Wage trends greatly determine how fast incomes at the middle and bottom grow, as well as the overall path of income inequality, as we argued in Raising America’s Pay. This is for the simple reason that most households, including those with low incomes, rely on labor earnings for the vast majority of their income. That is why my initial look at the data from the newly released Census Bureau report on income and, poverty in 2013 will look at wages and the incomes of working age households.

The Census data show that from 2012 to 2013, median household income for non-elderly households (those with a head of household younger than 65 years old) increased 0.4 percent from $58,186 to $58,448. However, that modest growth barely begins to offset the losses incurred during the Great Recession or the losses that prevailed in the prior business cycle from 2000 to 2007. Between 2007 and 2013, median household income for non-elderly households dropped from $63,527 to $58,448, a decline of $5,079, or 8.0 percent. Furthermore, the disappointing trends of the Great Recession and its aftermath come on the heels of the weak labor market from 2000-2007, where the median income of non-elderly households fell significantly, from $65,785 to $63,527, the first time in the post-war period that incomes failed to grow over a business cycle. Altogether, from 2000 to 2013, median income for non-elderly households fell from $65,785 to $58,448, a decline of $7,337, or 11.2 percent.

Stagnant wages over last ten years

The key driver of these income trends, besides lower employment and hours in the aftermath of the financial crisis, has been wage stagnation. In 2013, the median man working full-time, full-year experienced a slight decrease in real earnings of 0.2 percent, from $50,116 to $50,033. On the other hand, the median woman working full-time, full-year saw an increase of 2.1 percent, from $38,340 to $39,157. By these measures, real wages have failed to grow since 2007 for either men or women. Looking over a longer horizon, the trends are starkly disappointing. The median woman working full-time, full year saw her earnings grow from $29,688 in 1973 to $39,108 in 2002, and then stagnate in the 2002-2007 recovery and during the recession since 2007, reaching only $39,157 in 2013. Since 1973, the median man working full-time, full-year has seen no sustained growth, dropping from $52,421 in 1973 to $51,055 in 2002 and falling further over the 2002-07 recovery and the recession to $50,033 in 2013. 

To get household incomes rising we will need to get real wages of the typical man and woman to rise, something that we haven’t seen for more than a decade.