Median Household Income Down Last 15 Years – Why?


Median Household Income Down Last 15 Years – Why? by Gary D. Halbert

by Gary D. Halbert

November 25, 2014


1.  Median Household Income Down Since 1999

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2.  Composition of US Households is Changing Rapidly

3.  “No Earner” Households to Increase Significantly

4.  Census Bureau: Marriage Rate at 93-Year Low

5.  “Marriage Is Pro-Growth” by Larry Kudlow

6.  Our Next WEBINAR on December 4 at 2:00 EST

Median Household Income Down Since 1999

One of the most puzzling questions in economics today is why did median household income peak in 1999 and has yet to recover? Most analysts cite the fact that we had two serious recessions in the space of a decade, including the financial crisis of 2008-2009.

While the Great Recession ended in June 2009, real median household income (adjusted for inflation) remains well below the peak of around $57,000 in 1999 and has been below $52,000 in each of the last three years. The question is, why?

The standard answers, especially among progressives, are: 1) the sluggish economic recovery; 2) growing income inequality; 3) the failure to raise the minimum wage; 4) globalization and outsourcing; 5) corporate greed; and other variations of economic pessimism.

However, there are some other very obvious, but mostly overlooked, factors that can help explain why median household income has declined over the last 15 years that have nothing to do with economic stagnation. The fact is that there have been significant demographic changes in the composition of US households.

Economists Mark Perry and Alex Pollock, who also are contributors at the American Enterprise Institute, offered a very interesting analysis on median household income last week, and I will summarize their latest work for you today.

As you can see in the chart below, real median household income has declined since 1999 and has been fairly flat over the last three years. As we all know, the US population is aging and retirees as a share of the US adult population have risen from less than 15% (left scale) in 2007 to over 16.5% today. That number will continue to increase as more Baby Boomers retire.

Since retirees, generally speaking, have less income than their working brethren, that fact alone could drive median household income lower. But that’s only one part of the problem.

Median Household Income


Pollock frames the issue of falling household income as follows: