Where has US household income gone ?

I was at a seminar the other week on inequality in US household income, and I asked the speaker about something that’s puzzled me for a while. I didn’t really get an answer, so rather than do a lot of work myself, I thought I’d try this crowdsourcing all the cool kids are talking about. Here’s the puzzle.

Over the past 40 years or so, real median US household income has risen by about 30 per cent.

US Household income 1965-2005
US Household income 1965-2005

but real US GDP per person has more than doubled. How can this be ?

I’ve done enough work to rule out a couple of easy answers. Average household size has fallen from around 3 to 2.6, but that’s not enough to account for more than a small part of the gap. And inequality as measured by the ratio of mean to median household income has gone up, but again, not enough to account for the gap. In fact, even top quintile income hasn’t quite kept up with GDP per person.

Income by quintile
Income by quintile

So it seems as if the ratio of total household income to GDP must have fallen. Where has the extra income gone.

My candidate answers:
(1) A big chunk of income goes to the top 1 per cent of households and isn’t captured by the survey. The seminar gave some support to this idea, at least insofar as this group seems to have a big enough share of the total that the choice of the point where the Census Bureau stops measuring income makes a big difference
(2) A lot of income is flowing to the corporate sector and never being recorded as household income, perhaps because it is distributed in the form of capital gains, which aren’t counted. Again, a very large chunk of these would go to the top 1 per cent.

41 thoughts on “Where has US household income gone ?

  1. I think you’re right – all that money is being thrown at the rich, whose investment in the corporate sector hides the data.

    Short answer – the rich have gotten richer and the poor have gotten poorer.

  2. Salient One, given that ‘real median US household income has risen by 30%’ perhaps it is more appropriate to say that the rich have gotten richer and the poor have gotten less richer?

    On that, I would prefer that that second graph had a semi log scale to make sense but that seems to be an underused format?

    Although that still doesnt explain the divergence between income and GDP and its surprising there hasnt been some research on this given I thought it was pretty well known?

  3. Salient’s Oversight may be bigger than that. The expectation built into it is that people do not move between income brackets. This is obviously false, as, over time, young people typically move up through the brackets and the elderly, when they retire, often move rapidly downwards.
    So the old hackneyed mantra of “…the rich have gotten richer and the poor have gotten poorer” is wrong on several levels – the poor may not stay poor, the rich may not stay rich and, in any case, the levels at which you are considered “poor” have changed. So – false mantra.
    I was thinking – perhaps debt levels have something to do with it? Correct me if I am wrong, but if I borrow to build a house (for example) the borrowings would not show up in income (obviously) but the house building would count as GDP. The income (to the builders) may then flow (partially) out to the suppliers, some of whom were overseas, supressing domestic earnings. The same would be true of much borrowing in the US as it is part funded from overseas sources.
    My guess would be that if you threw in net household debt level increases as “income” (I know it is in fact not) you may get closer to the GDP increase figure. Not likely to be a full explanation, but could be a partial one.

  4. 1. In addition to the plausible explanations given in post: Are the data sets compatible?

    2. Re #2. The percentile distribution graph shows that the lowest (10%)income group did not have a noticable increase in real income at all. Further, there is evidence of increasing inequality purchasing power (real income). It may well be that some people can’t mentally work out trends in implied growth rates. But most of us, I think, can.

    3. This is yet another example of some difficulties in using macro-economic (aggregate) data.

    4. It is also yet another example of macro-economic data being useful for asking questions, including: Is it surprising that the idea of making credit available to an increasing proportion of people by means of securitisation failed?

  5. AR, I think a correct summary is

    The rich have got richer
    Median households have got a bit richer
    The poor have stayed where they were (your statement about changing poverty lines is true for Oz but false for US)

    And finally, the point of the post, it looks like the ultra-rich have captured a large share of the growth that doesn’t show up in the states.

    You’re right about national income vs GDP, but I don’t think this effect is large.

  6. “your statement about changing poverty lines is true for Oz but false for US”

    Apart from stereotypes, is there really such a big difference between the US and Aus in this respect that this is a reasonable claim to make?

