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More on the Standard of Living (excerpt)

Summary:
The income-inequality crowd is obsessed with the narrowest measure of median real household income compiled by the Census Bureau to measure poverty. Yet it excludes significant noncash government benefits. Furthermore, as I’ve observed previously, it is pre-tax so it doesn’t reflect income redistributed through the tax system. Even with all their tax shelters, the rich pay lots of taxes. The poor can get the Earned Income Tax Credit to boost their incomes. In June, personal income per household was at a record high of 0,277 (saar) in current dollars. It was 8,803 in real dollars, and up a whopping 108% since the start of the Census data in 1967. I don’t have a way of calculating median personal income per household, but I note that the trends in the Census measures of mean and median household income have been similar, though they do show the rich getting richer. In any event, mean real household income is up 49% since the start of the data, lagging well behind the comparable measure of total personal income. The important point is that incomes haven’t been stagnating as charged by the income-inequality crowd. Furthermore, in June, personal consumption per household rose to a record 4,440 in current dollars. It was ,244 in real dollars (saar), and up 118% since the start of the Census data in 1967.

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The income-inequality crowd is obsessed with the narrowest measure of median real household income compiled by the Census Bureau to measure poverty. Yet it excludes significant noncash government benefits. Furthermore, as I’ve observed previously, it is pre-tax so it doesn’t reflect income redistributed through the tax system. Even with all their tax shelters, the rich pay lots of taxes. The poor can get the Earned Income Tax Credit to boost their incomes.

In June, personal income per household was at a record high of $130,277 (saar) in current dollars. It was $118,803 in real dollars, and up a whopping 108% since the start of the Census data in 1967. I don’t have a way of calculating median personal income per household, but I note that the trends in the Census measures of mean and median household income have been similar, though they do show the rich getting richer. In any event, mean real household income is up 49% since the start of the data, lagging well behind the comparable measure of total personal income.

The important point is that incomes haven’t been stagnating as charged by the income-inequality crowd. Furthermore, in June, personal consumption per household rose to a record $104,440 in current dollars. It was $95,244 in real dollars (saar), and up 118% since the start of the Census data in 1967.

There simply aren’t enough rich people to explain this record high in the standard of living as measured by mean real consumption per household. To reiterate, mean real household income, which admittedly gives more weight to the rich than does the median measure, has also stagnated, but for a shorter period than the median. It is actually down 5% since 1999 through 2013. Yet since the start of 1999, real personal income per household is up 24% and real consumption per household rose 27%, both to new record highs.

Today's Morning Briefing: American Dream or Myth? (1) Myth, dream, and nightmare. (2) Rich, poor, and balderdash. (3) Widespread prosperity. (4) A misleading indicator of income. (5) Cash and noncash income. (6) The rich are richer, but everyone is better off too on average. (7) Income distribution before vs. after benefits and taxes. (8) Declining percentage of families in households. (9) Fewer people per household. (10) Consumers are doing what they do best. (11) More on the skills gap. (12) Bachelor’s degree not required to work at Starbucks. (13) Focus on market-weight-rated S&P 500 auto-related industries. (More for subscribers.)

Dr. Ed Yardeni
Dr. Ed Yardeni is the President and Chief Investment Strategist of Yardeni Research, Inc., a provider of independent investment strategy and economics research for institutional investors. In this blog, we highlight some of the more interesting relationships and developments that should be of interest to investors. Our premium research service is designed for institutional investors.

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