Middle-class incomes have biggest year to year rise – with a catch

New data suggests middle-class incomes rose in 2015:

The incomes of typical Americans rose in 2015 by 5.2 percent, the first significant boost to middle-class pay since the end of the Great Recession and the fastest increase ever recorded by the federal government, the Census Bureau reported Tuesday.

In addition, the poverty rate fell by 1.2 percentage points, the steepest decline since 1968. There were 43.1 million Americans in poverty on the year, 3.5 million fewer than in 2014…

The 5.2 percent increase was the largest, in percentage terms, ever recorded by the bureau since it began tracking median income statistics in the 1960s. Bureau officials said it was not statistically distinguishable from five other previous increases in the data, most recently the 3.7 percent jump from 1997 to 1998.

Rising incomes are generally good. But, note the catch in the third paragraph cited above: officials cannot say that the 5.2% increase is definitively higher than several previous increases. Why not? The 5.2% figure is based on a sample that has a margin of error of at least 1.5% either way. The data comes from these Census instruments:

The Current Population Survey Annual Social and Economic Supplement was conducted nationwide and collected information about income and health insurance coverage during the 2015 calendar year. The Current Population Survey, sponsored jointly by the U.S. Census Bureau and U.S. Bureau of Labor Statistics, is conducted every month and is the primary source of labor force statistics for the U.S. population; it is used to calculate the monthly unemployment rate estimates. Supplements are added in most months; the Annual Social and Economic Supplement questionnaire is designed to give annual, national estimates of income, poverty and health insurance numbers and rates.

According to the report (page 6), the margin of error for the percent change in income from 2014 to 2015 is 1.6%. Incomes may have risen even more than 5.2%! Or, they may have risen at lower rates. See the methodological document regarding the survey instruments here.

The Census has in recent years moved to more frequent reports on key demographic measures. This produces data more frequently. One of the trade-offs, however, is that these estimates are not as accurate as the dicennial census which requires a lot more resources to conduct and is more thorough.

A final note: it is good that the margin of error is hinted at in the article on rising middle-class incomes. On the other hand, it is mentioned in paragraph 12 and the headline clearly suggests that this was a record year. Statistically speaking, this may or may not be the case.

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