  7. I haven’t really worked with national accounts for some time so I have a number of probably stupid questions/hypotheses:

    1. Is it possible, firms are simply retaining and reinvesting more of their profits in order to return more capital gains to their shareholders?

    2. How are various forms of overseas transfers such as dividend payments, offshore investment and worker remittances dealt with?

    3. The number of illegal immigrants has increased significantly over the period, are they captured in the household count figures?

    As a more general observation, there’s an ongoing and worsening problem with the national accounts which you highlight with your comment about the exclusion of capital gains from income figures.

    The current system deals poorly with changes in stocks of wealth. For example, when 60 or 70^ of households are house owners (or mortgagees anyway), the impact of changes in home equity is much greater than it used to be.

  8. “This is obviously false, as, over time, young people typically move up through the brackets and the elderly, when they retire, often move rapidly downwards.”

    This analysis vastly exaggerates social mobility in the US (which is probably why its so beloved on the right).

    Rich kids working basic wage jobs after school for pocket money and rich retirees living off their savings and hardly what most people think of when they talk of social mobility.

    People born into a household in the lowest quintile have relatively little chance of moving up even to the second-lowest quintile. Ditto for people in the richest quintile.

  9. Lets say for argument sake inflation on average over 40 years is 2%pa ( looking at the real inflation data in the US it suggest a lot more) then $1 in 2008 would hold the same value as 20 cent in 1968. JQ figures, suggest median houselhold income has grown 30% in forty years.Yet $1 dollar in 1968 is worth 80% more than in 2008. Conclusion: we are all poorer. Why ? printing presses.

    Where is the money ? Its where the fiat money gets dumped into the market. It looks to me like at the moment its in the commodities markets, a simple observation based on the current rising commodity prices, because financial markets are “up the creek” institutional investors, hedge funds etc. have moved cash into commodities. Who ever owns the commodities has the money.

    Overall however I think were all poorer because of the “wisdom” of our self centered economic managers. They understand printing the money is the same as owning the money.

  10. I once worked out that the Census practice of top coding income over $1,000,000 per family (not households — families have a more even number of members so I assume a more even inequality observation) may hide as much as half of all top quintile income.

    Per capita income doubled since 1968. If you add up all mean family income quintiles in 1968 (when inequality was not severe and the top code served a useful purpose of not skewering the overall picture with a few billionaires’ incomes) and double that sum the result should square with adding up all mean family incomes in 2005. Any discrepancy should tell us (very roughly; per capita is not family — but still with somewhere inside the ballpark) what is missing from today’s top quintile report. Turns out that the discrepancy is about equal to the to report, suggesting that half of top family quintile report is missing from the report.

    I think this resulted in top quintile growing from 40% in 1968 to almost 60% in 2005 — instead of — only — 50%.

    [Not absolutely sure that household survey utilizes the top code.)
    I caught this fragment from Dean Bakers blogspot once — it is my main informant of where the income went:

    Dean Baker * (in 18th reply on his blog post) reproduced what he called “a slightly altered table from Gordon’s paper, showing income shares in 1972 and 2001” — my percentage changes on the right.

    0-20_______2.6%, _ 2.0%________- .6%__ -12.3%
    20-50____ 16.0%, _ 11.7%_______ -4.3%__ -11.7%
    50-80____ 33.7%, _ 27.2%_______-6.5%____ -7.4%
    80-90____ 17.0%,_ 16.1%________ – .9%___ –
    90-95____ 10.8%,_ 11.3%______ +_ .5% __+
    95-99.0___12.2%,_ 14.8%______ +2.6% ___+ 3.1%
    99.0-99.9__ 5.7%,__ 9.6%_______+3.9% ___+ 7.0%
    99.9 -100__ 1.9%,__ 7.3%_______ +5.4%__ +12.4%
    (see p. 84 of Gordon for similar breakdown of wage income)

    4.9% loss of overall share meant 26.3% cut of 0-50 percentile share.
    6.4% loss of overall share meant 14.5% cut of 50-90 percentile share.

