Income Stagnation in 2014 Shows the Economy Is Not Working for Most Families

We learned from the Census Bureau this morning that the decent employment growth in 2014 yielded no improvements in wages and, not surprisingly, no improvement in the median incomes of working-age households or drop in the number of people living in poverty. Wage trends greatly determine how fast incomes at the middle and bottom grow, as well as the overall path of income inequality, as we argued in Raising America’s Pay. This is for the simple reason that most households, including those with low incomes, rely on labor earnings for the vast majority of their income.

The Census data show that from 2013–2014, median household income for non-elderly households (those with a head of household younger than 65 years old) decreased 1.3 percent from $61,252 to $60,462. This decrease unfortunately exacerbates the trend of losses incurred during the Great Recession and the losses that prevailed in the prior business cycle from 2000–2007. Median household income for non-elderly households in 2014 ($60,462) was 9.2 percent, or $6,113, below its level in 2007. The disappointing trends of the Great Recession and its aftermath come on the heels of the weak labor market from 2000–2007, during which the median income of non-elderly households fell significantly from $68,941 to $66,575, the first time in the post-war period that incomes failed to grow over a business cycle. Altogether, from 2000–2014, the median income for non-elderly households fell from $68,941 to $60,462, a decline of $8,479, or 12.3 percent.

Income

Real median household income, all and non-elderly, 1995–2014

All households All households- imputed series All households- new series Non-elderly households Non-elderly households- imputed series Non-elderly households- new series
1995-01-01 $52,555 $54,231 $60,378 $62,268
1996-01-01 $53,319 $55,020 $61,506 $63,431
1997-01-01 $54,417 $56,152 $62,298 $64,248
1998-01-01 $56,394 $58,193 $64,823 $66,852
1999-01-01 $57,815 $59,659 $66,493 $68,575
2000-01-01 $57,718 $59,559 $66,849 $68,941
2001-01-01 $56,460 $58,261 $65,819 $67,879
2002-01-01 $55,801 $57,580 $65,145 $67,184
2003-01-01 $55,752 $57,530 $64,573 $66,594
2004-01-01 $55,558 $57,330 $63,816 $65,814
2005-01-01 $56,172 $57,963 $63,399 $65,384
2006-01-01 $56,589 $58,394 $64,250 $66,261
2007-01-01 $57,348 $59,177 $64,554 $66,575
2008-01-01 $55,303 $57,067 $62,436 $64,391
2009-01-01 $54,933 $56,685 $61,603 $63,532
2010-01-01 $53,497 $55,203 $60,012 $61,890
2011-01-01 $52,680 $54,360 $58,559 $60,392
2012-01-01 $52,595 $54,272 $59,127 $60,978
2013-01-01 $52,779 $54,462 $54,462 $59,393 $61,252 $61,252
2014-01-01 $53,657 $60,462

 

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Note: CPS ASEC changed its methodology for data years 2013 and 2014, hence the break in the series in 2013. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. Non-elderly households are those in which the head of household is younger than age 65. Shaded areas denote recessions.

To account for the redesign of the CPS ASEC survey, when the difference between the original data for 2013 and the redesigned data for 2013 is small in magnitude (less than a 1 percent difference) and statistically insignificantly different, data for 2013 is an average of the original and redesigned data. When the difference between them is relatively large in magnitude (1 percent or greater) or statistically significantly different, we display a break in the series and impute the ratio between them to historical data.

Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Tables H-5 and HINC-02)

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Stagnant wages over last ten years

The key driver of these income trends, besides lower employment and hours in the aftermath of the financial crisis, has been wage stagnation over the last dozen years. In 2014, the median man working full-time, full-year experienced a slight decrease in real earnings of 0.9 percent, from $50,834 to $50,383. On the other hand, the median woman working full-time, full-year saw a slight increase of 0.5 percent, from $39,427 to $39,621. By these measures, real wages have failed to grow since 2007 for either men or women. Looking over a longer horizon, the trends are starkly disappointing. The median woman working full-time, full year saw her earnings grow from $30,180 in 1973 to $39,757 in 2002, and then stagnate in the 2002–2007 recovery and during the recession since 2007, reaching only $39,621 in 2014. Since 1973, the median man working full-time, full-year has seen no sustained growth, dropping from $53,291 in 1973 to $51,902 in 2002 and falling further over the 2002-07 recovery and the recession to $50,383 in 2014. 

