Today’s media pick is from the NYT. For the first time since 2000, the average income actually rose in the US, according to IRS data. I don’t think we need to worry about a wage related inflationary spiral, though.
Ubiq-cerpt:™
"Americans enjoyed higher average income in 2006 for the first time since 2000, when the last economic expansion ended, the latest tax data show.
Adjusted gross income reported on tax returns in 2006 averaged $58,029. In 2006 dollars that was an increase of $739, or 1.2 percent, from the $57,289 average in 2000, analysis of Internal Revenue Service data showed.
Total income increased by $619.2 billion or 8.3 percent, all of which went to those making more than $75,000, and 42 percent of which went to the roughly one in 400 taxpayers who made more than $1 million in 2006.
Average income fell sharply in 2001 and in 2002, when it dropped to $51,870, off nearly 10 percent from 2000, tax data show. The average grew slightly in 2003.
Average income grew significantly in 2004, rising $2,291, and again in 2005, when the average increased by $2,210. Income growth continued in 2006, but at a much slower pace, increasing by $1,369 over the 2005 average once inflation is taken into account.
Salaries and wages, by far the largest source of income, nearly returned to the 2000 average in 2006. However, among the highest-paid workers, both total and average wages fell, an indication of how the Internet bubble had concentrated gains among a relatively few workers. The average wage in 2006 was $46,996, down $101, or a fraction of 1 percent, from $47,097 in 2000. Average wages in this decade hit a low of $45,956 in 2003, the I.R.S. data show."
Fascinating period of time — six years of zero wage gains, while goods and services skyrocketed in price. Ouch!
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UPDATE: August 27, 2008 6:49am
Three things to note:
1) This is old data, only updated as of 2006;
2) It is, a comment pointed out, average, not median — a longstanding peeve of ours.
3) The IRS measure is rather different than what we see out of BEA or BLS. The Fed’s numbers on family income seem to be the most cleareyed.
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Source:
Average U.S. Income Showed First Rise Over 2000
DAVID CAY JOHNSTON
NYT, August 25, 2008
http://www.nytimes.com/2008/08/26/business/economy/26income.html
And median income? Average income is only a moderately interesting concept given the large and growing disparity.
Not going to be enough for McCain, cause y/y real wage income is down about 3.5% for the past few quarters.
BTW why doesn’t that chart go till 2007? That data should be available, and half of 2008 is available…
Those figures are inflantion-adjusted, and they are worth whatever the inflation numbers are worth. The rising income has probably been caused by the real-estate and stock market boom, but those are the 2006 figures and the 2007-2008 vintage won’t be as good.
. . . on negative volume.
Agree with floormaster. Also, the data is for 2006. All those real estate related jobs were paying quite well indeed. They strip out food and energy from CPI to get core. I wonder what income would look like if you stripped out all condo-flipping and those bonuses that builders, bankers, mortgage brokers and real estate agents made.
Comment count has been off for a few days. You attribute this to people taking the blue pill? I am starting to think that the market psychology is such that people do not want to hear the truth anymore.
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BR: Big vacation week — Im away (hence all the guest posts).
The last 2 weeks of August, NY turns into Europe — half the population disappears.
I wonder how much of the gain is offset by the widening AMT net. Nice AGI gains, but do we come away holding less of it?
I would have thought David Cay Johnston would have used median instead of mean. He’s a well known critic of the tax system and its tilt in favor of the upper brackets. But the data I’ve seen on median aren’t much different than the numbers presented.
The IRS tax return data takes a while to become available. Most CPAs still have a large stack of 2007 returns to file, for example.
I would have thought David Cay Johnston would have used median instead of mean. He’s a well known critic of the tax system and its tilt in favor of the upper brackets. But the data I’ve seen on median aren’t much different than the numbers presented.
The IRS tax return data takes a while to become available. Most CPAs still have a large stack of 2007 returns to file, for example.
