Much of the country is angry these days. Millions of voters appear poised to throw all incumbents out of office for sundry misdeeds.
Yet, we don’t talk a lot about the sources of this anger, the core of which antedates the ongoing financial crisis and recession. That may be one reason why those most angry are not likely to be appeased by whatever changes in government result from the upcoming elections.
But for those who want to get beyond the back-and-forth about which official or which party bailed out banks or ran up deficits or left the borders unguarded, let me suggest perusing the U.S. Census Bureau’s “Income, Poverty and Health Insurance Coverage in the United States: 2008.”
It’s online at census.gov/prod/2009pubs/p60-236.pdf. [Note, 2008 pub no longer available online as it has been supplanted by the 2009 version, which is available at www.census.gov/prod/2010pubs/p60-238.pdf.]
At 67 pages, the 2009 report — using 2008 income — is extensive, with many tables breaking income down by race, sex, age and other variables. This is no quick read. Wading through it will take time and effort, particularly if you are not familiar with the jargon of income distribution studies.
To get at the issue discussed in this column, go directly to Table A-2, “Real Median Earnings of Full-Time, Year-Round Workers by Sex and Female-to-Male Earnings Ratio: 1960 to 2008.”
Start with males. In 2008, median earnings for males 15 years of age and older who had full-time, year-round jobs was $46,367. Just under 60 million men are in this category, about 30 million earned less than this amount and about 30 million earned more than that.
Now, go back 48 years to 1960. That year, median earnings for men in the same category were $34,152 in inflation-adjusted 2008 dollars. Thus in 50 years, median earnings for these men rose by about $12,000, or a bit over one-third. The average growth per year was just over 0.6 percent.
Then, work your way forward in time again to see when this increase actually took place. It broke $40,000 by 1967 and hit $48,452 in 1973. It has never gotten that high since. It was more than $47,000 for three years in the Carter administration, two years under Reagan, once under Clinton and twice during George W. Bush’s first term. But it has never gotten back to the mark achieved 37 years ago.
That is particularly remarkable, as productivity (output per hour of all persons in the business sector) doubled in the same period. (This is from another source, Table B-39 of the 2010 Economic Report of the President, www.gpoaccess.gov/eop/tables10.html) Moreover, per capita disposable personal income nearly doubled over the same interval.
So, how can per capita average income double while median earnings of full-time workers remains flat? It’s one of the central economic issues of our society, and one that’s largely ignored in public policy discussions.
For part of the answer, we need to return to that same table in the income report and check out comparable columns for women. In 1973 there were 2.3 men for each woman in this category. In 2008, that had declined to 1.35 men per woman. And, unlike for men, women’s earnings did increase over this interval, from $27,440 in 1973 to $35,745 in 2008. Therefore, while women with full-time year-round jobs only earned 77 percent of what men did in 2008, that is an improvement over the 57 percent of 1973.
So an increasing proportion of women in full-time jobs and increasing earnings for women explain part of the phenomenon of average per capita incomes for the population as a whole rising while median earnings from men’s full-time jobs remaining stagnant.
But most of the disparity is embodied in two adjectives in the previous sentence, the difference between “average” and “median.” If people above the median or middle position in the ranking earn more, average earnings for the group as a whole will rise but the median will stay the same.
That is what happened, particularly in the past three decades. From 1979 to 2005, the mean after-tax income for the highest-income fifth of the population increased by 69 percent. For the poorest fifth, the change over 28 years was 6 percent. For the middle three-fifths, the change was about 20 percent.
Even within the 69 percent overall average increase for the richest group, increases were highly skewed. The richest 1 percent saw a 176 percent increase.
The reasons for this sharp increase of income inequality in our country are complex and beyond the scope of one column. But much popular discontent must stem from the fact that many men don’t earn any more than their fathers did nearly four decades ago. And regardless of what happens at the polls in November, this is not likely to improve in the foreseeable future.
© 2010 Edward Lotterman
Chanarambie Consulting, Inc.