    * http://beatthepress.blogspot.com/2006/06/minimum-wage-and-doctors-pay.html
    ** http://faculty-web.at.northwestern.edu/economics/gordon/BPEA_Meetingdraft_Complete_051118.pdf
    Why did it happen– as opposed to where did it go?

    Lower 90 percentile earners allowed their bargaining power slip through complacency. We had a much happier nineteenth labor history on this side of the Atlantic — recent unhappiness blamed on the “great compression” — more recent happiness taken for granted as productivity boomed for decades (as long as everyone is making money, there was no big pressure on the bottom) and the post compression winners and losers had not yet sorted themselves out (fewer winners to beat up on losers).
    Meanwhile the American labor majority let their bargaining power slip…
    …today’s underpowered remedial proposals, inadequate even in earlier times and at poorer places — Obama’s $1 short of LBJ’s minimum wage proposal and the 1930s card check retread (instead of modern sector-wide labor agreements as practiced in third, second as well as first world economies) — illustrate by being supposed giant steps the very depth of the trench into which American labor has let itself fall…
    …while the top utilized their bargaining power like never before.

    All of which resulted in a very finite shift of 12.5% (as of 2001– not a good year for top few percentile incomes according to Dean Baker) from the bottom 90 percentile to the top 3%. If you squeeze a toothpaste tube from the bottom up, it all comes out the top.

    Since the top 3 percentile have always been highly educated we can assume it is not the bottom 90 percentile falling behind educationally that is at fault here.

  11. “People born into a household in the lowest quintile have relatively little chance of moving up even to the second-lowest quintile.”

    Sorry if this comes twice, but it seems to have hit spam the first time, but the real figures show in the US they’ve got a 65% chance or higher, and in Australia they have a 73% chance or higher. Of course the US is richer than Australia, so even that’s biased.

    See: Leigh, A. (2007). Integenerational mobiligy in Australia. B.E. Journal of Economic Analysis and Policy.

    The other thing you might want to consider is that if the US stopped taking poor immigrants, then their mobility would be the same as Australia.

  12. Last I heard Australian union representation had dropped from 40% to 20% over 25 years and a Thatcher type administration had hold until recently — so Australian labor has taken a huge hit too: not making it a perfect “normal” comparison anymore; that would probably be Europe.

    I understand Australia had a idiosyncratic labor setup of its own involving the judiciary or something. Now that that those days seem effectively gone maybe it is time Australian labor did the same thing American labor should: wake up and adopt the only sure protection from the race to the bottom, practiced in different versions in third, second and first world labor markets: sector-wide labor agreements. Like America, Australia might do well to look at the French-Canadian “lite” version (same economy; similar legal system).

  13. #6 Conrad, this is a simple statement of fact. The poverty line in Australia, and most other countries, is estimated as 50 per cent of median income. The US poverty line is the amount required to purchase a fixed bundle of goods determined in 1963.

    So, the Australian poverty line increases with median income, while the US poverty line is fixed.

  14. So the penny’s slowly dropping for some that temporally defining and measuring private income is somewhat problematic, before we even begin to tackle the question of public and private wealth? No doubt these people still have undying faith in those 10,000 plus pages of income tax act that has now degenerated into ‘Give us a call and we’ll tell you what we think of your latest brainwave’

    Yeah well, one thing’s for sure, the ATO aren’t taxing the income of my solar power generator, or should I say the 44c/Kwhr other power consumers are paying me to save the planet. As for separating business and private expenditure for the self-employed, or private and business income from said assets, all I can say is good luck, before you even get around to addressing the cash economy. Still, believing in progressive income tax is like believing in Marx. They’re both religions that defy all reason. Not a bad lurk for the practising disciple though if you can manage to nail one of those copious, well paid sinecures in the ATO. Since I’m not a true believer or disciple, I’d always opt for reason. Resource and carbon taxing, with an ANWT for the top end, with an exemption for holding it in the form of Warrawong Sanctuaries and the like. The more religious among us prefer to try and impute income for progressive taxing and thereby incentivise us to dig it up, chop it down and flatten it, etc. Has some visceral, emotional appeal for these true believers I guess.