“Total income increased by $619.2 billion or 8.3 percent, all of which went to those making more than $75,000, and 42 percent of which went to the roughly one in 400 taxpayers who made more than $1 million in 2006.”
Kinda says it all. Just confirms the argument that middle class / most of country is getting clobbered.
Too much globalism has done-in the Republican Party. If you lose the middle class you cannot win. They should have throttled things so as not to stagnate wages. Moderation is not a strong suit of capitalism.
Barry,
This looks an aweful lot like a lagging indicator of the recent credit bubble.
‘Total income increased by $619.2 billion or 8.3 percent, all of which went to those making more than $75,000, and 42 percent of which went to the roughly one in 400 taxpayers who made more than $1 million in 2006.’
All of which went to those above $75k? If so, who was most likely to profit from rise of the bubble, those above or those below $75k?
So now that the bubble has burst, what are we looking at in terms of changes to income levels?
Could it be similar to the drop off witnessed post 2000 when the other bubble burst?
It’d be interesting to see longer term data to compare the impacts of each bubble and what we’re likely looking at this time around.
Agreed on all points:
* What good is an ‘average income’ metric ? All of the gains could have been at the top for all we know.
* Also surprised Johnston used it.
* Inflation-adjusted with the current bogus inflation metric is meaningless.
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I’m sure this information has nothing to do with any kind of improvement in the underlying state of things. It’s bad and getting worse, isn’t it… are you sure it’s not worse and getting bad? cuz that’s the other side of the trade.
Ohh look, consumer outlook up. again. house price slide eases. again. but go ahead and wait for the year over year headlines to ‘really’ confirm… in umm 2009? 2010?
worse to bad… is actually quite good
-][
I didn’t see any reference there to this being inflation adjusted.
So, real income actually fell by what, 5%? More, I suppose.
That’s gonna leave a mark.
More housing bottom talk by MSM. Someday they’ll be right but not yet…..
http://www.thestreet.com/story/10434675/1/new-housing-data-suggest-a-bottoming.html?puc=newshome
I’ll be damned! I try to keep an eye or two on the US situation, but sometimes my mind tends to wander. Do you have any stats for Canada? Being a Vancouver realtor myself, I certainly want to keep track of how much people earn & stuff; for how else do you fathom prices on the real estate market? Most importantly, I’d love to see what the near future holds for us – but myself don’t dare to inspect it.
Yours truly,
Jay
Communities Become Home Buyers to Fight Decay. Suppose this has to happen but how can anyone say we’ve bottomed when this seems to be going on in many cities in large numbers?
http://www.nytimes.com/2008/08/26/business/26home.html
If the wealthiest 1 or 2 percent of Americans have seen their incomes rise significantly, as has been reported, then that would drag the average income up, even if everyone in the lower 98% has experienced flat or declining incomes.
With a skewed distribution like income, the median should always be reported, not the mean. This is the same seemingly deliberate data distortion that this administration used when it trumpeted that, on average, its tax cuts would deliver $1600 tax reductions per household. As I recall, the median tax cut received by most of the middle class was about a tenth of that.
nice bit from Emmanuel Saez last March around the same subject, http://elsa.berkeley.edu/~saez/saez-UStopincomes-2006prel.pdf, numbers go back to 191. seriously, how far can that pendulum swing?
Well, many goods and services are more expensive, but pretty soon housing will cost as much as in 2000!
Yay!
Oh, and stocks are at pre-2000 levels. Bargains abound!
I bet we see incomes as measured by the IRS go up again in 2007 and 2008: short sales and loan forgiveness count as income last I checked ;)
Tom E.,
“Too much globalism has done-in the Republican Party. If you lose the middle class you cannot win. They should have throttled things so as not to stagnate wages. Moderation is not a strong suit of capitalism.”
hmmm…seems moderation is somehow not a strong suit of Conservatives (i.e. Republicans)
-wtf