13 September 2017

Americans Were Making About $500 a Month More in 2016 than in 2014 (And How Income Growth Changes Voting)

Yesterday the Census Bureau released new data on household income from 2016. There are a variety of interesting things to come out of that and one really interesting thing about how changes in income change how Americans vote. First some data.

Incomes grew at an impressive rate. Earlier in the recovery, while unemployment remained high, income growth was slow. It has been a spectacular recovery. For 83 uninterrupted months now, the economy has created a jobs. A total of 16.4 million. But the economy started from a 10% unemployment rate. As the economy continued to create jobs, detractors continued to say, "Yeah, but wage growth ..." Well when you have 8 million people still standing out in the hallway hoping for a job, there is not much pressure to raise wages. Later in the recovery, as unemployment dropped below 5%, companies had to start offering higher wages. And they have.

Across all households, median income rose 3.2% to $59,039 and average income was up 3.6% to $83,143. Since 2014, average income is up $6,360. Think about that. That work out to $530 a month in extra income. (Median income is up nearly $400 a month.) This strikes me as a big deal. Car payments, an annual vacation, eating out, paying down debt .... $400 to $500 a month extra income makes a very real difference. This is simply great news and actually unsurprising. For years I've been predicting that the first half of the 2010s would be about lowering unemployment and the second half would be about raising wages.

One other bit of great news is that we're narrowing the gap between white men and women and minorities. Everyone's income grew but the incomes of women and minorities grew at an even faster pace. Median income for all households grew 3.2% but for Hispanics it rose 4.3%, for blacks it rose 5.7% and most impressive of all, for households headed by single women, it rose 7.2%. (For those of you alarmed at an erosion of white male privilege, rest assured that while incomes of white households rose at a lower rate - 2% - it is still higher than other groups.)

In all, this income report is great news. It also suggests the possibility that income growth can predict who Americans vote for.

The data reported goes back to 1967 and I used it to analyze how changes in income change how Americans vote. Since 1967, four Republican and three Democratic presidents have taken over from the previous party. (In 1968, 1980, 2000, and 2016 Nixon, Reagan, Bush and Trump took over from Democrats and in 1976, 1992, and 2008 Carter, Clinton, and Obama took over from Republicans.)

On average, Democrats inherit a worse economy than Republicans. The three Democrats were elected in years when median income was falling an average of nearly 1%. The four Republicans were elected in years when median income was rising by 1%. A difference of 2% is a pretty big deal.

What I make that mean is that whether households are more or less inclined to vote for someone who promises a safety net depends on whether they are feeling good about their income or threatened. When incomes are shrinking, Americans are seemingly more aware of the need for government help; when incomes are growing they are less aware. Good times are bad news for politicians who promise to help you through bad times and good news for politicians who tell you that people don't need much help. If that's right, it might not have been economic woes that caused people to pull the trigger on Trump but instead people who were feeling more secure because of higher incomes.

No comments: