9 ms·

How is "all time high" income surprising, given that inflation essentially guarantees perpetually increasing dollar amounts of everything?

baron816 9y ago
> The U.S. Census Bureau announced today that real median household income Real means the numbers are adjusted for inflation.
learc83 9y ago
Looks like they are adjusting for inflation. I didn't have time to dig to deep but they are reporting real income, which should be inflation adjusted.
jdavis703 9y ago
The increase is measured in "real terms" which means things like CPI are taken in to account. Further this number does decrease, for example during the last recession, so household median income is not directly correlated with inflation -- especially in this era of low inflation (compared to the mid-to-late 20th century inflation) that we've been in for a while.
- electrograv 9y ago
  Thanks for the explanation! For a layperson like myself in this field, this was not immediately obvious from the qualifier "real".
  - jdavis703 9y ago
    I'm also a layperson, so if a real economist posts something contradictory you'll probably want to listen to them. Of course economists are always contradicting each other so YMMV.
    - graeme 9y ago
      I majored in econ in undergrad, and you’re correct.
    - mcguire 9y ago
      Note: "real" in this comment does not refer to a post-inflation correction economist.
    - guest 9y ago
      I'm not a layperson but neither am I working in the field. You should always differentiate between a national economist (Keynes - spend when you are in recession, stockpile in progression - gives a stable rise) and the corporate stooges (Friedman et al - always spend forever in debt - gives erradic ups and down which enables aristocracy to contain power by having better access to information).
  - astura 9y ago
    Here's the Wikipedia: https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco...
- alexasmyths 9y ago
  " which means things like CPI are taken in to account." Yes - but we should all be weary of this. CPI is measured in funky ways, and it's tough one. Problems with measures: + Both housing and Oil prices are usually left out of the numbers they use (included in others). There are reasons for doing this, but it's bazonkers crazy to think of 'consumer prices' as not including their #1 item (housing) and a huge variable cost that consumers pay for directly (gas) but also that goes into everything (airline tickets, transport of stuff, taxi, etc. etc..) And of course the hardest thing to measure is the real value increase of a product ... i.e. a tomato that is bigger, redder, juicier, healthier - is worth more than one that is not. So - if prices for tomatoes stay flat - but - their value has actually increased, well, that's deflation. That intangible is super hard to measure and quantify. It's the later issue that is at the heart of so many economic arguments: some say we are 'poorer than ever' - and yet, every single bit of material consumable is way better than it ever was. The crappiest Peugot today drives better than the #1 Mercedes from 1985 ...
  - dragonwriter 9y ago
    > Yes - but we should all be weary of this. From context, I suspect, though I'm not certain, that you mean “wary” (cautious), not “weary” (tired).
    - mcguire 9y ago
      Possibly both.
    - alexasmyths 9y ago
      Meant 'wary' - thanks.
  - lotharbot 9y ago
    "core" CPI includes housing. This is funky for another reason: people don't live in similar housing to what people lived in in the past. If you look at census data (American Housing Survey) from 40-50 years ago, you find the average American home was under 1500 square feet, 2-3 bedrooms, 1-2 bathrooms, no AC, no laundry machines, and so on. In fact, the average American home in the 1970s was smaller and had less amenities than the average current American home for people below the poverty line. Any measure that just looks at the change in housing costs and doesn't adjust for the benefits of on-average larger homes with more amenities will end up overestimating that piece of monetary inflation (accidentally counting lifestyle inflation.) As you say, it's really hard to measure the "real value increase of a product", and that makes a lot of inflation measures... sketchy.
- thatcat 9y ago
  >(CPI) does decrease Does CPI decrease artificially based on subsidies to the indexed goods? For example with milk or any food with corn syrup, where the actual cost of production isn't reflected in the market price.
  - astura 9y ago
    The quote was "this number does decrease." "This number" refers to median income. Income tends to decrease in a recession.
    - thatcat 9y ago
      Thanks, I misunderstood.
- xiphias 9y ago
  The numbers would look more real with inflation statistics that are closer to reality: http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
forapurpose 9y ago
> How is "all time high" income surprising, given that inflation essentially guarantees perpetually increasing dollar amounts of everything? Even when measuring real dollars, it's not a surprise. The great majority of the time, the aggregate national income, measured by GDP, grows in the U.S. and in any other advanced economy. https://tradingeconomics.com/united-states/gdp-growth https://tradingeconomics.com/united-states/gdp-growth In the last 30 years, I count 11 quarters out of 120 when the GDP shrank.

