Median household income finally rises

The rising of interest rates may not slow down any time soon as a result of the Census Bureau’s annual report on the well-being of Americans, which stated the median household income rose this last year by 1.1 percent, after declining the previous five consecutive years.

The August 30, 2006 article, “Median Household Income Rises 1.1%,” written by Robert Guy Matthews of The Wall Street Journal, explains what affect this result and others will have on the overall economy.

While median income grew, so did the gap between the richest and poorest Americans last year. This trend has been fairly consistent since the early 1970s, with a slight stoppage in the late 1990s.

The richest 20 percent of American households claimed 50.4 percent of all U.S. income last year, the largest disparity since the Census Bureau started tracking the data in 1967.

This disparity suggests an economic concern among middle-class Americans, which will most likely be the main topic for Democrats in November’s congressional elections.

"‘There is nothing to celebrate here,’ said Ron Haskins, a former Bush administration official now at the Brookings Institution. ‘A lot of the money goes to the top, and Republicans are forever playing defense on this. The people in the middle are feeling squeezed. If Democrats aren't getting the best of the argument, they should be.’”

The median household income was $46,326 in 2005, up from $45,817 in 2004. Although the economy has grown 11.7 percent since regulations were revised in 2001, median household income is down 0.5 percent overall since that year.

“Daniel Seybert of Newton Falls in northeastern Ohio counts himself among those not seeing the robust national economy in his household finances. ‘We have been regressing, with higher gas prices and I am paying a lot more in county and state property taxes,’ said the 47-year-old Mr. Seybert, who earns about $43,000 a year after 28 years in a tire factory. ‘When I built my home in 1999, I paid $1,200 in property taxes. Now they are $2,400. That's just money out of pocket.’"

“While the median household income rose 1.1%, the average income of households in the bottom 20% rose just 0.6%. Within the top 20%, the gains were concentrated among the richest 5%. The Census Bureau's income calculations include wages, interest, dividends and government cash benefits but exclude capital gains and non-cash employee and government benefits.”

The Census Bureau did not locate a direct source of the widening gap. But census data does suggest that the richest households have benefited from job performance-related pay, such as bonuses, and stock options.

The economy lately has also favored workers with more education and training over unskilled workers who must compete more and more with lower wage workers in poorer countries.

“Bruce D. Meyer, a professor at the University of Chicago's Harris School of Public Policy Studies, said that the numbers are flawed. ‘Our official statistics are too gloomy,’ he said. ‘The middle has been doing better than the numbers suggest.’ Because the numbers don't reflect other income such as food stamps, housing assistance, Medicaid, mortgage deduction and other kinds of wealth transfers, they make Americans look worse off than they really are, he argued.”

Regardless of how you interpret these numbers, they are statistical data. Median household income is up but this is largely due to the rich top 20 percent Americans.

How poor will the poor become? How much will it affect our economy and real estate market?

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