Median Household Income (1994 Dollars) 1978 $33,074 1979 32,966 1980 31,891 << recession year 1981 31,374 1982 31,269 << recession year 1983 31,274 1984 31,972 1985 32,530 1986 33,665 1987 33,999 1988 34,106 1989 34,547 1990 33,952 << recession year 1991 32,780 << recession year 1992 32,361 1993 32,041 1994 32,264
As you can see, incomes dipped in recession years and started climbing
in-between. (The last recovery has been uncharacteristically flat, but
that's because income inequality is becoming extraordinarily great.
But more on that later.) Notice that the 1978 median income was not recovered
until 1986. Because economies grow in the long run, income continued to
rise after 1986 to $34,547, before sinking into the next recession.
But ultimately this chart is not useful in learning anything about
improving incomes in the 80s. There are three reasons. First, this chart
does not show how much overtime people were working to compensate for falling
wages. Second, the workforce as a percentage of the population has been
growing for decades now. In 1980, 63.8 percent of the population was working.
In 1990, this rose to 66.4 percent. What this means is that there were
more paychecks in all those households, which would drive up household
income, even if paychecks themselves were falling. Third, median income
doesn't show the broadening gap between the very richest and the very poorest.
But there is a way to get an idea of what this gap is.
Compare the chart above on median income with the chart below on average
income. Recall that the greater the gap between the two, the more income
is concentrated at the very top. As you can see, the gap has been growing:
Average Income (1994 dollars) 1978 $38,927 1979 39,161 1980 37,929 1981 37,481 1982 37,684 1983 37,795 1984 39,174 1985 40,033 1986 41,592 1987 42,281 1988 42,615 1989 43,647 1990 42,411 1991 41,263 1992 41,027 1993 42,489 1994 43,133
Therefore, yet another criticism of the first chart on median income
is that it does not show how the poor were actually losing ground.
Below is another chart often used in the debate. It is the median individual
income for full-time, year-round workers in 1994 Dollars:
Year Men Women 1972 $35,174 $20,204 1973 36,008 20,371 1974 34,728 20,485 << recession year 1975 34,107 20,355 << recession year 1976 34,577 20,738 1977 35,338 20,668 1978 35,265 21,167 1979 35,005 21,090 1980 34,525 20,872 << recession year 1981 34,035 20,490 1982 33,570 21,181 << recession year 1983 33,491 21,544 1984 34,239 21,998 1985 34,432 22,384 1986 35,014 22,775 1987 34,807 22,914 1988 34,253 23,232 1989 33,965 23,471 1990 32,859 23,348 << recession year 1991 33,003 23,117 << recession year 1992 32,568 23,337 1993 31,873 23,044 1994 31,612 23,265
Very generally, you can see that male median income has been falling
since 1973, and that female income has been rising. The men's loss is roughly
the same as the women's gain, but that doesn't mean they cancel each other
out. The workforce was 61 percent male in 1970, 57 percent in 1980 and
55 percent in 1990. So overall individual median income has been declining
slightly over the decades.
If you look closely at the men's falling and women's rising trends,
you can see evidence of the business cycle. Incomes tends to dip in recession
years, and recover in-between. But these cycles did not overcome the larger
trends.
As before, this chart does not indicate how much overtime people worked
to compensate for falling wages.
Let's again compare median individual income with a chart on average
income. Once more, remember that the larger the gap between average and
median income, the more income is concentrated near the top:
Average Income of year-round, full-time workers (1994 Dollars) Year Men Women 1972 $39,376 $21,783 1973 39,622 21,703 1974 39,283 21,942 1975 38,801 21,787 1976 39,173 22,345 1977 39,697 22,359 1978 40,190 22,840 1979 39,924 22,927 1980 38,600 22,925 1981 38,192 22,814 1982 38,459 23,473 1983 38,318 23,798 1984 38,852 24,345 1985 39,594 24,913 1986 40,739 25,581 1987 41,035 26,124 1988 40,886 26,398 1989 41,527 26,687 1990 39,772 26,524 1991 39,235 26,449 1992 39,293 26,662 1993 40,883 27,402 1994 41,099 27,816
Average male income has remained steady at about $39,000 a year --
but we've just seen that male median income is falling. This tells us that
men's inequality is growing dramatically. Women inequality is growing too,
but nothing quite like men's.
