"The Economy" Is Growing, but Most People Are Earning Less

The median is the point where half of make more than that, half make less.

Fiscal Times

By Eric Pianin
September 21, 2015

An another troubling sign of the wage stagnation bedeviling middle-class Americans, the Census Bureau last week reported that the median income for households headed by people below the age of 65 actually decreased 1.3 percent between 2013 and 2014 -- 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,” noted Lawrence Mishel and Alyssa Davis of the Economic Policy Institute, a pro-labor Washington think tank.

This crisis of wage stagnation and growing income disparity between the middle class and the wealthiest Americans is playing out in every corner of the country and has become a cause célèbre for both parties in the 2016 presidential campaign.

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Explanations for this phenomenon vary – but integral to all of them is the fact that the rich are getting richer while median income and lower income people are getting poorer, relatively speaking. Lane Kenworthy, a sociologist at the University of California at San Diego, says in the Pew report that as the top one percent of income earners have amassed a larger portion of the country’s total wealth, “household income growth for the middle class has become decoupled from economic growth.”

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“You get some of these good state growth numbers that are coming out, but a lot of the good growth that comes from the states is highly correlated with what’s going on with the top one percent of the population,” Frank said in an interview. “So when the top one percent does pretty good, it just so happens that the state is generally doing really good too.”

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“I think one of the biggest things that could help is that the Federal Reserve doesn’t panic and worry about inflation too soon,” he said. The Fed decided late last week to keep short-term interest rates near zero as a hedge against a possible decline in the economy later this year – a good move as far as Kenworthy is concerned.

“If it’s willing to let unemployment go a bit lower, we might actually begin to see some real wage increase, just like we did in the late 1990s,” Kenworthy said. “That’s totally a national rather than a state government issue.”