timxu

I read a New York Times article this morning that reported a pretty alarming statistic: inflation-adjusted median household income in the U.S. fell 6.7% since June 2009. Since 2007, that value has dropped 9.8%. Based on just these two numbers, I’d agree with the conclusion of the study’s authors that the standard of living for American households has dropped quite significantly in the last few years. It was already clear, based on the more visible unemployment rate, that U.S. companies were finding ways to produce more without hiring more. This study indicates that not only are they more productive, they’re doing so while paying their workers less real wages.

Median household income history

Spurred by the article, I decided to investigate the current state of employment in the U.S. Looking through the data collected by the government and found some remarkable things. First, I went through some statewide median household income numbers from the U.S. Census bureau. As of March 2011, real median household income (HHI) in the U.S. has fallen to levels first reached in 1989, and last seen in 1996. In other words, the median U.S. household was making just as much real income the year before I was born as they are today. That’s incredible.

I also looked at it from a state-by-state perspective, benchmarking each state’s change in median household income over the last four years to the national average of -$3,378. Results here were pretty surprising: the states with the highest rate of income growth were all rural (Vermont, North Dakota, Wyoming, Nebraska, and Utah); the states with the lowest rate were more mixed (Minnesota, Georgia, Hawaii, Alaska, and Ohio). New Jersey was 7th, with median HHI remaining flat. Connecticut was 10th, with median HHI dropping only 1.48%.

Characteristics of the Unemployed

I also found the nature of today’s unemployed population fascinating. The government segments unemployment in a lot of different ways including race, gender, occupation, age. Looking through some of these segmented data, I found some interesting nuggets.

-Male unemployment is about 2 percentage points higher than female unemployment.
-African-American unemployment is about 16%, almost 50% higher than the nationwide unemployment. It’s also more than twice the rate for Asian-Americans (7.5%)
-Americans between age 20 and 24 have a 15.5% unemployment rate.
-The unemployment rate for management, professional, and related occupations is 4.7%.
-The unemployment rate for construction occupations is 20.1%.
-About 53% of the unemployed population are those who permanently lost their jobs.

It appears to me that the 9.6% national unemployment is very much skewed towards transitional or seasonal labor. The highest unemployment rates were in occupations like food preparation, building and grounds cleaning, construction, farming and fishing, factory jobs. These are the blue-collar workers that are already living paycheck-to-paycheck. It’s no surprise that the current protests and negative national mood seems to be emerging from the lower-middle class, while the rest of America watches and keeps their heads low.

It’s interesting, though, that there’s a lot of public anger directed towards major corporations. But based on the data, it appears that a lot of these major corporations, especially in the services, healthcare, and management industries, are at, or close, to natural rates of unemployment.

Occupy Wall Street

So what about those thousands of men and women sitting around on city streets around the world? It turns out they’re somewhat misguided. I looked at household income numbers across percentiles, and found that, surprisingly, the income level for the top 5% of American households has remained largely unchanged since 1992, staying around 21.5% of aggregate income. This flies in the face of Occupy Wall Street’s “We Are the 99%” slogan. Unless the 1% has been taking entirely from the next 4%, it’s clear that the income disparity has NOT changed in the last 20 years. Before 1992 is a different story. In fact, between 1982 and 1992, the share for that top 5% grew from around 16.5% to 21.5%. That era was Reaganomics. So while the top 0.01% has grown tremendously due to tremendous growth in CEO pay, the balance of the top 5% of Americans has remained largely unchanged.

I will be careful to note that I don’t mean to disregard their argument against the broader systemic issues with the world’s financial systems. That is best left for another post.