A chart that is much more informative in this debate is income by quintile.
(The top 5 percent has been added because that is where most of the income
growth occurred.)
Mean income of households by quintile (1994 Dollars)
Quintiles:
Year First Second Third Fourth Fifth Top 5%
1967 $6,638 $18,098 $28,897 $40,430 $73,267 $116,784
1968 7,202 19,034 30,186 42,113 73,754 114,189
1969 7,361 19,620 31,351 43,911 77,184 118,808
1970 7,281 19,359 31,176 43,947 77,810 119,432
1971 7,310 19,012 30,826 43,824 77,652 119,100
1972 7,730 19,687 32,127 46,119 82,798 128,330
1973 8,063 19,988 32,661 46,953 83,271 126,903
1974 8,312 19,911 31,999 46,205 80,693 118,985
1975 8,001 18,997 31,082 45,138 78,607 115,870
1976 8,178 19,411 31,841 46,209 80,637 119,271
1977 8,238 19,442 32,058 46,941 82,286 121,449
1978 8,358 20,006 32,955 48,258 85,168 126,519
1979 8,239 20,069 33,035 48,451 86,096 128,568
1980 8,073 19,482 32,066 47,213 82,929 119,959
1981 7,954 19,062 31,484 46,898 82,147 116,940
1982 7,756 18,971 31,306 46,547 83,966 122,381
1983 7,795 19,040 31,403 47,119 85,264 124,903
1984 7,996 19,447 32,160 48,417 87,933 129,271
1985 7,984 19,737 32,691 49,162 90,684 136,281
1986 8,037 20,230 33,776 50,872 95,113 145,285
1987 8,045 20,331 33,991 51,378 97,709 153,940
1988 8,148 20,441 34,189 51,681 98,665 155,610
1989 8,391 20,797 34,570 52,292 102,221 165,153
1990 8,158 20,444 33,768 50,913 98,804 157,335
1991 7,903 19,748 32,803 50,006 95,895 149,649
1992 7,698 19,205 32,356 49,669 96,240 152,751
1993 7,602 19,134 32,073 49,843 103,846 178,234
1994 7,762 19,224 32,385 50,395 105,945 183,044
The first thing that stands out about this chart is that income
stagnated in the first three quintiles, grew somewhat in the fourth and
fifth quintiles, and skyrocketed in the top 5 percent. In fact, if this
chart had shown the top 1 percent, you would have seen exploding incomes.
Supply-siders attempt to use this chart to show that income increased
for all quintiles during the Reagan years. But this chart suffers from
all the usual drawbacks: it doesn't reflect increased overtime, it doesn't
reflect a growing percentage of workers in those households, and how a
president was doing depended on which part of the business cycle he was
in.
And if you really want to bug the living daylights out of a supply-sider,
just point out that the poorest quintile actually did better under Carter
than under Reagan. The average income of the poorest quintile was $8,076
from 1978 to 1982 (Carter's four budget years plus the recession year of
1982, which supply-siders incorrectly blame on Carter). But the poor averaged
slightly less -- $8,056 -- during Reagan's so-called "Seven Fat Years"
from 1983 to 1989. So, incredibly, the poor did even better during the
worst recession since World War II than under Reaganomics!
In conclusion, here are some important questions to ask before accepting
any income comparison:
To cut through much of the confusion that surrounds this debate,
Congress published a study in 1992 about eroding family incomes during
the Reagan years. Here is what they found:
"This report takes a close look at one important type of family
-- two-parent families with children -- in two years, 1979 and 1989, and
concludes that such families have a legitimate basis for their growing
economic concern:
[Congressional Study: Families on a Treadmill: Work and Income
in the 80's, January, 17, 1992.]
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