“Please find below a link to the AEI’s Alex Pollock’s article “If income is going up, can median household income go down? It’s possible.”…

…His first simple example is as follows: Household “C” is made up of a married couple where the wife (C1) makes $35,000 and the husband (C2) makes $20,000, for a combined Household Income of $55,000. Let’s pretend for a minute that the entire United States is made up of households identical to Household “C”. If that were the case, the median household income in the U.S. would be $55,000 per year. Now things change. Both the wife and the husband, over some period of time, have their incomes increase by 20%, each….to $42,000 for the wife (C1) and $24,000 for the husband (C2) and let’s also assume they get divorced and become two separate households…Household C1 and Household C2. Also, lets assume that (at the end of this same period) we have an immigrant (F) move to the U.S. and earn $20,000 a year. Now we have three households (C1, C2, and F) and they would have an average (as a proxy for median) annual income of $28,667. That is a whopping 48% reduction in median household income (from $55,000 to $28,677), even though the two households eligible for annual raises had increased their annual incomes each by 20%!!! The point being, as Mr. Pollack points out in this article….that America’s household mix has changed a lot over the years….from two-earner households to one (as more divorce or delay or never marry) and with a higher-mix of lower-earning recent immigrants. I believe this same issue could be negatively impacting a lot of our “macro” statics. For example, standardized test scores in states like California. Boy, if I was President Obama, I would have my economists digging into these macro stats, because the Republicans have been touting the fact that median U.S. household incomes, especially adjusted for inflation, haven’t gone anywhere (for a long time and especially during his tenure) and that may or may not be right.”, Mike Perry

If income is going up, can median household income go down_ It’s possible – AEI

Posted on November 2, 2015, in Postings. Bookmark the permalink. Leave a comment.

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