baron816 9y ago

> The U.S. Census Bureau announced today that real median household income Real means the numbers are adjusted for inflation.

learc83 9y ago

Looks like they are adjusting for inflation. I didn't have time to dig to deep but they are reporting real income, which should be inflation adjusted.

jdavis703 9y ago

The increase is measured in "real terms" which means things like CPI are taken in to account. Further this number does decrease, for example during the last recession, so household median income is not directly correlated with inflation -- especially in this era of low inflation (compared to the mid-to-late 20th century inflation) that we've been in for a while.

electrograv 9y ago
Thanks for the explanation! For a layperson like myself in this field, this was not immediately obvious from the qualifier "real".
- jdavis703 9y ago
  I'm also a layperson, so if a real economist posts something contradictory you'll probably want to listen to them. Of course economists are always contradicting each other so YMMV.
  - graeme 9y ago
    I majored in econ in undergrad, and you’re correct.
  - mcguire 9y ago
    Note: "real" in this comment does not refer to a post-inflation correction economist.
  - guest 9y ago
    I'm not a layperson but neither am I working in the field. You should always differentiate between a national economist (Keynes - spend when you are in recession, stockpile in progression - gives a stable rise) and the corporate stooges (Friedman et al - always spend forever in debt - gives erradic ups and down which enables aristocracy to contain power by having better access to information).
- astura 9y ago
  Here's the Wikipedia: https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco...
alexasmyths 9y ago
" which means things like CPI are taken in to account." Yes - but we should all be weary of this. CPI is measured in funky ways, and it's tough one. Problems with measures: + Both housing and Oil prices are usually left out of the numbers they use (included in others). There are reasons for doing this, but it's bazonkers crazy to think of 'consumer prices' as not including their #1 item (housing) and a huge variable cost that consumers pay for directly (gas) but also that goes into everything (airline tickets, transport of stuff, taxi, etc. etc..) And of course the hardest thing to measure is the real value increase of a product ... i.e. a tomato that is bigger, redder, juicier, healthier - is worth more than one that is not. So - if prices for tomatoes stay flat - but - their value has actually increased, well, that's deflation. That intangible is super hard to measure and quantify. It's the later issue that is at the heart of so many economic arguments: some say we are 'poorer than ever' - and yet, every single bit of material consumable is way better than it ever was. The crappiest Peugot today drives better than the #1 Mercedes from 1985 ...
- dragonwriter 9y ago
  > Yes - but we should all be weary of this. From context, I suspect, though I'm not certain, that you mean “wary” (cautious), not “weary” (tired).
  - mcguire 9y ago
    Possibly both.
  - alexasmyths 9y ago
    Meant 'wary' - thanks.
- lotharbot 9y ago
  "core" CPI includes housing. This is funky for another reason: people don't live in similar housing to what people lived in in the past. If you look at census data (American Housing Survey) from 40-50 years ago, you find the average American home was under 1500 square feet, 2-3 bedrooms, 1-2 bathrooms, no AC, no laundry machines, and so on. In fact, the average American home in the 1970s was smaller and had less amenities than the average current American home for people below the poverty line. Any measure that just looks at the change in housing costs and doesn't adjust for the benefits of on-average larger homes with more amenities will end up overestimating that piece of monetary inflation (accidentally counting lifestyle inflation.) As you say, it's really hard to measure the "real value increase of a product", and that makes a lot of inflation measures... sketchy.
thatcat 9y ago
>(CPI) does decrease Does CPI decrease artificially based on subsidies to the indexed goods? For example with milk or any food with corn syrup, where the actual cost of production isn't reflected in the market price.
- astura 9y ago
  The quote was "this number does decrease." "This number" refers to median income. Income tends to decrease in a recession.
  - thatcat 9y ago
    Thanks, I misunderstood.
xiphias 9y ago
The numbers would look more real with inflation statistics that are closer to reality: http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts

forapurpose 9y ago

> How is "all time high" income surprising, given that inflation essentially guarantees perpetually increasing dollar amounts of everything? Even when measuring real dollars, it's not a surprise. The great majority of the time, the aggregate national income, measured by GDP, grows in the U.S. and in any other advanced economy. https://tradingeconomics.com/united-states/gdp-growth https://tradingeconomics.com/united-states/gdp-growth In the last 30 years, I count 11 quarters out of 120 when the GDP shrank.