50 percent of wage earners had net compensation of $28,851 or less.
If you can sum up the sentiment among the American public in two words it would be economic frustration. The public is frustrated that inflation is eating away at the quality of life many have come to expect. While families don’t need bankers or politicians to tell them about this, it is especially infuriating when the Fed and other policy makers jabber on that inflation is very low. From 2000 onward the cost of housing, healthcare, and education has far outstripped any true income gains. In other words households are feeling poorer because they are. And we are living under a two income household trap as well. The only reason people feel like they are keeping up is having dual lower wage earners. Social Security data highlights an economy that is doing a great job of producing low wage jobs. The two income trap is also magnified because little is discussed about the cost of raising children (it is extremely expensive when you factor in daycare and then try to save for college). The myth of US high wages is slowly taking a hit and the public is becoming more aware.
The low wage machine
Some people are surprised when we dig deep into the wage data. It is always humorous to watch politicians talk about middle class households that “only” make $250,000 a year. A household making that much would be in the top 2 percent of households. That is not the middle. Let us see what Social Security data has to show for it:
“(SSA) The “raw” average wage, computed as net compensation divided by the number of wage earners, is $7,050,259,213,644.55 divided by 158,186,786, or $44,569.20. Based on data in the table below, about 67.2 percent of wage earners had net compensation less than or equal to the $44,569.20 raw average wage. By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $28,851.21 for 2014.”
Half of wage earners in the US make $28,851 a year or less. So when we see the median household income of roughly $52,000 we can understand why so many people are living paycheck to paycheck. This is where the two income trap hits:
The chart was adjusted in the early 2000s but household income hasn’t changed much since then adjusting for inflation (in fact it has fallen). While net income is up, discretionary money left over paying the bills is less. And this is considering the fact that we now have more dual income households:
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