Here is a report from the US Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2010, that sheds some light on the changes of the past several years. Here are a few important summary findings:
- Real median household income was $49,445 in 2010, a 2.3 percent decline from 2009 (Figure 1 and Table 1).
- Since 2007, the year before the most recent recession, real median household income has declined 6.4 percent and is 7.1 percent below the median household income peak that occurred in 1999 (Figure 1 and Tables A-1 and A-2).3
- Both family and nonfamily households had declines in real median income between 2009 and 2010. The income of family households declined by 1.2 percent to $61,544; the income of nonfamily households declined by 3.9 percent to $29,730 (Table 1).
- Real median income declined for White and Black households between 2009 and 2010, while the changes for Asian and Hispanic-origin households were not statistically significant (Table 1).
- Real median household income for each race and Hispanic-origin group has not yet recovered to the pre-2001 recession all-time highs (Table A-1). (5)
Now consider the poverty statistics the report contains. Here is a summary graph:
The national poverty rate reached a forty-year low in 2000, at about 12%. Through the decade, however, the national rate has grown to 15.1% in 2010, representing 46.2 million people. Here again there is a stunningly wide gap between white and black populations. The poverty rate in 2010 for white non-Hispanic households is 9.9%, while the rate for black households in 2010 is 27.4% (Table 4).
We’ve tended to think of this period as a difficult economic time that will eventually come to an end. But perhaps that’s too optimistic. Perhaps what we are witnessing is a structural adjustment of the US labor market, with a permanent downward shift in income for middle and low income people. And perhaps these shifts will be most extreme for African-American households. (The past decade seems to bear this out. From 2000 to 2010 white non-Hispanic households had declined 5.5%, while black households declined 14.6% during that same period (8).)
The severe national recession of the past several years is having a negative impact on the employment and the starting salaries of chemists and chemical engineers. The latest data from the American Chemical Society on graduates from 2009 found that median starting salaries fell about 5% for those receiving bachelor’s and doctoral degrees compared with the previous year. New graduates with master’s degrees appeared to have gotten a jump in pay.
Even the banking and financial sector has contracted (link):
The financial services industry, hammered by job cuts and record losses, is in for an even bigger contraction as the global recession deepens, said Marc Faber, publisher of the Gloom, Boom & Doom Report.
“The financial sector will contract and it will contract much more than we’ve seen so far,” said Faber, who was in Tokyo to speak at an event hosted by CLSA Ltd. Financial professionals have “been in paradise for the past 25 years.”
More than 275,000 jobs in the financial industry have been lost in the last two years, according to Bloomberg data, while losses and writedowns at global companies exceeded $1 trillion in the past year. Faber said the contraction could rival declines seen in the 1970s following the collapse of Bernard Cornfeld’s Investors Overseas Services that shook confidence in the industry for a decade.
So the financial industry isn’t providing ready opportunities for young MBAs; many of them too will need to find other, less well-paying jobs.
Does this mean that everyone in the US economy is facing downward pressure on wages and salary? Not exactly. There is a segment of the American economy that is doing very well indeed. Here is a graph provided by Lane Kenworthy demonstrating the growth in income of the top 1% (link). (Kenworthy’s discussion is very good.) The top line is the median household income of the top 1%. The lower lines, showing virtually no growth, represent the median of the middle three quintiles and the median of the bottom quintile of households.
So here are two important questions. Is the US economy on a path towards a shift to lower-paid jobs for a large segment of its working population? And are there policies that could be chosen that would result in an outcome that looks more fair than this graph of the recent past, with reasonable growth of income for all American workers and less extreme growth at the very top?