August 30, 2006 | posted by Michael Baxter in Uncategorized |

It all depends on how you measure average. But by one method at least, the average US household is worse off today than in 2000. Households particularly badly hit are those in which the main income earner is under 65. Retired households have faired better, or so says the US Economic Policy Institute.

On the face of it, the findings are ridiculous. How can the US get richer while the average American gets poorer? And of course, the mean average income has risen roughly in line with GDP. But the trouble with this measure is that it can be distorted by individuals at extreme ends of the scale. And in the US, the rich are seeing their income rise, while for many others it’s falling. For example, the richest fifth of the US populace now receive 54.4 percent of all national income, the highest on record, (records go back to 1967).

The median average household, that’s the household which sits in the middle, where half of all households have higher incomes and half have lower, has seen income fall by 2.7 percent since 2000. And for working households, that’s where the head of the household is under 65, income has fallen by 5.4 percent This is despite a 12.5 percent rise in GDP over the same period, while output per hour has risen 16.6 percent.

According to the Economic Policy Institute, the middle fifth-receive 14.6% of total income-and the bottom fifth-receiving just 3.4%-are tied with recent years for the lowest share on record.

It’s common knowledge that in the US the richer tend to be very rich. But one surprising conclusion from the report is that it would appear it pays to be over 65. In 2005, for example, while the average household of working age saw income fall 0.5, retired households saw income jump 2.8 percent.

The Economic Policy Institute also said that “Other data sources, such as the national income accounts, reveal historically high growth rates of “non-labor income” such as corporate profits, suggesting growth has been eluding wage earners and flowing up the income scale to those with high levels of assets. Today’s data corroborate this dynamic, showing that the gains that did occur tended to show up among higher income households, and not among those who depend on their paychecks to get ahead.”

For further information

Income PictureEconomic Policy Institute

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