  15. “Lets say for argument sake inflation on average over 40 years is 2%pa ( looking at the real inflation data in the US it suggest a lot more) then $1 in 2008 would hold the same value as 20 cent in 1968. JQ figures, suggest median houselhold income has grown 30% in forty years.Yet $1 dollar in 1968 is worth 80% more than in 2008. Conclusion: we are all poorer. Why ? printing presses.”

    Sorry, these are REAL (i.e. inflation-adjusted) figures not nominal figures.

  16. Posts number 10 and 12 (by Denis Drew) say some very interesting things.

    Agreement making in the APS (Australia Public Service) is at a strange pass now. There are great salary discrepancies between favoured agencies (Tax, Finance, PMs Office, Defence) and the disfavoured agencies in Human services and Welfare. It seems that the Fisc, Treasury, power-holding and war-making agencies are being vastly favoured over agencies which help people. In other words, the oppressive apparatus is favoured over the helping apparatus.

    In the human services agencies, there are two bargaining processes occurring which are unsustainable and must have logical endpoints. The first is the process of workers having to sell off or trade off conditions to get pay rises. Since workers do not possess an infinite number of conditions, the process must end when the total number of conditions has been traded off. Indeed, the process is likely to stop before that as workers realise that certain conditions contain qualitative values which they are no longer prepared to or are even able to sell off.

    The other of these processes which is unsustainable and must have a logical endpoint is the process of indefinitely constricting pay rises relative to rates of pay for comparable work in comparable agenies (and private enterprise). If pay rises are indefinitely constricted relative to rates of pay for comparable work in comparable organisations then the organisation in question will struggle and then fail to attract the required quantity and quality of staff in a competitive labour market.

    There is also the issue of pay “rises” often being only equal to or even less than the real real inflation on “typical-family-basket” purchases. The process of excessive focus on constricting labour costs on the model of the current proposed and previous agreements has not just a point of diminishing returns. It has a further range of negative returns.

    This is demonstrable from first principles. Constriction in the growth of labour costs is a relative phenomenon. To name the most important specifics, it is relative to the rate of inflation and it is relative the rates of pay for comparable work in comparable organisations.

    If pay rises were indefinitely constrained below the level of inflation then pay would be indefinitely falling in real terms. This process has an end point. Real pay must eventually fall below the reproductive cost of labour and then below even the subsistence cost of labour.

    That is to say, firstly families could not continue to raise and educate the next generation of workers. Then secondly, current workers could not even subsist on a daily basis.

    It will be raised in counterargument that the above outcome is never intended for governemnt workers. This is precisely my point. Because this outcome is not intended and cannot be seriously contemplated in any way then the process must have an end point. The process must have an end point either when the system actually collapses or when the politicians and managers of the system realise either near-sightedly or far-sightedly that it will collapse unless they change their methods.

    Or is the collapse of certain agencies still intended?

  17. The figures in the paper I pointed to are a bit more optimistic (26% aus vs. 35% US stay in the first quintile), but the important was that the US and Australia figures were not especially different and a big chunk of the difference was caused by immigration (which Australia has targetted better than the US). Try reading from page 15:

    Personally, the other thing I’d like to see is data for females, who seem rather neglected in this debate.

  18. The big point is that whereas apologists for the US system tend to assume that greater inequality there is offset by greater social mobility (which was broadly true in the last great era of inequality a century ago), the reverse is true. Whatever excuses you make, it remains true that the US has both low social mobility and high inequality in income and wealth, and both of these trends are getting worse.

  19. Folks,

    This is no mystery, just basic national income math. It turns out that there are four factors that entirely account for the schism between median household income and per-capita GDP. However, let’s start with the basics. From 1967 to 2007 per-capita GDP rose by a factor of 2.1757 (117.57%). Over the same period median household income rose by a factor of 1.2956 (29.56%). The four factors are:

    1. The ratio of Net National Income to GDP has fallen by 1.59% or an adjustment factor 0.984096. The main reason is faster depreciation of capital goods (PCs and the like).

