Standard Living

According to the U.S. census, median household income in the U.S. has not changed much since 1998. The economy does continue to expand. What is happening is that the richer households are absorbing all the gains, leading to increased inequality. I’ve commented before on whether or not this matters.

I’ve now seen a couple of attempts to argue against this, on the basis that household sizes are shrinking. The argument is that when the household gets smaller, then even if the household has the same amount of money, there is more money per person.

Unfortunately, this argument is too simple. A household has fixed expenses which remain the same regardless of the number of people. One obvious fixed expense is the cost of the house itself. If the cost of housing as a proportion of household income has increased faster than the size of the household has decreased, then the argument does not hold.

It is also quite possible that the earnings-per-person of a single parent living alone has increased, while the earnings-per-person of a single parent living with children has decreased. That would maintain the same statistics, but would suggest that more children are living with fewer resources, which would seem to be undesirable.

More importantly, I think this type of argument is somewhat off-the-point. I think what matters to most people is stability of shelter, food, and health care. Stability of income is acceptable provided those prices are stable. Instability of income is rarely desirable. So the whole issue of tracking average household income seems much less interesting to me than tracking income stability for families in different economic strata.