Class Note for INDV 102 with Professor Kenworthy at UA
Class Note for INDV 102 with Professor Kenworthy at UA
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Date Created: 02/06/15
1 Income growth requires two earners Median earnings for men have been stagnant actually declined slightly since 1973 As a result only households with two earners have experienced rising incomes 1 Income growth requires two earners 20 GDP per capita 9 Median familyinoome 0 Median 2 earner family income lquot39 El Median1earnerfamily income r 15 II on 2 39gtlt39 D 39O E 10 5 I I I I 1945 1955 1965 1975 1985 1995 2005 Year Note In 2005 median income was 40700 for oneearner families and 75100 for twoearner families Source My calculations using Census Bureau data wwwcensusgovhheswwwincomehistincf12arhtml 1 Income growth requires two earners At the same time it39s important to recognize that most of the movement of women into employment has been voluntary It39s a product of improved education and pay and changing norms not simply a response to slow income growth 2 Costs have increased causing a rise in debt Chi0 care and transportation With both adults employed more households now need paid child care and two cars Home mortgage The median home price adjusted for inflation rose from 125000 in 1975 to 218000 in 2007 As a result mortgage payments have increased Health care Outof pocket health care expenses mainly insurance premiums and copayments have increased 2 Costs have increased causing a rise in debt College Most children now attend some college College costs even for public universities have increased very rapidly 2 Costs have increased causing a rise in debt College Home mortgage Cars Health insurance 0 Early 19705 O Mid20005 I I 0 6000 12000 Cost 2004 Note Early 1970s fourperson family with one employed adult one stayathome adult and two preschool age children Mid2000s fourperson family with two employed adults and two preschoolage children Total costs 19300 in the early 1970s 45500 in the mid2000s Source Child care home mortgage car and health insurance estimates are from Monica Lermerises quotThe Middle Class at Riskquot 2007 figure 12 wwwtcforgistasptype PBamppubid625 using data from Elizabeth Warren and Amelia Warren Tyagi College cost data include tuition fees and roomboard at public fouryear institutions the data are from College Board quotTrends in College Pricing 2006quot table 4a wwwcollegeboardcom 2 Costs have increased causing a rise in debt Have these rising costs and needs resulted in a big increase in debt Yes and no Debt as a share of disposable personal income jumped from 70 in the early 19805 to 130 in 2005 Part of this is credit card debt most of it is mortgage debt But the key statistic is debt payments relative to income Data are available beginning in 1989 They suggest only a small rise 2 Costs have increased causing a rise in debt 20 5 8 10 D n 6 Middle quintile l Second quintile Bottom quintile 0 I 1975 1985 1995 2005 Year Note Average debt payments as a share of income The calculations are available only beginning in 1989 The quintiles refer to the income distribution Source Brian Bucks Arthur Kennickell and Kevin Moore using Survey of Consumer Finances SCF data 3 Economic insecurity has increased I39ll consider this issue this later in the course 4 Balancing work and family has become more dif cult Jerry Jacobs and Kathleen Gerson The 77me Divide 2004 find that a growing share of employed men about 25 and women about 10 work 50 hours per week Most of these and many others employed fulltime say they would prefer to work fewer hours Harriet Presser Working in a 247 Economy 2003 finds that a growing share of Americans 3540 work outside regular hours andor days in part to accommodate family needs quotIt39s better than the alternativequot quotI tis better than the alternative United States 20 GDP per capita 0 Median household income v 395 T X g E 10 395 I I I I 1975 1985 1995 2005 Year Sweden 20 GDP per capita 0 Median household income Index 1975 5 I I I I 1975 1985 1995 2005 Year Note Income data are for inflationadjusted median posttransferposttax income adjusted for household size Source My calculations using OECD and Luxembourg Income Study LIS data statsoecdorg and wwwlisprojectorg Summary Summary Since the mid19705 median income has grown slowly relative to the economy The concern is slow growth not stagnation or decline There are lots of arguments suggesting that quotit39s not as bad as it looksquot but most are not supported by the data There have been considerable improvements in quality of life for middleincome Americans but it39s not clear that those improvements wouldn39t have occurred had median income grown more rapidly The key image 20 GDP per capIta 0 Median family income 3939 15 39 E 9 aw g 1 o W I I I I 1945 1955 1965 1975 1985 1995 2005 Year Source My calculations using Bureau of Economic Analysis and Census Bureau data See wwwbeagovnationaIindexhtmgdp and wwwcensusgovhheswwwincomehistinchistinctbhtml
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