Wednesday, May 2, 2012

Two Income Households, 'Mean' and 'Median' Income Statistics

(* Editor's note: A related post is here -- Only 20% are Middle-Class, Most Don't Come Close)

"Clowns to the left of me, jokers to the right, here I am, stuck in the middle with you."

Editor's Note: This is "part 2" to a previous article

Page Menu: Union versus Non-Union Wages | Low Wages Rule the Day | Poverty | The Top 1% | Households, in General | Two Income Households

Short Explanation of Mean and Median Numerals

There's a huge difference between the much reported "average household income" and what most people actually earn. The "median" is the "middle number" (in a sorted list of numbers). To find the median, place the numbers you are given in value order and find the middle number.

Example: find the median of 12, 3 and 5. Put them in order: 3, 5, 12. The middle number is 5, so the median is 5. If there are an even amount of numbers such as 3, 5, 8, 12 , find the value half-way between them, add them together and divide them by 2: (5 + 8 = 13 ÷ 2 = 6.5). And so, the "median" in this example is 6.5.

Mean Value - The "mean" is just the average of the numbers. Add up all the numbers, then divide by how many numbers there are. It really doesn't tell you very much regarding what most people actually earn without gathering all the data and computing the numbers. And someone has.

The total U.S. labor force is 153,392,000 with a participation rate of 64.2% because 139,764,000 are actually working, 18,425,000 were part-time, and 6,130,000 were unemployed over 6 months. 77.3 million Americans earn poverty wages and 8 million unemployed are no longer counted by the Bureau of Labor Statistics (they claim a much lower number).

The Bureau Labor Statistics reports "median" weekly earnings of the nation's 100.8 million full-time wage and salary workers were $769 in the first quarter of 2012 ($39,988 a year or $19.22 a hour). Women who usually worked full time had median weekly earnings of $697, or 82.2 percent of the $848 median for men.

Yahoo reports that based on date from Social Security, "while the average U.S. income last year was $39,959, the mean income — the figure where half earn more and half earn less — was much lower, $26,364. This disparity reflects the fact that "the distribution of workers by wage level is highly skewed."

50 percent of all wage earners had net compensation less than or equal to the median wage, which is estimated to be $26,363.55 a year for 2010. The U.S. Census Bureau defines "median income" as the amount which divides everybody's personal income into two equal groups, half having income above that amount, and half having income below that amount. More here from the Huffington Post.

Dean Maki, chief U.S. economist for Barclays Capital, says government reports from the U.S. Census, the Social Security Administration, and the Department of Labor's Bureau of Labor Statistic often reflect "aggregate" or "average" incomes, which may be skewed by wealthier Americans. "The Sentier Research study is more indicative of a typical household", says Dean Maki.

Remember, a "median wage" or "mean" wage is not what most people actually earn, especially before taxes.

(* Editor's Note: I've often heard the media reports saying "the average American median wage in the U.S. is $50,000", or some such number they're always throwing around, and I always thought I earned much less than most other people...when in fact, we've all been getting under-paid for the last 30 years.)

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Union versus Non-Union Wages

The Bureau Labor Statistics reports in 2011 that the union membership rate--the percent of wage and salary workers who were members of a union--was 11.8 percent. The number of wage and salary workers belonging to unions was14.8 million. In 1983 the union membership rate was 20.1 percent and there were 17.7 million union workers.

Public-sector workers had a union membership rate (37.0 percent) more than five times higher than that of private-sector workers (6.9 percent). In 2011, 7.6 million employees in the public sector belonged to a union, compared with 7.2 million union workers in the private sector.

In 2011, 16.3 million wage and salary workers were represented by a union. This group includes both union members (14.8 million) and workers who report no union affiliation but whose jobs are covered by a union contract (1.5 million).

In 2011, among full-time wage and salary workers, union members had median usual weekly earnings of $938 ($48,776 a year before taxes) while those who were not union members had median weekly earnings of $729 ($37,908 a year.)

Today day in 2012 the average mean wage for a steelworker is $24.11 an hour, or $50,160 a year -- about what a typical teacher, fireman, or police person might earn. That's because they are represented by unions, and their wages have kept pace with the rising cost of living over the past sixty years. They're not over-paid as the Republicans like say, they're just earning an average and comfortable middle-class most of us did back in the 1950s.

I calculated that a middle-class wage today would be about $21.63 an hour BEFORE payroll taxes, not including emergency savings for repairs, clothes, entertainment, or a savings account for retirement and college. More here...

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Low Wages Rule the Day

The Bureau Labor Statistics reports in 2011, 73.9 million American workers age 16 and over were paid at hourly rates, representing 59.1 percent of all wage and salary workers. Among those paid by the hour, 1.7 million earned exactly the prevailing Federal minimum wage of $7.25 per hour. About 2.2 million had wages below the minimum. Together, these 3.8 million workers with wages at or below the Federal minimum made up 5.2 percent of all hourly-paid workers.

