Off the charts: Across U.S., shrinking paychecks

International Herald Tribune
Sep. 02, 2005

The American middle class is making less than it used to. But then again, so is almost everyone else. Even the highest-income U.S. households made less money in 2004 than they did five years earlier.

That is one conclusion available from data released this week by the U.S. Census Bureau in its annual report on income and poverty in the United States.

The charts to the right look at the real income, adjusted for inflation, of three groups of American households. The first covers those in the bottom quintile, that is the lowest 20 percent of income. The next shows income of the middle quintile, that is those who earn more than the bottom 40 percent but less than the top 40 percent. That is, arithmetically at least, the middle class. The group on the right is the top quintile, the 20 percent of American households who earn the most money.

The charts compare the mean income of each group, in each year, to the average figure for the same group in the 1970s. They do not show how actual people did, since some people in one quintile one year move up or down to another one.

What they show is that in 1999 the middle class was making an average of $46,190 - measured in 2004 dollars - per year, a figure that was 22.8 percent higher than the 1970s average. By 2004, that figure was down 3.8 percent to $44,555, which was just 18.2 percent higher than the 1970s figure.

The middle class was not alone in slipping, however. Adjusted for inflation, every quintile of Americans made less in 2004 than it had five years earlier, as the great boom of the 1990s was nearing an end.

The highest-income Americans, those in the top quintile, suffered the least, with a 1.1 percent decline, while those in the bottom 20 percent suffered the most, with an 8.7 percent drop.

The Census Bureau data go back to 1967. The 1999-2004 period was the first five-year period in which the average income of every quintile declined.

Over all, higher-income Americans have done better than other groups somewhat consistently. The average figure for the top quintile in the 1970s was $96,788, adjusted for inflation to 2004 dollars. By the peak for that group, in 2000, the figure was up 61.2 percent, to $156,054. By last year it was down to $151,593.

The poor have not gotten poorer over that period. The mean income of the bottom quintile was $10,264 in 2004, up 12.5 percent from the 1970s average. But their gain is less than that of any other quintile. And since 1999, their average income has fallen 8.7 percent.

The decline reflects the recession of 2002. But it also shows how the very strong economy of the late 1990s produced jobs even for people who were relatively unattractive to employers. Many of those have not done as well since.

Another way of looking at the data is to ask how much of national income is taken by the top quintile. Back in the 1970s, that group took almost 44 percent of national income. In 2004 the figure was 50.1 percent, equaling the record share set in 2001.

Each of the other four groups now has less of the national income than did its predecessor in the 1970s. The lowest quintile gets 3.4 percent, down from 4.1 percent, while the middle quintile gets 14.7 percent, down from 17.4 percent.