Income and Poverty Over the 2000-2007 Business Cycle

2000-2007: the first business cycle during which median household income in America falls from peak to peak:

http://www.census.gov/prod/2008pubs/p60-235.pdf

It's not all George W. Bush's fault, but I can think of a number of things he did to hurt and not a damned thing he did to help.

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The poverty rate rose from 12.3 to 12.5 percent of the population between 2006 and 2007.

And private health insurance coverage continued to decline.

Comments

[Filip Tufvesson]

"2000-2007: the first business cycle during which median household income in America falls from peak to peak"

How do you know we peaked in 2007?

[Circumspice]

[howard]

prof, since you've provided these other nice charts, let me provide to your readers a link to what i understand to be the gold-standard survey of private health insurance, produced annually by kaiser (this is the 2007 survey; the 2008 is due in september):

http://www.kff.org/insurance/7672/index.cfm

short form: since 2000, the percentage of people covered has fallen, and the out of pockets has risen in real terms.

[Nietz]

So this means we should expect median income to fall from here in the short term? Oh boy.

Wouldn't Americans start to notice their counterparts in other countries getting richer and demand more? I've heard Mr. Krugman and DeLong suggest this stagnant wage issue is largely a US phenomenon.

[Neil B ☼]

Well, two things oft forgotten are:
1."Family income" includes the total from typically both spouses working, and if more wives work that increases the FI total despite stagnation in real hourly compensation.
2. FI also doesn't account for more money earned from a given person working longer hours (and yes, less due to working fewer) so that also distorts the more relevant figure of hourly compensation (or, whatever equivalent can be presented in the case of salaries._

Hourly pay in real dollars, or its equivalent, is the true measure of how much we're getting back for our work.

[Cyril Morong]

"This is the first economic expansion on record where typical households have seen their incomes decline. Under the Clinton Administration, median household income increased by $6,200."

When exactly did the expansion start? There was a rececssion in 2001. Of course, median income is lower than in 2000. But we have to see how it looks compared to just before the economy started to expand again. Is it now higer or lower than at that point?

[Nietz]

Well, the linked Census report does show individual income... The median income for males looks like a long flat-line extending decades.

We finally stopped adding hours & family members under the Bush administration, so household income will probably be as flat as individual income, given no changes.

That's why I was wondering how long it is possible to sustain this. Won't most Americans start to look poor as income in other nations grow with the GDP?

[howard]

Nietz, one way or another, there is a large amount of debt in the american economy and the debt service is becoming problematic; this almost certainly means that living standards have an excellent chance of declining as more resources must be devoted to paying the bills now due for past consumption.

[Gavin Andresen]

It seems to me that retiring baby boomers will be skewing the raw data for the next few years.

They're moving from private insurance to Medicare-- how much of that basic demographic shift explains the "private health insurance decline?"

And they're retiring and starting spending their savings instead of spending their paychecks, so (absent other stuff happening, like young people getting richer or baby boomers suddenly deciding to come out of retirement) I'd expect to see personal savings rates go even more negative and net wealth decline.

[SvN]

"Wouldn't Americans start to notice their counterparts in other countries getting richer and demand more?"

The USD has fallen from less than $0.85/Euro at the start of July 2001 to over $1.55/Euro at the start of July 2008. By itself, this has increased the income in Euro zone by over 85% relative to that of US workers. This dwarfs relative changes in price levels, median wages, etc.

No, I don't think they are noticing.

P.S. I'm writing this while visiting the European Economics Association annual meetings here in Milan. Things in Europe seem really expensive for a North American, yet people here seem to be able to afford it.

[gpawelski]

Maggie Mahar did a very good (and very depressing) piece on the fallacy of declining uninsured.

http://www.healthbeatblog.org:80/2008/08/poverty-health.html