To get household incomes rising we will need to get real wages of the typical man and woman to rise, something that we haven’t seen for more than a decade.

Income

Real earnings of full-time, full-year workers, by gender, 1995–2014

Men: Full-time, full-year Women: Full-time, full-year
1995-01-01 $48,596 $34,711
1996-01-01 $48,309 $35,634
1997-01-01 $49,538 $36,738
1998-01-01 $51,281 $37,522
1999-01-01 $51,720 $37,401
2000-01-01 $51,227 $37,764
2001-01-01 $51,196 $39,078
2002-01-01 $51,902 $39,757
2003-01-01 $52,363 $39,560
2004-01-01 $51,146 $39,165
2005-01-01 $50,202 $38,645
2006-01-01 $49,636 $38,189
2007-01-01 $51,525 $40,090
2008-01-01 $50,997 $39,315
2009-01-01 $52,030 $40,053
2010-01-01 $52,081 $40,065
2011-01-01 $50,752 $39,082
2012-01-01 $50,947 $38,976
2013-01-01 $50,848 $39,617
2014-01-01 $50,383 $39,621

 

ChartData Download data

The data below can be saved or copied directly into Excel.

Note: Earnings are wage and salary income. Shaded areas denote recessions. CPS ASEC changed its methodology for data years 2013 and 2014; in this graph, the data for 2013 are an average of the new and old series.

To account for the redesign of the CPS ASEC survey, when the difference between the original data for 2013 and the redesigned data for 2013 is small in magnitude (less than a 1 percent difference) and statistically insignificantly different, data for 2013 is an average of the original and redesigned data. When the difference between them is relatively large in magnitude (1 percent or greater) or statistically significantly different, we display a break in the series and impute the ratio between them to historical data.

Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Table P-41)

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  • The wages are too damn low! Every year the minimum wage isn’t raised it’s a pay cut by the rate of inflation to our lowest paid employees.

  • BC Shelby

    …when you remove CEO, executive and top end professional salaries (a small sector of the total workforce) from the equation, the picture changes dramatically. Where I live (Portland OR) the what I call the “real world” hourly wage based on what I’ve seen in most job postings is between 10.00$ to 12,00$. With rents in particular skyrocketing out of control here (outpacing income growth by a factor of 2 to 1), housing costs alone are taking a much bigger bite than the recommended 33- 35% of one’s monthly income, and is even a higher burden after taxes and deductions.

    Taking the midpoint of the range above (11.25$ an hour) if you equate that to 1985, it translates to just over 5.00$ in purchasing power. Reversing the equation, that same 11.25$ in 1985 would translate to almost 25$ in purchasing power today. So based on increases in the cost of living, wages have not just stagnated, but fallen sharply.

    Why did I choose 1985?

    On one forum I was on the other day, a person mentioned that back then he and a friend were earning 15$ an hour working at UPS and Safeway respectively The wage which I have been seeing for jobs at those same two companies today are listed as being between 10$ – 10.50$ an hour.
    Seattle has disproven the right wing’s “gloom and doom” theory that rasing wages will hurt business and cost jobs. As a matter of fact, many establishments in the city have seen an increase in revenue since, as more people have more buying power.

  • antonw

    Isn’t this analysis based on the CPI. Tough to read this stuff. FED data is all
    I read unless price index is given.

  • Consumer spending is 70% of the US economy. So I believe you’ve identified the real culprit of this lukewarm economic recovery. Now I’m hearing the Republican-controlled state legislatures are passing laws that would prohibit cities, counties, etc. within the state from enacting minimum wage/living wage laws. That’s not only counter-productive; it’s mean-spirited and cruel.