Median household income in 2014 was unchanged from 2013, according to the latest release of Current Population Survey income data. This seemingly ho-hum finding is in fact interesting news, revealing how stuck we are in the economic backwash of the Great Recession. The $53,657 median household income of 2014 was not statistically different from the $54,462 median of 2013, the Census Bureau reports. This is the third consecutive year of no statistically significant change in median household income following two years of decline.
Because the Census Bureau changed the way it asks about income in the Current Population Survey, the 2014 numbers are not comparable with figures prior to 2013 (when respondents were split into two panels for comparative purposes, with one panel asked the new questions and the other the traditional questions). A comparison of 2013 data
from the two panels reveals how much better the new questions capture IRA and 401(k) withdrawals, boosting the 2013 estimate of median household income by 3.2 percent.
One factor that may be suppressing median household income is the aging of the population as millions of boomers retire and live on reduced incomes. But the Census Bureau reports no statistically significant change in median household income for any age group between 2013 and 2014. Here are the 2014 numbers…
Median household income by age in 2014
Under age 25: $34,605
Aged 25 to 34: $54,243
Aged 35 to 44: $66,693
Aged 45 to 54: $70,832
Aged 55 to 64: $60,580
Aged 65-plus: $36,895
Sluggish Household Growth 2014-15
The number of households in the United States grew by just 0.53 percent between 2014 and 2015–from 123.9 million to 124.6 million, according to the Census Bureau’s Current Population Survey
. A Demo Memo analysis shows that this is the fifth slowest rate of growth in more than five decades of keeping score. One factor behind the sluggish growth was the 4.2 percent decline in the number of households headed by the youngest adults. Here is the numerical (and percent) change in households by age of householder…
Change in households, 2014 to 2015 (numbers in 000s)
Total households: 656 ( 0.5%)
Under age 25: -282 (-4.2%)
Aged 25 to 34: 87 ( 0.4%)
Aged 35 to 44: -43 (-0.2%)
Aged 45 to 54: -98 (-0.4%)
Aged 55 to 64: 114 ( 0.5%)
Aged 65-plus: 877 ( 3.0%)
The decline in households headed by people aged 35 to 54 is due to the small Generation X moving into those age groups. The increase in households headed by people aged 55 or older is due to the large Baby-Boom generation in those age groups.
Fewer Millennials Live Independently
Young adults aged 25 to 34 are less likely to live independently than were their counterparts in 2007, according to an analysis of Current Population Survey data by Pew Research Center
. Pew defines independent living as heading one’s own household or living in a household headed by a spouse, unmarried partner, or other nonrelative.
The percentage of 25-to-34-year-olds who live independently is 86 percent among those with a bachelor’s degree, 79 percent among those with some college, and 75 percent among those with a high school diploma or less education. Regardless of education, the figures are lower in 2015 than in 2007.
Behind the decline in independent living is less money. Median weekly earnings for 25-to-34-year-olds in 2015 are below the 2007 level, after adjusting for inflation…
Median weekly earnings of 25-to-34-year-olds
Bachelor’s: $951 in 2015, still less than the $966 of 2007
Some college: $560 in 2015, well below the $640 of 2007
High school or less: $500 in 2015, below the $527 of 2007
What’s Holding Down Wages? Maybe The Lower Rate of Job-to-Job Transitions
Although the unemployment rate has fallen by nearly 5 percentage points since the Great Recession, wages have not grown much. One reason for sluggish wage growth, according to an analysis appearing in the Federal Reserve Bank of New York’s Liberty Street Economics blog
, is the low rate of job-to-job transitions–workers who leave one job and immediately take another without experiencing a spell of nonemployment. Job-to-job transition workers typically are moving up the job ladder, finding new jobs with higher pay. Unfortunately, the job-to-job transition rate has yet to recover from the Great Recession.
Using data from the Survey of Consumer Expectations, Fed economists analyzed changes in the wages of job-to-job transition workers and workers who experienced a period of nonemployment before their current job…
Job-to-job transition workers
Current wage: $27.28
Starting wage at current job: $20.09
Ending wage at previous job: $18.79
Period of nonemployment workers
Current wage: $18.31
Starting wage at current job: $14.61
Ending wage at previous job: $17.92
Although both types of workers had similar wages at the end of their previous job, the job-to-job transition workers had a higher starting wage at their current job and a much higher current wage. Because of the lower rate of job-to-job transitions, conclude the researchers, fewer workers are moving up the job ladder. That may be suppressing wage growth.
