained from workers in other countries who will work for less money. Globalization is a good thing for those workers. Consumers pay less for goods and eventually the profits being produced will be reinvested in economic growth in the U.S. (at least that's the theory). Don't get me wrong though, there are a lot of things that need to change in the U.S. where the undeserving get subsidized. Nicky and Chris Alger convinced me (I went kicking and screaming though) that the susidies to cotton farmers in the U.S. need to go for instance. Cotton farmers have a good lobby and that sucks big time IMO.

[MaxPower]

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The average size of a house today is 2,100 square feet. In 1949, it was 900 square feet.

That certainly has something to do with it.

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Is 2,100 the average size of all houses or just the average size of new houses? There is a big difference.