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So the news this week was that Median Income has gone up and everyone is super excited!  But should we really be excited?  Are people really doing better?  Are we really making more money these days?

Well, that depends on who you are.  http://www.npr.org/2016/09/18/493949725/a-nation-engaged-is-this-still-a-land-of-economic-opportunity  In reality, many people are still struggling to simply survive on wages from an inefficient minimum wage. Many are not seeing an increase in their income.  Many continue to live on wages that, due to inflation, have less purchasing power all the time.  Costs have increased across the board, notably for food, housing and health care.  Gas, of course, is at a real low of late, often less than $2/gallon.  Thanks, Obama!!  🙂

What you may not be hearing as clearly in the news as they talk about the Median Income Rise, is that Wages have not gone up at the same rate as the Income has reportedly increased.  Income has grown by 5% while Wages have increased by less than 3%.  https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/salary-budgets-2016.aspx This means that the real increase is due to two factors.

First, increased income is due to non-wage income.  If you are hearing this as “rich people earning more”, you’re onto something.  Most poor people don’t have a lot of investments so they aren’t making non-wage income.  The only income they have is from wages.  But rich people?  They make wages AND investment income (or some of the really rich don’t even have wages – they don’t need a job to make income!).  So we have a higher median income but it’s not because we’re really making more money from our jobs.  It’s because investment income has increased.

More importantly, the reason median income has risen is because people are working many more hours than they did previously.  At minimum wage, you cannot afford to live on a 40-hour paycheck, so this means you have to work more than the 40-hour week to secure an income that allows survival.  When you work 80 hours at minimum wage, your income goes up! So, yes, you have more money from your wages.  You don’t have much of a life outside of working, eating and sleeping, but hey, you can afford food AND gas and you may not have to move to a new apartment next month!

There was a good NPR story on this on the radio this past week but it was pretty confusing to hear the commentary on what the numbers meant.  The two women discussing it had a bit different comprehension to what I’ve captured above; they were much more upbeat about the numbers.  I know that each of us has a little different take on reality based on our own experiences and goals.  And I think it behooves us to hear from each other what experience we each have in regards to economics and daily financial survival.  I think it might surprise many wealthy and privileged people how expensive it can be to be poor.  If you want a good read on how many people live in poverty, and why they don’t seem to be able to escape it, try reading Hand to Mouth: Living in Bootstrap America by Linda Tirado.

Here are some other references for you…

money-to-bank-distribution

http://positivemoney.org/issues/inequality/  (From the UK but an excellent summary on how money is created and how the poor are being sucked of their funds to finance the rich.)

cbpp-income-inequality-2011

http://www.theatlantic.com/business/archive/2011/10/income-inequality-is-not-a-myth/247389/  (Excellent report on the “myth” of income inequality and how Technology, Trade, and Taxes play a part.)

Just keep in mind, while it may give you a warm, fuzzy feeling to hear that Median Income is rising, many people are still feeling left out in the cold.

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