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U.S. household income vs weekly wages

September 13, 2017

On Tuesday the U.S. Bureau of Census came out with it's latest figures on median income of U.S. households. The news is relatively good. Real median household income for 2016 rose to $59,039, up from $57,230 in 2015. However, the 2016 household income is only just now barely above the 1999 level of $58,665 The poverty rate also fell, to 12.7 percent, about the same as it was in 2007 before the Great Recession took its toll.

 

This relatively good news got me to thinking. How does this square with the data on real average weekly earnings, which are are still lower than they were in 1965 and even lower relative to the 1970s?

 

So I looked for graphs of real average weekly earnings and median household income. There are multiple reasons why the two graphs can show different pictures. For one thing, household income includes income from all workers in the household. So over time, as more households became multiple earner households, household income could rise even in the absence of increases in weekly earnings. In fact they could rise even if average weekly earnings were falling. this is especially pertinent when looking at historical data. Since 1965 women have come into the work force in increasing numbers, many of them married women or women living with a partner in a household. In 1965, 39 percent of women 16 years and over were in the labor force. By 2016 that number was 57 percent. They added a lot to the increases in household income.

 

Another reason for differences in the two series, especially in the last few years as recovery from the Great Recession has continued, is that household income can rise if household workers increase their weekly hours of work, either by moving from part time work to full time, or by or by putting in more overtime work. Of course, increased work hours per week increases average weekly wages as well as increasing household income, but the proportional rise in the two series may differ. Since 2014, more than 5 million workers have found full time work. There is a limit to how much the increase in full time workers can contribute to rising household income without more healthy increases in hourly wages.

 

I'm comparing average weekly earnings of production and non supervisory workers, not the earnings of their bosses, and, as we know, wage inequality has risen. Higher earners have gained ground, with the top 5th of all earners getting half of all overall income. That can bring up the overall median income while the average production and non supervisory worker wage lags behind.

 

 

 

 

 

Having said all that, if you look at the two graphs and the movement in the two series from 1995 on, you can see that the general movement in both series are not all that different. Both series begin to rise from about 1995, but then begin to dip down. Household income started the decline in 2008, while weekly earnings perhaps a little later. The graph of household income shown here only starts at 1984, but if we were to go back in time we could see that household income has had a more steady increase since 1967 when it was about $45,000 (in today's dollars). It has risen to the 2016 number of $59,000 with some blips down in some years but has risen more steadily than has average weekly wages - most probably from the increasing work of women. After correcting for rising prices average weekly wages of production and non supervisory workers are still lower than they were in 1965.

 

 

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