Census Bureau
Gary Burtless of Brookings is skeptical of those Census Bureau surveys showing falling household income:
According to Census tabulations, real median household income dropped 1.5 percent last year. It was the sixth year out of the last seven in which median income fell. … Measured on a comparable basis, it appears that median income adjusted to reflect consumer price change has shrunk more than 9 percent since 2007 and more than 10 percent since 1999. If we accept these estimates, middle-income Americans have about one-tenth less income than they had in the late 1990s. Many politicians and opinion writers accept the estimates without question.
Burtless does not accept those estimates without question. First, economic growth and real disposable income were up 2% or so last year. So it’s weird incomes were down by almost the same amount. But maybe it’s an income inequality thing. The 1% took all the income gains. Yet Burtless points that, according to Census, “average incomes in the top 5 percent of the income distribution fell faster than incomes in the middle and at the bottom of the distribution.” So that’s not it, either.
So what’s going on here? Here is the explanation Burtless prefers:
The explanation for the shortfall of income growth in the household survey compared with the national income statistics must be the growing discrepancy between the amount of income reported by households in surveys and the amount recorded in other sources, such as tax reports and Social Security payment files. These administrative data files provide the main source of information for compiling the national income accounts. According to the Census Bureau’s CPS survey, the total money income received by Americans, adjusted for price inflation, fell 1.1 percent per person in 2014 compared with 2013. In contrast, the national income and product account statistics show that money income per person, using the same consumer price index, increased 2.1 percent. The CPS has shown slower money income gains than the national accounts in 10 of the past 15 years.
So while Census surveys suggest real income person has fallen by 4% since 1999, Commerce Department’s estimates suggest an increase of 8.5%, if not twice as much.
Income disparities have certainly increased over the past 40 years, producing smaller income gains for low- and middle-income Americans compared with those at the top. In addition, average income gains have slowed in the past 15 years compared with the previous 20. It is also the case, however, that income reporting on household surveys has deteriorated over time, reducing the fraction of income gains that are captured in the country’s oldest income survey. Middle class income gains have slowed since 2000, but it is doubtful they have turned negative over the period.
For more, here is my recent post on middle-class stagnation. Also, my The Week column on the same issue.
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