econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 19 September 2016

Fun With Fake Statistics: The 5%

by Charles Hugh Smith, Of Two Minds

The truth is the rich are getting richer and everyone else is losing ground as inflation chews through stagnant incomes.

Supporters of the status quo nearly wet their pants with joy when the Census Bureau reported that real (adjusted for inflation) median household income rose 5.2% between 2014 and 2015. Too bad it was completely bogus: the supposed increase in everyone's income is pure statistical trickery.

First, the marks who fell for it: here's the Huffington Post wetting itself with glee: Average Americans Just Got a Huge Income Boost.

This headline is risibly wrong on a number of counts. Most importantly, a notch up in median household income doesn't mean "average Americans Just Got a Huge Income Boost": It means that half of households in 2015 earned more than $56,516 and half earned less than $56,516.

It does not mean every household saw a boost in income.

Please follow along as I show you how median household income works. Let's start with a simple sample group of ten households. Household #1 earns $40,000, #2 earns $41,000 and so on, as each additional household earns $1,000 more than the previous household. Household #10 earns $49,000.

The median income of our group is $44,500, as 50% earn less than $44,500 and 50% earn more than $44,500.

As the economy expands, it adds two households earning $48,000 and $49,000 respectively. Meanwhile, the income of the two households that had earned $48,000 and $49,000 respectively each leaps to $250,000 each.

The median household income of the group increases to $45,500, but only the top two households experienced any increase in real income--and their income soared. The "average household" didn't make a dime more, even as the economy expanded and income for the entire group rose an astonishing 45%.

You see what happened as median household income increased: all the gains went to the top layer--"average" household income didn't rise at all. See how much fun we can have with misleading statistics?

Yes, median household income would rise if every household earned an additional $1,000. But an increase in median household income does not prove every household gained.

In fact, other statistics reveal that the increases in income and wealth have been concentrated in the top 1%, 5% and 10%.

Increases in household wealth continue to accrue to the top of the wealth pyramid: The "Devastating" Truth Behind America's Record Household Net Worth:

According to the CBO (Congressional Budget Office) report Trends in Family Wealth:

"...families in the top 10 percent of the wealth distribution held 76 percent of all family wealth. ...the difference in wealth held by families at the 90th percentile and the wealth of those in the middle widened from $532,000 to $861,000 over the period (in 2013 dollars). The share of wealth held by families in the top 10 percent of the wealth distribution increased from 67 percent to 76 percent, whereas the share of wealth held by families in the bottom half of the distribution declined from 3 percent to 1 percent."

Just to remind you how meaningless "median" measures really are, the "median household wealth" increased to $81,000 while the rich became much richer and the poor became poorer.

But this isn't the end of the "median household income" trickery: the key trick word is "real," which means adjusted for inflation.

I hope you see this coming: it all depends on how you measure inflation. As explained in this insightful expose, the Census Bureau didn't use the conventional Consumer Price Increase (CPI) measure of inflation; they used a lower deflator of income which magically boosts income--not in the real world, of course, but in the world of trickery, magic, smoke and mirrors, all designed to manage perceptions of a status quo that has failed the bottom 95% of households.

Deconstructing The 5.2% Median Income Gain - -More BS From The Washington Statistical Mills:

"Sentier Research uses the more familiar Consumer Price Index (CPI) for the inflation adjustment. The Census Bureau uses the little-known CPI-U-RS (RS stands for "research series") as the deflator for their annual data.

The choice of the inflation-adjustment deflator makes all the difference in these median household income calculations."

If CPI is used, the "real median household income" has not even regained its 2008 level.

If "real" inflation is running hotter than "official" inflation--which it is if we properly weight the big-ticket items such as rent, healthcare and college tuition--then "real household income" has declined sharply since 2008: the 5% "gain" is completely illusory.

The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016)

Inflation Hidden in Plain Sight (August 2, 2016)

Revealing the Real Rate of Inflation Would Crash the System (August 3, 2016)

The truth is the rich are getting richer and everyone else is losing ground as inflation chews through stagnant incomes and rising debt loads stripmine disposable income. Bought and paid for cheerleaders for our failed, corrupt status quo will always hype bogus, purposefully misleading statistics--but don't mistake fakery for fact.

Author's note: My new book is #4 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book's website.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Opinion Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Opinion


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Expected Effects of Petitions to Improve the Monetary System
Energy and Falling Productivity
News Blog
Infographic Of The Day: Four Tips To Grow Wealth
Early Headlines: Asia Stocks Down, Yen Rises, Oil Soft, Wells CEO Gives Up Bonuses, Trump Didn't Want To Embarass Clinton, US Asset Bubbles, US Crime Rates Falling And More
What is Democracy, Anyway?
Transcript Of Elizabeth Warren Questioning Wells Fargo CEO John Stumpf
Documentary Of The Week: Elizabeth Warren Indictment Of Wells Fargo
Clinton Wins Round One
Why Alzheimer's Research Is Failing To Hit Treatment Targets
Voters Still Distrust Both Presidential Candidates
What We Read Today 27 September 2016
How To Get People To Exercise
September 2016 Conference Board Consumer Confidence Now At Highest Level Since the Great Recession
Richmond Fed Manufacturing Survey Remains In Contraction In September 2016.
September 2016 Chemical Activity Barometer Continues to Signal Improving Economic Growth
Investing Blog
Banks Of Absurdity
Investing.com Technical Summary 27 September 2016
Opinion Blog
Trump Stumped In First Debate With Clinton - Will It Cost Him?
Why All Banks Should Be Federally Owned
Precious Metals Blog
War On Cash Turns To $20, $50, And $100 Bills
Live Markets
27Sep2016 Market Close: US Major Indexes Closed Higher As Commodities Fell, WTI Crude Slipped Three Percent
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved