Much was made of the nominal 5.2% 2015 income gain reported by the Census Bureau earlier this week with the mainstream media quick to tell everyone how great it was, as did I initially, but the more I thought about it the less I believed it. Data from Census shows that median income for full time male workers saw a 1.6% gain in 2015 while full time female workers saw a 2.8% gain. Both are far short of the 5.2% reported. That said income doesn’t just come from earnings. So the balance had to come from investments which is a bit of a stretch to say the least when one starts to think about participation and various market returns last year. Additionally, the nominal 5.2% gain in income is also far higher than the equivalent GDP or Gross Domestic Product figure of 3% and the disposable personal income gain for the year of 3.7%. Even allowing for increases in the labor force only gets the figure up to 4.2% nominally and other metrics on compensation and income again don’t come anywhere near to showing a 5.2% gain in income during 2015. As I said previously, color me skeptical and very at that.
One of the harsh realities of theoretical economics is that low unemployment isn’t welcome by corporate America because it forces wages higher and cuts into profits. That said on a real or inflation adjusted basis earned income has gone nowhere since the mid 90’s and if you break this data down into quintiles you find that of the gains seen they have largely accrued to the top 5% while the rest have seen no gain or as you go further down the economic scale increasing declines in median earnings.