Tag Archives: income

Median income falls in the 2000s, poverty rate up

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Recently released figures from the Census Bureau show troubling news with two oft-cited measures of income:

The bureau’s annual snapshot of American living standards also found that the fraction of Americans living in poverty rose sharply to 14.3% from 13.2% in 2008—the highest since 1994. Some 43.6 million Americans were living below the official poverty threshold, but the measure doesn’t fully capture the panoply of government antipoverty measures.

The inflation-adjusted income of the median household—smack in the middle of the populace—fell 4.8% between 2000 and 2009, even worse than the 1970s, when median income rose 1.9% despite high unemployment and inflation. Between 2007 and 2009, incomes fell 4.2%.

While the poverty figures have drawn a lot of media attention, they are now at 1994 levels (also around the time of a recession). It is not good news that the poverty rate is up but this isn’t catastrophic compared to recent historical figures.

Perhaps more troubling is the decrease in the median income over the course of an entire decade. This suggests that the economic problems aren’t just limited to those at the bottom of the economic ladder; it is affecting many more Americans who saw no real income growth over a ten year stretch. Figures like these are also used by some as evidence of the growing income gap in America.

Untangling the effects of income on happiness

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Examining the relationship between income and happiness can be tricky. A recent research study, conducted by two Princeton researchers and summarized by LiveScience, is illustrative of some of the issues in this research field:

-The researchers were working with a large dataset that is built around a daily survey of Americans: “they analyzed more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 U.S. residents conducted by the Gallup Organization.”

-Changes in income were measured in terms of percentages rather than absolute numbers. This was done to reflect the fact that a percentage change in income would be better for comparisons across income types. As the researchers note: ““In the context of income, a $100 raise does not have the same significance for a financial services executive as for an individual earning the minimum wage, but a doubling of their respective incomes might have a similar impact on both.”

-Survey respondents answered questions related to two measures of happiness: overall life satisfaction and what their emotions were the day before. According to the LiveScience article: “For life evaluation, participants indicated on a scale from zero to 10, from worst to best possible, how they would rate their lives. For emotional well-being, participants answered yes/no questions about whether they had experienced various positive and negative emotions a lot during the prior day.” Having both of these dimensions is critical as a general question about happiness might be interpreted differently (do the reseachers mean happy right now or overall?) by respondents.

-Some of the findings: having a “Low income seemed to magnify the emotional pain of life’s misfortunes, including divorce, illness and loneliness.” However, there was a tipping point of $75,000 where having more money didn’t help improve one’s well-being:

The researchers suggest that making anything more than $75,000 no longer improves a person’s ability to spend time with friends, avoid pain and disease and enjoy leisure time – all factors involved in emotional well-being.

“It also is likely that when income rises beyond this value, the increased ability to purchase positive experiences is balanced, on average, by some negative effects,” they write. For instance, a past study revealed a link between high income and a reduced ability to savor small pleasures, the researchers noted.

This tipping point of $75,000 is above the median income in the United States. I would be curious to know if individuals feel this tipping point when their income does rise to this level – are they cognizant of this point? Or once they reach $75,000, are they still locked into a mindset that having more money will lead to increasing levels of well-being?

Also, this $75,000 point could be quite fluid. Over time, this point would change based on economic conditions and cultural understandings of what is a “good income.”

If concussions are costly, why still play football?

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At various levels, football organizations seem to be taking concussions more seriously. The effects on players, particularly long-term effects due to repeated incidents, can be devastating.

In an article from the Kansas City Star, a doctor asks a sociological question that I haven’t heard raised within this debate over concussions and what can be done:

“Why would people still play football?” says Bennet Omalu, a neuropathologist and co-founder of the institute. “But I must warn you: That is a sociological question.”

This is a great point – is there anyone seriously advocating football is too dangerous for players? If the risks are high for players, should they turn away from football? For players, what makes the risk worth the potential rewards?

The article suggests several reasons for continuing to play such as potential fame, income, and the thrill of playing. But outside of the thrill of playing (which might be quenched elsewhere), these are cultural reasons; these are things endowed upon football players by millions of adoring fans. If the fame and money weren’t there, how many would still play knowing the risks?

Military towns benefit from increased compensation

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USA Today reports “16 of the 20 metro areas rising the fastest in the per-capita income rankings since 2000 had military bases or one nearby.” Compensation packages have increased since 2000: “Soldiers, sailors and Marines received average compensation of $122,263 per person in 2009, up from $58,545 in 2000.”

