Trend: Inflation-adjusted median American family income declined from $61,000 in 2000 to $60,500 in 2007.
Consumer spending could be slowing for a good reason. (Did the inflation adjustment exclude energy and food prices? If so, the real buying power of that income would be even less!)
The New York Times describes the Census Bureau’s inflation-adjusted numbers for median family income. Excerpts below.
Link: For Many, a Boom That Wasn’t - New York Times.
In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureau’s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.
This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew while the economy did. You can think of this as the most basic test of an economy’s health: does it produce ever-rising living standards for its citizens?
In the second half of the 20th century, the United States passed the test in a way that arguably no other country ever has. It became, as the cliché goes, the richest country on earth. Now, though, most families aren’t getting any richer.
“We have had expansions before where the bottom end didn’t do well,” said Lawrence F. Katz, a Harvard economist who studies the job market. “But we’ve never had an expansion in which the middle of income distribution had no wage growth.”
More than anything else — more than even the war in Iraq — the stagnation of the great American middle-class machine explains the glum national mood today. As part of a poll that will be released Wednesday, the Pew Research Center asked people how they had done over the last five years. During that time, remember, the overall economy grew every year, often at a good pace.
Yet most respondents said they had either been stuck in place or fallen backward. Pew says this is the most downbeat short-term assessment of personal progress in almost a half century of polling.
The causes of the wage slowdown have been building for a long time. They have relatively little to do with President Bush or any other individual politician (though it is true that the Bush administration has shown scant interest in addressing the problem).
The tax code, meanwhile, has become far more favorable to high-income workers at the same time that they — and they alone — have received large pretax raises.
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