The Census Bureau reported this week that median household income rose to $59,039 in 2016, a 3.2 percent increase from the previous year and the second consecutive year of healthy gains.
To be clear, household income is the amount of income earned by an entire household, whether it’s a single occupant, a couple, or roommates.
Let's explore the term 'median', which denotes the midpoint. The median is the "middle" value in a list of numbers.
When it comes to median income, this means that half of earners have incomes above that amount, and half have incomes below that amount.
The fact that median household income rose last year is obviously good news, but before we pop the champagne, let’s have a little perspective.
Middle-class households are only now seeing their income eclipse 1999 levels. The Census Bureau reports that in 1999, median household income, adjusted for inflation, was $58,655.
Yes, it took us 17 years just to get back to where we started. Are we really supposed to celebrate that?
According to the Social Security Administration, 50 percent of wage earners make less than $30,000 annually, 61.5 percent make less than $40,000 and 70.5 percent make less than $50,000.
Again, 50 percent of all wage earners make less than $30,000 per year, and a lot of them come from single-income households.
The proportion of Americans who live alone rose to 27 percent in 2013, according to the latest Current Population Survey from the Census Bureau; that’s more than one-in-four people. Obviously, these are single-income households and a lot of them are surely earning less than the median.
As of 2012, 60 percent of married couples with kids had dual income households. Among the households with just one income earner; the father was the sole earner in 31 percent and the mother was the sole earner in 6 percent.
The average American household consisted of 2.53 people in 2016.
So, the median household income is generally a byproduct of two earners. That suddenly makes $59,000 seem a lot less impressive.
The incomes of the richest households are much further apart from those at the median than those at the median are from the bottom households. In other words, the difference between the households at the top and those in the middle is much more vast than the difference from those in the middle to those at the bottom.
Consider how different the earnings are among those above and below the median income.
According to the Internal Revenue Service (IRS), the top 1 percent had an adjusted gross income of $465,626 or higher for the 2014 tax year.
Clearly, the top 1 percent are not all billionaires.
Remember, a significant majority of earners take home less than $40,000 per year. Thirty-seven percent of earners take home less than $20,000. However, the lifestyles of those two groups aren’t as radically different from each other as they are from those who make at least $465,000 a year.
Roughly 534,000 Americans made more than a million dollars in 2013, according to the latest IRS data available.
The mega wealthy — a fraction the top 1 percent — now earn an average of $1.3 million a year. That’s more than three times as much as the 1980s, when the super rich "only" made $428,000, on average, according to economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman.
The top fifth of earners are taking home more than half of all overall income, a record.
The top 1 percent take home more than 20 percent of all income.
However, the bottom 50 percent collect about 12 percent percent of national income.
This is why the savings rate was just 3.5 percent in July. People simply don’t have enough left-over income to save. Most Americans are spending everything they make just to get by and are using credit cards to make up the difference, even for basics like groceries and gas.
Credit-card debt in the U.S. recently surpassed the peak set just before the 2008 financial crisis. Outstanding revolving credit, which includes credit-card debt, rose to $1.02 trillion in June, according to a monthly report from the Federal Reserve.
Low incomes and slow income growth are having some rather glaring effects, especially on younger Americans.
Last year, the Pew Research Center reported that 32.1 percent of 18- to 34-year-olds lived at their parents’ homes in 2014, exceeding the 31.6 percent of young adults who were married or living with a partner in their own household.
Yes, one third of young adults — people up to the age of 34 — are still living with their parents. Yet, the findings were even worse the following year.
Almost 40% of young Americans were living with their parents, siblings or other relatives in 2015, the largest percentage since 1940, according to an analysis of census data by real estate tracker Trulia.
It should be noted that 1940 was the end of the Great Depression, so the current state of affairs is quite troubling.
This huge percentage of adult children living with their parents has added at least one additional working adult to millions of households. Assuming the adult child lives with both parents and is working, it results in at least three income earners in millions of households.
Once again, that $59,000 median doesn’t seem so impressive.
Yes, it’s nice that median household income went up last year, but we’re still only back to 1999 levels and it’s clear that the masses are still struggling.
Remember, the bottom 50 percent collect just 12 percent percent of national income.
That’s important to consider, if you’re celebrating the rise in median household income.
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