Saturday, November 22, 2014

One Reason Why Household Income Is Falling

Median household income is falling. Progressives paint this as a chronic problem with our economic system, and an acute problem associated with the Great Recession.

Then what about this:


There’s certainly a position that could be taken that what we have is one or both earners in two-income houses being pushed out of work.

But I don’t think that’s a very strong position. Instead, look at the ends of the expansions.

The Bush II expansion (2002-7) was a pretty strong one, and two earner households showed no growth during its later stages. There was even a slight decline in no earner households from 2003 to 2007. But one earner households went through the roof. This sounds like a lifestyle choice.

The effect is there too in Clinton’s share of his expansion (1993-1999). Two earner households hold steady (at best), and no earner households decline. Again, the one earner households rise.

Then there’s the Reagan expansion (1983 to 1989). Again, no earner households hold steady, but now two earner households climb steadily. That’s probably baby boomers getting married. It’s also the heydey of yuppies. I’d bet that when the blush wore off, a lot of those couples got divorced, and some of them didn’t remarry.

The absence of any business cycle pattern in one earner households is indicative of an economic symptom without an economic cause. Arguably, it doesn’t require an economic solution either.

Via Carpe Diem.

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