    2. The CPI-U-RS (used to deflate household incomes) has risen considerably faster than the GDP deflator. The primary reason is that the GDP deflator includes many goods that consumers never buy (capital goods). These have fallen in price relative to consumer goods over the years (housing, medical care, etc.). The shift is 7.62% of an adjustment factor of 0.92376.

    3. Median household size has fallen from 3.268 in 1967 to 2.586 in 2007. This is an adjustment factor of 0.7915.

    4. The ratio of the median household income to the mean household income has fallen by 16.9%. This is an adjustment factor of 0.83099.

    If you multiply the four adjust factors, you get a total adjustment factor of 0.5979. Multiplying the total adjust factor times the growth in per-capita GDP gives almost the exact change in median family income over the period in question.

    I think most folks know about the fall in median household size and the increase in the mean to median household income ratio. However, the faster growth in the CPI-U-RS versus GDP deflator is probably less known. The shift in the ratio of NNI to GDP is obscure.

  20. Conrad, the paper I linked to use data for quartiles rather than quintiles, factor in different base periods and methodologies and there probably isn’t a huge difference in their estimates.

    The key point here (besides John’s point) is probably that my initial assertion about most people staying in the same quintile as their parents is almost definitely wrong.

  21. “apologists for the US system tend to assume that greater inequality there is offset by greater social mobility…, the reverse is true.”

    I think you are confusing inequality with social mobility. It’s certainly true that inequality has increased, but it isn’t true social mobility has decreased — it has remained basically flat. For example, here’s a nice graph of it in the US: graph here

    This makes the US similar to Australia (increasing inequality, flat mobility). At a guess, one of the main differences may be that there is a lot of hidden mobility amongst females in Australia thanks to the way schools/universities are set up here versus the US, since there has been a big trend for females to get better educated than males in the last decade, including far greater higher education participation (two-thirds of graduates are females, and most degrees allow you to get into the middle class). Thus the male figures may be biased as they may be far less mobile than females.

  22. “Over the past 40 years or so, real median US household income has risen by about 30 per cent.”

    Say for instance, A constant median over time where the population at each point in time differs, says nothing about how well or poorly any individual households in the original population did over that whole period.For example, income between time A and time B may have increased for households at time A. But at time B new households had enetered the market beneath the median. Increased immigration and more people entering the labour market as new workers can cause the median to stay constant even as most households see real income increases. So how useful is the “real median US houshold income” data ?

    “but real US GDP per person has more than doubled. How can this be ?”

    GDP, looks at the value of final goods and services produced during a time interval.This is based on the view that what drives and economy is not production of wealth but rather consumption.ie. consumer demand causes economic growth. The supply of goods is taken for granted where as in real life they have a cost that may be desired but not possible. The GDP does not take that into account.

    So the GDP can’t tell us if the final goods and services produced during a particular period of time are a reflection of real wealth or reflection of capital consumption.

    My view is that US citizens are poorer now than in the 70’s and 80’s.

    The official US census suggest the average US citizen income is increasing after “ADJUSTING FOR INFLATION”. The problem is that adjusting for inflation using CPI understates the true inflation rate. It would be better to use the Federal reserves M2 statistics instead of CPI. M2 reflects “money supply” ( wikipedia “Money Supply”). Change in Money supply is an important instrument that affects inflation.

    Using Median Household income with no inflation adjustment and the M2, and calculating these ratios in two different time periods (and adjusting for households growth) you will find that for example between 1980 and 2005 household income was 85% of what it was in 1980

    So US citizens at a minimum have lost 15% from there pay cheques in 25 years (I suspect a lot more however). This is a more important issue than beating up corporations and wealthy people and highlights our governments poor and/ or dishonest management of our economies

  23. I think that there are 2 main forces at work here. The first is the extended computer driven automation of industry. Todays machines are massive, expensive, and multi-multi functional. Production cells typically cost 6 million dollars and employ 1 or 2 people. This standard of automation produces huge quantities of product that are the underpining of our standard of living, but at the same time channel revenue vertically.