While places with nearby military bases benefited from these changes, USA Today also found some losers in per-capita income over the past decade. These include high-tech centers, college towns, and industrial cities.

Deciding who is really rich

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As the American government considers changes to the tax brackets, James Surowiecki of the New Yorker says this involves an important question: how much money does one have to make to be rich?

While the administration has suggested being rich starts at $200,000 income per year, Surowiecki describes why it is not so simple:

Judging from surveys of how Americans describe themselves, most of the privileged don’t feel all that privileged. Why is that? One reason is the American mythology of middle-classness. Another is geography: in a place like Manhattan, where the average apartment sells for nine hundred thousand dollars, your money doesn’t go as far. And then there’s a larger truth about how wealth is getting concentrated in this country. As the economists Thomas Piketty and Emmanuel Saez have documented, people who earn a few hundred thousand dollars a year have done much worse than people at the very top of the ladder.

Indeed, wealth and income is often relative: if you made $150,000 a year but lived in a neighborhood and mainly associated with people who made around $1,000,000 a year, you might feel poor. The same concept is used to describe various levels of poverty: the relative poverty of the United States versus the absolute poverty experienced in Third World nations. Americans are notorious for feeling like they are middle-class, even if they clearly are not.

At the same time, I find it slightly difficult to believe that $200,000 doesn’t make one rich. Of course, one has choices about how to spend that money. Making $200,000 in Manhattan is not the same as the making that money in Nebraska. However, it should cover all of one’s expenses. Those making over $200,000 are still part of a small and elite group: according to the Census Bureau, in 2006 3.5% of American households made over $200,000 a year.

Surowiecki suggests the solution is to create separate tax brackets for the rich and “super-rich.” If the tax rates are changed, this seems reasonable to me – though it complicates the tax code.

The links between money and happiness

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There is a lot of research exploring the links between income/having money and happiness. The New York Times discusses some of this research and how the recession might be pushing people to find satisfaction in things other than money.

With those who have cut back in spending or are legitimately downsizing (moving into a smaller home or giving up a car vs. giving up cable for a while), it remains to be seen whether such behavior will continue when economic times are better.

Inequality due to credit card fees

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A study from the Federal Reserve Bank of Boston argues that credit card reward programs contribute to income inequality. According to the Yahoo story:

Merchants usually don’t charge different prices for card users to recover the costs of fees and rewards, but instead, mark up the prices for all consumers.

As a result, people who pay cash — and who are more likely to be lower income — end up subsidizing those who pay by credit card…

After accounting for rewards paid by banks, households who earn more than $150,000 annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.

On one hand, this seems fairly obvious: those with more money to spend will use credit cards in order to earn more rewards. On the other hand, the impact on prices of the fees on business owners pay to the credit card companies is generally hidden.

Perhaps more places could offer discounts for people who pay in cash? The only time I have encountered this on a large scale is at gas stations in New Jersey.

Show about upper income workers draws upper income watchers

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Season Four of Mad Men kicked off this past weekend. Ratings were good (2.92 million viewers) and the show attracted a large proportion of wealthy viewers. Mediaweek reports:

If Mad Men’s numbers can’t compete with high performing cable fare like TNT’s The Closer and Rizzoli & Isles––both of which are averaging around 7.4 million viewers through two episodes each––or USA’s Burn Notice (5.67 million) and Royal Pains (5.46 million), the show does attract a disproportionate spread of high-income supporters. Per Nielsen, approximately 48 percent of Mad Men’s audience is comprised of people who boast annual household income of $100,000 or more.

While it’s not a perfect comparison, USA’s entire suite of original series draws nearly a third (32 percent) of its deliveries from viewers in the 18-49 demo with annual incomes of $100,000 and up.

After seeing this report, I would be curious to see the income figures for other popular television shows. Compared to many television dramas and comedies which seem to aim for a broader audience and so often include more average families and workplaces, Mad Men presents a more upper-class setting. I would assume there are splits between social classes in regards to what television shows are popular.

Even if Mad Men does present compelling and worthy story lines examining the complicated world of the 1960s (and critics do seem to like it), is it just making a presentation for mainly upper class viewers? At the same time, the show also presents an image of “the good life” (and the downsides of it) which could appeal to many.

I’m guessing these income figures appeal to advertisers.

(Full disclosure: I have only seen a few minutes of the show though I have read several appraisals by critics.)