Members stevenkesslar Posted October 11, 2019 Members Share Posted October 11, 2019 (edited) There's some interesting and somewhat contradictory data just out from the US census. I'm actually not sure what to make of it. That said, it proves that the US economy is a complex thing. And also that if we want to really shift things, like income inequality, we really should be thinking about "big structural change". Let's start with the most common headline: Census: US inequality grew, including in heartland states That's the factoid that got the most coverage. Median incomes went up slightly less than one percent, from $61,423 per household in 2017 to $61,937 in 2018. The Gini Index went up from 0.482 to 0.485, meaning more income inequality. That means we have the highest level of income inequality in the US in 50 years, as long as this index has been measured. Trumpians responded that the report showed that income is up, unemployment is down, and poverty is down. All of which is true. The data is somewhat confusing. If you go to the actual report, you can download all kinds of tables. And some of them actually seem to slightly contradict each other. Here is one example of that that was reported by the conservative press: What that chart from a conservative publication shows is that the increase in income was actually concentrated more toward the have nots. And that appears to be true. For the second quintile, median income went up from $36,367 in 2017 to $37,293 in 2018. For the Top 20 %, it actually went down slightly, from $234,603 in 2017 to $233,895 in 2018. The most ridiculous argument made by a few conservatives is that this "proves" Trump's tax cuts really did benefit the have nots, not the rich. False. We know for a fact that 75 % of the benefit went to the Top 20 %, and about 5 % of the benefit went to the Bottom 40 %. So what is interesting is that, despite the tax cuts, the rich did not get richer, and the have nots got a little more. The likely explanation is that the Top 20 % derives more income than other Americans from things like investment income and divideneds. During 2017, the stock market boomed, and average income for the rich did, too. Their median income for the Top 5 % went up over five percent from 2016 to 2017, from $394,6681 in 2016 to $416,303 in 2017. In 2018 the stock market was actually down. Median income for the Top 5 % rose to only $416,520. That's $200 bucks more, on average. The tax cuts showered on the rich probably kept their investment income from going down, like the stock market did. There's several points there. First, it doesn't make the Trump economy circa 2018 look all that great. Second, it doesn't suggest that somehow the tax cuts really grew the economy, for anyone. Third, it suggests that the richer you are, the more you make your money off investments, as opposed to work. Unless you call collecting dividend checks work. Speaking of work, it's not clear why incomes went up most for the have nots. One logical theory is that the tight labor market has finally actually resulted in a little bit of trickle down, and wages went up at the bottom of the wage scale. There's probably at least some truth to that. Ironically, that may be bad news for Trump. This kind of trickle down is usually associated with the end of a business cycle. Next stop: recession. Another theory is that whatever gains have come for the have nots came as the result of Democrats, who pushed increases in the minimum wage. That is probably a factor, too. A total of 20 states, pretty much all Democratic "blue" (although they are marked in red in the graphic below), increased minimum wages between 2017 and 2018. And if you do the math, it likely would help people in the second quintile the most, since that group is above the poverty level, but probably tends to have a lot of people who work at the low end of the wage scales. There's some other data that suggest minimum wages may have had an impact. The biggest increase in income by age went to 15 to 24 year olds, which is a relatively small group (6 million people). They make on average about $40,000 a year, and that group's income went up 9 % in one year. Meanwhile, the much larger group of people (24 million) aged 55 to 64 make about $70,000 a year. Their incomes actually went down 2.3% from 2017 to 2018. So the people most likely to be paid at or near minimum wage - the young - made the most gains. Since Trump voters are heavily skewed towards the older, not sure it's a good thing that incomes went down for the age cohorts mostly likely to vote for Trump. Ouch! And those young Californians or Oregonians that got the benefit of a minimum wage hike? Probably not voting for President Toxic in 2020, I'd guess. Regionally, same thing. The region with the biggest income gain was the Northeast, where incomes went up 4.3 %. The region with the lowest income gain was the South, where incomes went up 0.3 percent. The Northeast states are more liberal, and many of the minimum wage increases occurred there. The South is the only region where a number of states have NO state minimum wage law - they just go by the federal level. Only a few states, mainly Florida, increased their minimum wage. That said, I'll also post at the bottom of this thread the changes by state. I was curious, so I actually looked at the 20 states that had a minimum wage increase. There's no obvious and clear correlation. In about half the states that had minimum wage increases (like California, Oregon, Washington, Florida) incomes went up way more than the national average - 2 to 3 %, as opposed to about one percent nationally. In Maine, which increased minimum wage, average incomes went down more than any other state, by about 3 %. On the face of it, California and Florida are a lot bigger than Maine, so when you average it all out it would suggest that nationally the net impact should be positive for people who are one step below the bottom of the ladder. And that is basically what happened. Relatively few people actually make the minimum wage. So while it may have been one factor, it probably was not the biggest. We either are in or near a manufacturing recession thanks to Trump's trade war. That has hit the heartland harder than the coasts. My guess is that when you add it all together, the trade war had more impact than minimum wage hikes. Now let's look at the real big picture. Here is how these numbers have changed for the Top 5 % and the Bottom 20 %, if you adjust for inflation and go back to the start of the Reagan Era: Top 5 %: inflation-adjusted median income rose from $202,165 in 1980 to $416,520 in 2018. That's a 106 % increase in real income, after you adjust for inflation. Bottom 20 %: inflation-adjusted median income rose from $13,093 in 1980 to $13,775 in 2018. That's a 5 % increase in real income. I picked 1980 because I would argue that this is the outcome we should have expected from 40 years of trickle down, with occasional respites under Clinton and Obama. Tax cuts for the rich, no or paltry minimum wage increases for the people at the bottom, and sending factory jobs to China or giving them to robots all had an impact. But it all came back to government policy. Which is why I agree with Elizabeth Warren. We don't need tinkering. We need big structural change. There's people that say the war on poverty failed. That's bullshit. The war on poverty actually slashed the poverty rate dramatically, especially among seniors due to Medicare and Medicaid. We went from about 40 million poor people in 1959 to about 25 million by the end of the 60's, thanks to the War On Poverty. And it also fell under Clinton, to the tune of about 10 million less poor people. The median wage for the Bottom 20 % went from $12,628 in 1993, the year Clinton took office, to $14,852 in 2000 when he left. That's an 18 % increase. In other words, it went up three times higher under Clinton than it has during the entire era of trickle down from 1980 to today. The Bottom 20 % actually make less today,adjusted for inflation, than they did in 2000. For the Top 5 %, median income went from $298,215 in 1993 to $369,069 in 2000, a 24 percent increase. So under Clinton a rising tide did lift all boats. The Top 5 % did slightly better than the Bottom 25 %, but it was comparable. My point is that that happened by design. Clinton pushed things like the Earned Income Tax Credit and the Childrens Health Insurance Program (CHIP) that did in fact spread out the benefits of economic growth. We need to go back to the idea of big structural change, like The New Deal and The War On Poverty, and also the buildup up factories in a dynamic Main Street economy that was supported by federal investments and policies, like research and building highways. Hmm.Wonder who could do that? Here's the chart of income changes by state, in case anyone is interested: https://www.census.gov/library/stories/2019/09/us-median-household-income-up-in-2018-from-2017.html?utm_campaign=20190926msacos3ccstors&utm_medium=email&utm_source=govdelivery Edited October 11, 2019 by stevenkesslar Quote Link to comment Share on other sites More sharing options...
