Why We Keep Getting Poorer: High-Cost Housing
by ilene - February 5th, 2010 8:52 pm
Why We Keep Getting Poorer: High-Cost Housing
Courtesy of Charles Hugh Smith Of Two Minds
The reason why we’re poorer: more of our income goes to housing than it did 35 years ago.
Simply put: housing costs have far outpaced household incomes over the past 35 years, making the high cost of housing the primary driver of declining discretionary income: what’s left after paying taxes and housing.
You might want to refill your coffee or tea cup because we have to slog through some potentially confusing numbers to root out the truth.
There is information in the difference between median income and mean/average income.
Median is the number at the 50% line, e.g. first half of households earning less than the median household income and the other half earning more. (wikipedia on median/mean)
Mean income (average) is the amount obtained by dividing the total aggregate income of U.S. households by the number of households.
Consider that the median income of U.S. households in 2008 was $50,303 while the average income was $68,424. (Source: U.S. Census Bureau Table H-6. You have to download the h06AR Excel file to obtain 2008 data.)
Why the big difference? The higher income households earn a much greater income that the lower 4/5 of households. That preponderance of income in the top 5% and top 20% causes the average income to be much higher than the median.
We need to ask not just much more do higher-income households earn that middle-income households, but how much has each group’s income risen in the past 35 years? In other words: has income risen equally across all incomes, or has it risen more in one group or another?
The Census Bureau divides the households into quintiles--20% each, with a special category for the top 5%. (income by quintile.)
The numbers are remarkable. I am not making a judgment here, i.e. that incomes "should be" different from these facts; we all know wages for low-skill jobs have stagnated while high-pay, low-skill factory positions have declined due to global wage arbitrage and broad post-industrial trends.
Nonetheless, it is clear that the vast majority of income increases have accrued to the top 20% and top 5%. Here are the numbers, adjusted into 2001 dollars (data ends at 2001):
Bottom 20%
1975: $12,664
2001:…