When Building Wealth, Timing Is Everything
When it comes to building wealth, timing is everything. Gen Xers are learning this the hard way, according to an analysis of American debt by The Pew Charitable Trusts
Many Gen Xers bought houses when prices were peaking during the housing bubble. Now they owe more in mortgage debt than any other generation and $8,000 more than Boomers did at the same age (in 2013 dollars)…
Median housing debt at age 40
$69,602 for Gen Xers in 2013
$61,437 for Boomers in 1995
The timing is better for Millennials. By delaying homeownership, they have less housing debt than Gen Xers did at the same age (in 2013 dollars)…
Median housing debt at age 27
$17,429 for Millennials in 2013
$22,255 for Gen Xers in 1998
“These data show that the timing of home purchases for each of the generations has contributed to very different debt profiles,” concludes the report. Pew’s analysis of debt also includes education loans, vehicle loans, and credit card debt.
Average Household Spending Rises in 2014
The average household spent $53,495 in 2014, according to the Bureau of Labor Statistics’ Consumer Expenditure Survey
–3 percent more than in 2013, after adjusting for inflation. Despite the increase, spending remains below it’s all-time high of $56,833 (in 2014 dollars) reached in 2006. The low point occurred in 2013, when the average household spent just $51,929.
Necessities account for some but not all of the spending boost between 2013 and 2014. The average household spent 7.5 percent more on rent, after adjusting for inflation, but it also spent 9.6 percent more on apparel–a category that had been in long-term decline. Spending on entertainment climbed 8.2 percent, and spending on food away from home was up 4.5 percent. Spending on gasoline was down 7 percent. Health insurance spending in 2014 cannot be compared to earlier years because of changes in the way the Consumer Expenditure Survey collects the data.
Average household spending (in 2014 dollars)
How Spending Has Changed Since WWII
The average American household spends differently than its counterpart did in the 1940s, according to an analysis in the Monthly Labor Review
. Here are the most striking changes in the share of the household budget devoted to…
Food and alcohol (-19.7 percentage points)
Housing (+14.1 percentage points)
Clothing (-12.7 percentage points)
Transportation (+14.1 percentage points)
Medical care (+2.7 percentage points)
The share of household spending devoted to recreation and entertainment climbed from 2.8 to 5.6 percent between 1944 and 2013, and the share devoted to education more than tripled-growing from just 0.6 to 2.1 percent. Conversely, the share of household spending devoted to tobacco fell from 2.0 to 0.7 percent, and the share devoted to reading plummeted from 1.1 to just 0.2 percent. Note: For comparative purposes, spending data are adjusted to exclude gift purchases, cash contributions, personal insurance, and pensions.
Survey Finds 68% of Formerly Uninsured Now Have Health Insurance
Health insurance coverage has expanded greatly because of the Affordable Care Act. According to a longitudinal study of California’s uninsured by the Kaiser Family Foundation
, an impressive 68 percent of California residents who lacked health insurance in the summer of 2013–prior to the implementation of the ACA–were covered by health insurance when re-interviewed in the spring of 2015.
What a difference health insurance makes. When first interviewed in 2013, fully 86 percent of the uninsured said it was difficult to afford health care. It was their top financial concern. Among those who had gained health insurance by 2015, only 49 percent still felt this way, and health care costs now ranked 4th as a financial concern after rent/mortgage, utilities, and gasoline. Among those who were still uninsured in 2015, paying for health care continued to be their number-one financial concern, a problem for 85 percent.
Who remains uninsured two years after the rollout of the ACA? Fully 70 percent of the still-uninsured are Hispanic. Among them, 58 percent are undocumented immigrants and ineligible for coverage. Many Hispanics who are eligible but still uninsured say they’re afraid to sign up because it might draw attention to a family member’s immigration status.