    The second force is the progressive consumption of big business by institutions, which are supposedly amortising future funding for the shareholders/superannuitants. But I suspect, without having much knowledge of the effects of this kind of structure, bleed capital out of circulation rather than disburse it.

  24. It looks as though John’s crowdsourcing has worked, given that Peter Schaeffer at 20 has provided a plausible reason for the disrepancy.
    But I’m wondering why it worked. Peter Schaeffer hasn’t posted on this site before. How did he find out the question was out there?
    Can you enlighten us Peter?

  25. jquiggin you have made comments on the divergence between quintiles based on the naive graph posted. There is no evidence of any significant divergence on the data you have displayed if an appropriate semi log scale is used?

    That still doesn’t explain the conundrum but hey …..

  26. Hi John,

    It looks like the GDP per person link that you put up for this post refers to nominal GDP per person, not real GDP per person. Also, you need to watch out for the inflation index that’s used on a particular data series (GDP deflator, CPI Index, PPI Index, etc.).

    First, real GDP uses a price deflator (I believe this is true but I might be wrong). So, instead of using the price deflator, I calculated real GDP using the CPI Price Index. With this measure, real GDP per person only grew 76% from 1967 to 2007, not 200%. I believe that CPI is also the same measure used to add inflation effects back into household income data. Thus, using the CPI index puts the two measures on equal footing.

    Secondly, if you factor in the decrease in household size from 3.3 to 2.57 over the last 40 years – voila – you get the 38% change in household income that you’re looking for.


  27. Trying to eyeball the above graph on (absent)percentages it would appear that the anomalous result is the light blue third one up … slack growth on that quintile where the bulk of workers are. Maybe not surprising given this is where globalisation should show up?

  28. Does Shaeffer’s figuring (way over my pay grade) account for a quarter of the US workforce earning less than the minimum wage of 1968 as of June last year (before the first meager incremental increase) — double the average income later?

    Does it account for the same gap between median income and per capita (average) output not opening up in Europe (where labor is not asleep at the bargaining wheel: sector-wide labor agreements and all that kind of thing)?

    PS. For whatever it might mean to the figures: the Census inflation (CPI-U-RS — used exclusively it seems by the Census) yields lower inflation and higher growth than the BLS inflation (CPI-U — which almost everyone else follows). And again, since households can have only one person, a better look a distribution spread might be the family survey.

  29. Shaeffer’s numbers suggest that median income did not really go anywhere (I think that is what he means). I think that may be safely disputed by showing that median income share very clearly did go somewhere: downhill with the rest of 90 percentile earners.

    First, Census table shows per capita income (comparing apples to apples now) doubled from 1967 through 2007).

    Census mean family income quintiles table show:
    5th quintile mean grew 22.4% over that span;
    4th grew 31.4%;
    3rd mean (effectively median) grew 47.3%;
    2nd grew 64.6%;
    1st (w/o adjusting for top coding) grew 95.8%.

    If you play my little top coding adjustment game using per capita income for your overall growth gauge — as described above:
    1st quintile income grew 175.4%. (I mis-remembered above that my adjustment doubles top quintile income — rather it approaches doubling income growth.)

  30. Conrad, we are talking at cross-purposes. I was stating that income mobility in the US is
    (1) Lower than in other OECD countries
    (2) Lower than in the US a century ago, last time inequality was so great.
    Your graph shows constancy for men 1977-2000, which I don’t dispute.

    As regards women, the old view (in the 50s when this literature started) was that women’s income and social status were determined by that of their husband. Hence, it was said “women’s social mobility represents the correlation between men’s status and that of their fathers-in-law”.

    That’s no longer true of course, but it’s still true that men earn the larger share of household income, so women’s family income is greatly affected by their marital position.

  31. I attended a presentation on the distribution of gains from the “New Zealand Economic Miracle”.

    One of the observations in this seminar was that the increasing prevalence of salary packaging made comparing the gains of different income groups difficult.