In the gray area of the chart below, the male and female median individual incomes are added together and then divided by 2 for a median income of $26,598 a year. That was in 2003; seven years later it's gone down to $26,363 a year -- or based on a 40-hour week, a median hourly wage of $12.67 in this income group.

Most new jobs are in the service industry and pay less that $10 an hour. (See a list of jobs with wages near the bottom) The most dominate occupations in the U.S. today: (Source: Bureau of Labor Statistics)

  • Office and Administrative Occupations 21.4 million
  • Sales and Related Occupations 13.6 million
  • Food Preparation and Serving Related Occupations 11.2 million
  • Transportation and Material Moving Occupations 8.6 million
  • Education, Training, and Library Occupations 8.4 million
  • Production Occupations 8.4 million. Manufacturing was once our most dominate occupation. Last year Representative Betty Sutton, in a speech to the House of Representatives, noted that just between 2001 and 2010 alone, America has lost over 56,000 factories. Politifact rated her claim "true".

The "median" hourly wage in this group is $16.57 and the "mean" annual wage is $45,230. The national average wage index for 2010 was $41,673.83

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The Top 1%

Meanwhile, CEO pay has skyrocketed in that same period of time, averaging near $13 million a year in 2011. A 2006 analysis of IRS income data by economists Emmanuel Saez at the University of California, Berkeley and Thomas Piketty at the Paris School of Economics showed that the share of income held by the top 1% was had already been as large in 2005 as it was in 1928.

EPI researchers found that the wealthiest 1 percent of U.S. households had net worth that was 225 times greater than the typical median household's net worth. That disparity, according to EPI, is the highest ratio on record.

1.4 million make up the very top quintile of taxpayers.

Based on 2009 tax year filing data, the Internal Revenue Service says an adjusted gross income, or AGI, of $343,927 or more will put you in the top 1 percent of taxpayers. A married couple with two kids and combined earnings of $343,927 or more also was among the top earners in the country.

The 1.4 million Americans in the IRS' top taxpayer category reported nearly 17 percent of all the country's taxable income. From those filers, the IRS collected $318 billion or almost 37 percent of all the individual taxes paid.

The Tax Policy Center in Washington, D.C., a joint venture of the Urban Institute and Brookings Institution, ran an economic simulation model that showed the top 1 percent of earners in 2009 made $503,086. TPC projects $516,633 as the cutoff for the top earners in 2010 and $532,613 for 2011.

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The nation's official poverty rate in 2010 was 15.1 percent, up from 14.3 percent in 2009 ─ the third consecutive annual increase in the poverty rate. There were 46.2 million people in poverty in 2010, up from 43.6 million in 2009 ─ the fourth consecutive annual increase and the largest number in the 52 years for which poverty estimates have been published.

The number of people without health insurance coverage rose from 49.0 million in 2009 to 49.9 million in 2010, while the percentage without coverage −16.3 percent - was not statistically different from the rate in 2009.

  • 55.8 million receive some form of Social Security benefits (retirement averaged $14,760 a year and those on SS disability averaged $13,332 a year).
  • Of the 12.7 million who are unemployed, only 6.7 million currently receive unemployment benefits ($15,340 a year).
  • 8 million exhausted all their unemployed benefits without ever finding work again. ZERO income.

Squeezed by rising living costs, a record number of Americans — nearly 1 in 2 — have fallen into poverty or are scraping by on earnings that classify them as low income.

Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty, says "If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years."

Among those requesting emergency food assistance, 51 percent were in families, 26 percent were employed, 19 percent were elderly and 11 percent were homeless.

And we already know what to expect from the Republicans and their right-wing advocacy groups such as the Heritage Foundation (called "think tanks", but are more like lobbyists). They are all denying these statistics so as not to have taxes raised on millionaires and billionaires, which are now historically low. Tax Rates on from1862 to 2012.

Many formerly middle-class Americans are dropping below the low-income threshold — roughly $45,000 for a family of four — because of pay cuts, a forced reduction of work hours or a spouse or both losing their job.

About 97.3 million Americans fall into a low-income category and 49.1 million who already fallen below the poverty line and are counted as poor, number 146.4 million, or 48 percent of the U.S. population (10.2 million had been added just since the recession that began in late 2007).

Paychecks for low-income families are shrinking. The inflation-adjusted average earnings for the bottom 20 percent of families have fallen to just under $15,000 a year, and earnings for the next 20 percent have remained flat. In contrast, higher-income brackets had significant wage growth since 1979, with earnings for the top 5 percent of families climbing 64 percent to more than $313,000.

Fifty percent of U.S. workers earned less than $26,364 last year. Despite population growth, the number of Americans with jobs fell again last year, with total employment of just under 150.4 million — down from 150.9 million in 2009 and 155.4 million in 2008. In all, there were 5.2 million fewer jobs than in 2007, when the deep recession began, according to the IRS data.

Median compensation last year was just 66 percent of the average income, compared with nearly 72 percent in 1980.

Per capita income is total personal income divided by the total population. Median household income is the income of the "middle" household. When the household income distribution is arranged in order from lowest to highest, half of all incomes are below and half are above the median.