More Renters in Single-Family Homes
According to data from the American Housing Survey
, the number of renters who live in a single-family house grew 30 percent between 2007 and 2013. That’s twice as fast as the growth in renter households overall and far surpasses the 8 percent increase in the number of renters who live in multi-family buildings. Here is the number of renter-occupied households by type of housing unit in 2013 and the percent change in the number since 2007…
Renter-occupied housing, 2013 (and % change 2007-13)
Total renter-occupied housing units: 40,201,000 (15%)
Single-family homes: 14,222,000 (30%)
Multi-family buildings: 24,420,000 (8%)
Mobile homes: 1,559,000 (4%)
Peak Transportation Spending
Has household spending on transportation peaked? It looks that way, according to a Demo Memo analysis of the Bureau of Labor Statistics Consumer Expenditure Surveys
. The average household devoted 17.0 percent of its budget to transportation in 2014. While this is more than the Great Recession low of 15.6 percent in 2008 (the smallest since the early 1960s), it remains well below the 19-plus percent of the early 2000s.
Transportation is our second biggest expense. In 2014, the average household devoted $9,073 to transportation, most of it for vehicles and gasoline. The evolution of this major household expense has been documented by the Bureau of Labor Statistics’ consumer expenditure surveys
. In the earliest, taken in 1901 and 1918-19, there was no separate spending category for transportation, so minor was the expense. As cars became common, transportation became a category. In 1934-36, transportation consumed 8 percent of average household spending. At the time, 40 percent of households owned a vehicle. The figure climbed over the decades, peaking in 2008 at 89 percent. In 2014, a smaller 87 percent of households owned or leased a vehicle. The average number of vehicles per household was 1.9, down from 2.0 as recently as 2009.
With households holding on to their vehicles longer (the average age of light vehicles
is now 11.4 years, up from 9.1 in 2000), greater fuel efficiency, increased urbanization, and the rise of ride sharing services, it looks like peak transportation spending may be in our rear view mirror.
A Decline in Commuting to Work by Automobile
The percentage of American workers who commute by automobile is on the decline, peaking at 87.9 percent in 2000 and falling to 85.8 percent by 2013, reports the Census Bureau
. Much of the decline in automobile commuting is due to less carpooling. The percentage of workers who carpool fell to its lowest point in 2013–9.4 percent, and less than half of the 19.7 percent of 1980. But the percentage of workers who drive alone to work alone has also fallen (very) slightly in recent years–from the all-time high of 76.6 percent in 2010 to 76.4 percent in 2013.
Percentage of workers who drive alone to work
Walking/Bicycling as Transportation
On an average day, only 10 percent of Americans walk or bicycle as transportation, according to an analysis by the Centers for Disease Control
–meaning they walk or bicycle not for exercise but to get from point A to point B. Although urban populations have been growing in recent years, the percentage who walk or bicycle as transportation has fallen slightly over the past decade–from 11.8 percent in 2003 to 10.3 percent in 2012, according to the CDC analysis of the American Time Use Survey. Younger adults are most likely to walk or bicycle as transportation on an average day. Here are the 2012 stats by age…
Percent who walked/bicycled as transportation in past 24 hours
Aged 16 to 39: 14.0%
Aged 40 to 59: 8.4%
Aged 60-plus: 6.9%
Rise of the Non-Religious
According to a Demo Memo analysis of the General Social Survey
, this is the percentage of people aged 18 or older who say they have no religious preference, 1972 to 2014…
No religious preference
Inheritance and Retirement Risk
Researchers at the Center for Retirement Research analyzed the impact of inheritances on the National Retirement Risk Index (NRRI) using inheritance data from the Federal Reserve’s 2013 Survey of Consumer Finances. The NRRI is a measure of the percentage of households at risk of missing their target retirement income replacement rate. In 2013, the NRRI was 51.6–meaning 51.6 percent of working-age households are at risk at age 65 of being unable to maintain pre-retirement spending after retirement. If inheritances were eliminated, the percentage at risk rises by only 0.8 percentage points–to 52.4 percent.
Why do inheritances have such a small impact on retirement readiness? One reason is that few households receive an inheritance–only 19 percent had ever received an inheritance, according to the 2013 Survey of Consumer Finances. Another reason is that most inheritances are modest. Among householders aged 30 to 59 who had received an inheritance, the median value was just $87,500 (including the value of inherited houses). Finally, inheritances don’t have much of an impact because those who receive them are already better prepared for retirement (risk index of 40.4) than those who do not (risk index of 54.2). Among households receiving an inheritance, eliminating the windfall boosts their risk of running out of money from 40.4 to 44.8 percent–still well below average.