Random Musings (with some policy)

A couple of short observations:

- In the past week, I learned the following via USA Today:

"After eight lean years, Americans finally got fatter paychecks in 2015 — their first significant hike since 2007 and the biggest since record keeping began in 1968. The U.S. median household income rose 5.2% to $56,516, the U.S. Census Bureau reported Tuesday."

Obviously, folks making more money is a sign of greater economic vitality. However, thinking that such results validates economic policies, domestically or internationally derived, would be an interesting discussion point that I am skeptical in believing. Take what was brought up later in that article:

"However, the income of the typical U.S. home still hasn't managed to rise above where it was before the last recession. In 2007, median household income — the point at which half would make more, while the other half would make less — was $57,423, adjusted for inflation. And incomes peaked in 1999 at $57,909, also adjusted for inflation, the bureau says in its report, "Income and Poverty in the United States: 2015. "

So according the Census, real incomes (i.e. incomes adjusted for inflation) have decreased over the last 8 years. So on the median, (not the average) households are making less income than they did 8 years ago. This suggest the economy has been not been great for the middle class over the last decade. A healthy middle generally is seen as a sign of a mature and stable economy.

So the question for me is "why" median incomes are decreasing. Upon some initial analysis, I've come up with two main observations of why this could be: (1) Smaller households; (2) stagnant wage growth; and (3) folks working less. Let's address these one by one:
Smaller households

Smaller households generally create greater downward pressure on wages since that means there are more units of measurement and more workers are earning at lower wage levels than higher wage levels.  Take this trend chart of the growth of one-person households over time:

In short, there are notably more one-person households than even at the beginning of the century and it continues to be a higher proportion of total households.  Hence since there are more workers at lower wage levels than higher ones, it would follow that wages would trend down.

Stagnant Wages

When I talk about stagnant wages, I am talking about real wages (inflation-adjusted). Take this chart of actual wages and real wages (i.e. purchasing power) over time.

So in short, folks are not improving their standard of living on average.  As you can see, this has been an issue for decades, but really illuminates itself when median households are declining.

Folks Working Less

The logic here is simple: working less means less earnings.  So taking that into account, look at the relationship between median household income and average hours worked over time (data from the Bureau of Labor Statistics):

Quite the strong correlation, isn't it? The stability of these figures is very consistent. Average hours worked per week stays within a fairly tight range, but we're currently working notably fewer hours now than we were 10 years ago, and that makes a difference in how much income one is earning.

We certainly could have extensive policy discussions on how this could be addressed and the causes of these trends.  However, I'm just pointing out some flash points to initially examine when looking at this societal issue.

- I learned this week that the IPhone 7 has been released.  I'm an IPhone 6 user and generally have been pleased with the product.  Well, when the IPhone 7 came out I was asked if I wanted to pay the hundreds of dollars to upgrade.  Well, when I looked into it I found the following review that sums up my thoughts:

I have to say, while having a water resistant phone is nice to have, it doesn't provide as strong as a compelling case to actually buy one.  Also, I like to plug in my phone into my auxiliary outlet in my car to play my Bible readings and podcasts, the IPhone 7 eliminated that option.  So I really don't think I'll purchase one.

Till next time.