Insightful income trends

OPINION:

In 2006, the fifth year of this relatively subpar economic expansion, median household income increased a somewhat impressive 0.7 percent, according to a widely anticipated annual report on income, poverty and health insurance released Tuesday by the Census Bureau. After falling for five years in a row (2000-04) from its 1999 peak, median household income increased for the second consecutive year last year. However, the 2006 median income level ($48,201) was still more than $1,000 less than the 1999 median income level ($49,244). Thus, five years into the expansion, the median household income was significantly less than it was seven years ago. In fact, it is only $110, or about $2 per week, higher than it was during the recession year of 2001.

The median level of income is located at the midpoint of the household income stream. Half the 116 million households in the United States have incomes lower than the median, and half have incomes higher. All annual income figures reported by the Census Bureau were expressed in constant 2006 dollars, eliminating the effect of inflation. For the 82.7 million white households, 2006 median income ($52,423) was $1,009 below its 1999 peak ($53,432). For the 14.4 black households, 2006 median income ($31,969) was $2,766 below its 2000 peak ($34,735). For the 13 million Hispanic households, 2006 median income ($37,781) was $1,053 below its 2000 peak ($38,834).

Throughout the current expansion, the trend in the median household income has been extremely disappointing. In 1996, the fifth full year of the previous expansion, which began after the 1990-91 recession ended in March 1991, the median household income ($45,416) was nearly $2,000 higher than its 1991 level ($43,492). That contrasts sharply with the virtual stagnation of 2006 median income ($48,201) compared to 2001’s ($48,091).

According to the Census Bureau report, “Income, Poverty and Health Insurance Coverage in the United States: 2006,” the percentage of households with incomes greater than $100,000 in 2006 (19.1 percent) finally surpassed the 2000 level (18.3 percent). However, the cumulative percentage of households earning more the $50,000 in 2006 (48.6 percent) was actually less than the 49.2 percent of households with incomes above $50,000 in 2000.

Notwithstanding the disappointing trend during the first five years of the expansion, it can at least be said that household median incomes have finally begun moving in the right direction (upward) during the last two years. Unfortunately, the same cannot be said for the inflation-adjusted median earnings of full-time, year-round workers. In fact, the median earnings for the 63 million full-time, year-round male workers declined for the third year in a row in 2006. Compared to $44,546 earned at the median level in 2003, the 2006 figure ($42,261) was a staggering $2,322 lower. That’s a haircut of $45 per week, or $194 per month. For full-time, year-round female workers (there were 45 million of them in 2006), the median earnings ($32,515) represented the fourth consecutive year of decline. The median earnings level for full-time, year-round female workers is now more than $1,300 (more than $100 per month) below its 2002 peak.

Given a total of 116 million U.S. households in 2006, each income quintile comprised 23.2 million household units. Between 2000 and 2006, the average income levels declined for each of the bottom four quintiles (about 93 million households last year). Only in the top one-fifth of households did average income increase from 2000 to 2006.

Even more disturbing has been the trend in the median income of non-elderly households (i.e., under 65 years). There were 92.3 million non-elderly households in 2006. Applying the standard consumer-price deflator to annual census data and expressing the results in constant 2006 dollars, the liberal-oriented Center on Budget and Policy Priorities reports that the median income level for non-elderly (i.e., working-age) households peaked in 2000 at $57,101. For each of the next five years, that crucial median income level declined, ultimately dropping to $54,001 in 2005, when it was $3,100 (more than $250 per month) below its 2000 peak. Finally, the median income level for these 92.3 million households rebounded last year, rising by $725. But the 2006 working-age median household income level ($54,726) was still more than 4 percent below its 2000 level. That, mind you, was in the fifth year of an expansion.

Speaking of the expansion, we note that the economy has grown an average of 2.7 percent per year over the 2002-06 period. Worse, the overall 2006 median household income level ($48,201), which is only 0.2 percent higher than the 2001 level ($48,091), reflects an average annualized growth rate of an imperceptible 0.05 percent. In sharp contrast, over the first five full years of the previous expansion, the economy grew an average of 3.2 percent per year. Over the same 1992-96 period, median household incomes increased 4.4 percent, averaging 0.9 percent per year. Then, for the next four years (1997-2000), both the economy and median household income really began to soar. Economic growth averaged a stellar 4.2 percent per year (1997-2000), and the 2000 median household income ($49,163) was 8.3 percent higher ($3,747) than its 1996 level ($45,416). Those income trends are as important as the poverty and health insurance trends that the Census released. Unfortunately, the mainstream media thinks otherwise.