    We know for example, that share allocations were common during the dot-com boom and were not limited to the “top 1 per cent”. Other employee benefits (paternity leave, health lower-level employees. Would these have been counted as household income, or corporate expenses?

    While such trends would not address the issue of trends for the poorest, it could help explain the overall gap. It could also suggests that gains are more widely spread than just the richest of the rich.

  32. “A lot of income is flowing to the corporate sector and never being recorded as household income, perhaps because it is distributed in the form of capital gains, which aren’t counted.”
    Probably true, but another way in which income and GDP can diverge is via the growth of the public sector, coupled with the interminable vagaries of accurately measuring household income.

    Let’s look at a couple of obvious examples. Take my widower aged pensioner father. He’s a freehold homeowner, with a modest bank account and a share portfolio paying fully franked dividends. Not enough to affect earning a full pension under the assets and income tests. Now an income survey would probably pick up the full pension, perhaps some bank interest and perhaps some dividends, providing he remembers to tell the interviewer about the latter at 88 now. Even if he does, they might miss me claiming back those franking credits for him at the end of the fin year. They’ll also likely miss the $500 one off, gratis payment from the Govt. That payment, accompanied by a letter from the Rt Hon Soc Sec Minister and his local Senator has already been administered by the public sector and all the resourcing fully accounted for in GDP. Where was his income in that? Unlike me, he then gets drivers licence,rego, gas, electricity, water and council rates discounts. All ultimately measured by GDP, including all the admin costs, yet nary a cent measured as income no doubt. Ditto his PBS medications, doctors bills, public transport subsidy, etc. Actually he had to stop driving this year and so no licence or rego discount but now he gets Taxi Subsidy vouchers, the income depending on useage. Then there’s the GDP District nurse every morning to see he doesn’t forget his medication, and the cleaning/home help to see he doesn’t clog up the Aged Care waiting lists. Five visits a week via two separate, Govt funded agencies at a pittance contribution to their real GDP costs. Some other mob took care of the grab rails and bed rails, etc previously note.

    Now the ABS collector knocks on my door wracking up her contribution to GDP and that ABS back office GDP to boot. The self-employed Observa rattles off his estimate of income, MrsO her fortnightly teacher’s pay and MsO her Austudy. Of course the self-employed O would never dream of muddling up private vs business expenses, nor taking any undisclosed cash for services rendered, let alone use any company assets for private purposes. Perish the thought! Should MsO net off Hecs from her Austudy and add on some of that GDP from that fine, venerable institution she attends? What about the $9500 in GDP from the Govt the O’s household got in subsidies for their solar power plant this year. Switching to Truenergy will gain 64c/kwhr in unmeasured income that will be GDP when passed on by Truenergy no doubt. On and on it goes as the Govt shuffles GDP and household income around in endless circles until the collected statistics become meaningless due to that old adage- Garbage in garbage out! Just like the data I supplied for the business censuses and surveys I’ve copped in the past.

  33. Oh I nearly forgot to impute my share of income from looking up the Grocery Watch website once. Wonder how much GDP that little lot cost? Can’t wait for my pay from Fuel Watch and the lad will no doubt be hanging out for that Home Savings account boost to his household income, assuming the Govt can get any financial institutions interested in the GDP side of things.

  34. “So US citizens at a minimum have lost 15% from there pay cheques in 25 years (I suspect a lot more however). This is a more important issue than beating up corporations and wealthy people and highlights our governments poor and/ or dishonest management of our economies”

    I suspect a simple comparison of house ownership rates and market penetration of various household appliances would tend to refute this.

  35. It looks like we can bring this story home to Australia. The Australian today has an article “income dropped say most earners” http://www.theaustralian.news.com.au/story/0,25197,24345929-601,00.html
    about a report from the Melbourne Institute for Applied Economic and Social Research that includes;
    From 2001-2005 the national economy grew about 10%, GDP per capita grew about 7% but only 58% of Australians recorded an income gain and the median gain was 5.2%.
    25-54 year old couples recorded the highest gains – 72.4% had income gains with a median of 13.4%.
    It was not the case that income increases were concentrated among the rich.

