April 24, 2005

Are you better off than you were three decades ago?

Based on: Median Income for 4-Person Families (US Average) and Consumer Price Index (year to year average) I spent an afternoon and calculated an Inflation Adjusted Median Income for 4-Person Families and the year to year percentage change in the value. Positive change is shown in black, negative change in red..

Inflation Adjusted Median Income for 4-Person Families

Year Adj. Income
% Change
1974 $13,286
1975 $13,087 -1.50%
1976 $13,514 3.27%
1977 $13,721 1.53%
1978 $13,913 1.40%
1979 $13,704 -1.50%
1980 $13,119 -4.27%
1981 $12,843 -2.10%
1982 $12,712 -1.02%
1983 $13,016 2.39%
1984 $13,297 2.16%
1985 $13,529 1.74%
1986 $14,062 3.94%
1987 $14,393 2.35%
1988 $14,667 1.90%
1989 $14,609 -0.40%
1990 $14,094 -3.52%
1991 $14,050 -0.31%
1992 $14,019 -0.22%
1993 $13,891 -0.92%
1994 $14,094 1.46%
1995 $14,490 2.81%
1996 $14,586 0.67%
1997 $14,765 1.23%
1998 $15,271 3.43%
1999 $15,987 4.69%
2000 $16,041 0.33%
2001 $15,867 -1.08%
2002 $15,483 -2.42%
2003 $15,704 1.43%

It is interesting to pull some feedback from these values.

First, the effects of the business cycle on families is visible in the waves of black and red. Most recessions only last a couple of years, but the effects on family incomes often lasts four or five years. Employment tends to be a lagging economic indicator. Also, the drop in family incomes in 2001 - 2002 was relatively mild compared to the larger dips in 1989 - 1993 and 19790-01982.

You can also correlate these figures with presidential elections. In 1984, 1988, and 1966 the incumbent party was reelected when after a couple of years of increases in family incomes. In 1980 and 1992 the incumbent party was defeated after a couple of years of reductions in family incomes. 1976 and 200 stand out because in those years family incomes increased, but the incumbent party lost the presidency. However, in both these elections the party in power had been involved in widely publicized scandals, and these scandals could have trumped the effects of the economy.

Overall, the Inflation Adjusted Median Income for 4-Person Families has increased by about 18% between 1974 and 2003, an increase of less than 1% per year. Also, the definition of the family has changed over that time. There are more 2 earner families in 2004 than there were in 1974. Also, average family size is shrinking, so the 4-person family is less representative in 2003 than it was in 1974. It would take more detailed data and analysis to more completely represent the full status of families. I suspect the answer is that families are working harder and have less time together, but have a bit more income available, particularly on a per person basis.
Posted by georgegmacdonald at 07:05 PM