U.S. Census data show that from 2000 to 2010, median income in the U.S. declined 7 percent. And the outlook for recouping lost earnings isn't good, according to a recent Wall Street Journal survey of economists. The economists told the newspaper they expect inflation-adjusted incomes to rise only 5 percent over the next decade.

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Households, in General

The Bureau Labor Statistics reports (PDF) 141,006,000 million "employed" households. As of 2009 from the U.S. Census (PDF): There were 60,844,000 married couples, of which 33,249,000 both worked.

Real "median household income" is also still 7% lower than it was in December 2007 and 3.9% lower than in June 2009, when the recession officially ended, says a study by Sentier Research. On top of that, we had 2.5% inflation this year and 3.3% in 2011, as wages remain low while the cost of living keeps rising.

According to the last U.S. Census, there were 114,235,996 households, and according the Bureau of Labor Statistics, the number of families with at least one member unemployed was 9.0 million in 2011.

Americans' incomes continued to fall in the recovery, Sentier data show, as more workers found fewer jobs and many of the unemployed took lower-level positions to get by on. There are currently 7.7 million who are only working part time but wanted full-time work.

Reuters reported on October 2011) that "median annual incomes" (adjusted for inflation) dropped 6.7 percent between June 2009 and June 2011, more than double the 3.2 percent drop experienced during the recession. This knocked real MEDIAN ANNUAL HOUSEHOLD INCOME down to $49,909 in June 2011 from $55,309 in December 2007, when the recession began. "Essentially, American households continued to lose ground." By spring 2011, the number of doubled-up households had increased by 2.0 million to 21.8 million.

The U.S. Census reports a similar number before it dropped, that "median household income" in the United States in 2010 was $49,445 (that would be an individual mean income of $24,722 per person in two income households, a 2.3 percent decline from the 2009 median income.)

U.S. Census: Income, Expenditures, Poverty, & Wealth: Household Income (Excel 98k and PDF 60k)

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Two Income Households

With the emergence of a two-tier labor market, the economic benefits and life chances have considerably shrank for the lower middle class, that had needed two income earners in order to sustain a comfortable middle-class standard of living.

The national MEDIAN wage (the middle, not average, for all earners) for individuals is approximately $32,000 and $46,000 for households. In terms of personal income distribution, the growing lower middle class could have gross annual personal incomes ranging from about $32,500 to $52,800 a year. But the working class majority earns $14.40 an hour or less (about $32,000 or less annually) and would need to earn at least $28.00 a hour to sustain a family of four they way someone could 60 years ago without a second income. 53% of all Americans are now members of the working or lower classes.

Such households could boast annual incomes ranging from $35,200 to $52,800, and thus be located in the MIDDLE of the income range, are sometimes referred to as being middle class, but in reality, cannot afford a real middle class lifestyle with the rising cost of living.

The definition of "Dual Income, No Kids" or DINKS, is a household in which there are two incomes and no children (either both partners are working or one has two incomes). DINKS are often the target of marketing efforts for luxury items such as expensive cars and vacations. Or DINKY, an acronym meaning "Dual (or Double) Income, No Kids Yet/Yuppie".

But these days most people need a two income household...from various sources:

  • The Department of Labor says, "Between 1996 and 2006, the number of dual-income families increased by 31%, from 25.5 to 33.4 million families.
  • According to Bureau of Labor Statistics data from 2010, in families with children, 58% of households had two working parents.
  • Here it says, "In 2007 the U.S. Labor Department reported that 57 percent of all married couples, both husbands and wives worked."
  • And of all households: Dual-income families accounted for 43.6 percent, single-income homes for 42.3 percent, and elderly couples who do not work made up 14.1 percent.
  • Wiki says, "In 2005 the U.S. Census Bureau reported that 42% of all households had two income earners.
  • Bureau of Labor Statistics: "Dual-earner couples are swiftly replacing the traditional married-couple model of a "breadwinner" husband and "homemaker" wife. From 1970 to 1993, the proportion of dual-earner couples increased from 39 percent to 61 percent of all married couples."

While households with just one income earner, most commonly the male, were the norm in the middle of the 20th century, 42% of all households and the vast majority of married couple households now have two or more income earners. With so many present day households having two income earners, a substantial increase in HOUSEHOLD INCOME is easy to explain.

Elizabeth Warren, Harvard Magazine: "The typical middle-class household in the United States is no longer a one-earner family, with one parent in the workforce and one at home full-time. Instead, the majority of families with small children now have both parents rising at dawn to commute to jobs so they can both pull in paychecks... The only real increase in wages for a family has come from the second paycheck earned by a working mother."

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"A recession is when a neighbor loses his job. A depression is when you lose yours." - Ronald Reagan

1 comment:

  1. is not buying the low wage propaganda. You cant derive a median income by factoring in the unemployed or even part-time workers. You can only use full-time. Median, full-time income is ludicrously high. Here in Maryland, a two-parent family with two adults working full-time is bagging $115K a year... MEDIAN!