  36. Re Australia: A couple of years ago I compared a National Accounts measure of average household incomes with the various measures of median household income shown in the ABS income surveys. The National Accounts measure started from the NA measure of household gross income, subtracted a few items not included in household surveys (most importantly income of superannuation funds), adjusted for household size and deflated by the CPI.

    After these adjustments, the growth over the 1993-94 to 2002-03 period was slightly less for the NA mean (1.3%pa) vs the income survey median (1.5%pa). I didn’t compare against GDP.

    [Details in Saunders and Bradbury, Economic Record, September 2006, Fig 4]

  37. Anecdotally it’s easy to show measuring income is extremely problematic and for confirmation of that you only need to speak to the ATO. That said, there are enormous lies, damned lies and statistics being bandied about everywhere at the moment, to hide the awful truth. Mogambo takes up the story, in his inimitable style-

    Fixated as I am on inflation in prices because it scares The Living Hell (TLH) out of me, I was drawn to how Peter Schiff of Euro Pacific Capital was amused that the government and its minions have reported that “the GDP deflator, used in the report to downwardly adjust GDP to account for inflation, was shown at just 1.2% annualized … the lowest deflator in 10 years”, while at the same time “the latest reading on consumer prices (CPI) in the second quarter shows year-on-year inflation running at a 5.6% rate, a seventeen-year high!”

    He asks, without the slightest hint of the venomous sarcasm you would expect, “How can it be that inflation is simultaneously running at a 17-year high and a 10-year low? Welcome to the Alice in Wonderland world of government statistics.”

    But this obvious fraud and bold-faced lying does not lead me to, as you would think, a Predictable Mogambo Screeching (PMS), which unfortunately has the same acronym as Pre-Menstrual Syndrome.

    And while both PMSs have a lot of features in common, the main difference is that when I get in your face, bellowing in a loud, arrogant, irritated and irritating rant about what an idiot you are, it is only because you are not buying more gold and silver, on your way to buying more gold and silver, or just getting home after going out and buying more gold and silver.

    I note that Peter Schiff does not ascribe to the Mogambo-Scream-Loudly-Until-People-Do-What-You-Want Theory (MSLPDWYWT), probably because it has never actually worked or perhaps because he never heard of it since I just made it up, but he was intrigued that there was no response in the news media to this startling paradox about how inflation could simultaneously be at a 17-year high and a 10-year low.

    Well, the answer was that they didn’t know. And so he tried to inform them. The results were more dismal than you would think, and “Although none of the reporters we spoke with could explain why inflation could run at a 10-year low and a 17-year high at the same time, they did not deem the anomaly sufficiently noteworthy. Having been ignored by reporters, I then tried the opinion pages. Unfortunately the piece that we prepared on the subject was rejected this week by all the leading national newspapers.”

    After all these years, I have very little respect left for the various media and their execrable “journalism”, especially now that they are predictably leftist morons who are always proponents for more and more government programs and government spending, which costs so much money that so much money was created that it has now led to inflation in consumer prices being at a 17-year high, almost matched and usually exceeded everywhere in the world, too, which is beyond terrible, and true American patriots should rise up in open rebellion against the federal government and the Federal Reserve, making it easy for me to take over and begin the long-awaited Mogambo Reign Of Terror (MROT).

    Mr Schiff is not going to be drawn into a senseless fantasy about some stupid Utopian MROT, and says that the important point is that investors don’t get the real facts, and “reacting to the global economic slowdown by buying dollars and other US-based assets while selling gold, commodities, and foreign assets, are jumping out of the frying pan right into the fire. My guess is that it will not be much longer before they feel the heat.”

    Well he was right now that Wall Street has fallen 7% in the last 3 days and yesterday spot gold jumped $70US or 9% in a day, the largest one day rise in 9 years. Fiat money creation and all those who sail with it are about to meet their dreaded nemesis is my guess now.

  38. Coem back to this topic a bit because a new thought occurred to me: if capital investment is growing faster than GDP then shouldn’t returns to capital be going up as a proportion of GDP?

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