Scott Winship of the Manhattan Institute continues his series on how U.S. living standards have fared over time with a new analysis of the post-1979 era, which he dubs the “Bronze Age” in contrast to the “Golden Age” of the 1950s and 1960s.
1. In this analysis, he considers the period from 1979 to 2007, having earlier considered the period from 2007 to the present.
2. Winship starts with the Census Bureau’s definition of “money income,” which factors in “all private sources of income, the earnings and pensions of government employees and retirees, and cash benefits from the federal government” (cash benefits include Social Security, unemployment, and welfare benefits, but the Census Bureau does not include non-cash benefits like SNAP, Medicaid, Medicare, and public housing benefits in its definition of money income).
3. He uses the Bureau of Economic Analysis’s Personal Consumption Expenditures deflator to account for the impact of changing prices over time, and he finds that median money income rose by 25 percent from 1979 to 2007.
4. When he excludes taxes and transfers, median market income rises by 20 or 23 percent, depending on whether or not one counts the value of employer-sponsored health insurance.
5. Adjusting for household size bumps up the increase of 26 to 30 percent.
6. Adjusting for household size and factoring in non-cash benefits (but not taxes) for a measure of market income plus transfers yields an increase of 37 to 42 percent.
7. And then Winship adjusts for taxes as well:
I estimate that median post-tax and -transfer income rose by 31 to 35 percent before adjusting for household size and by 40 to 43 percent after the adjustment. CBO’s estimates, unlike those in the CPS data, account for corporate and excise taxes but they do not account for state taxes. The CPS data account for state income taxes, but they do not include tax credits in determining liability for either federal or state income tax. Both estimates include payroll taxes. The CBO figures suggest that median post-tax and -transfer income rose by 42 to 49 percent, depending on whether or not household size is adjusted.
After applying the same kind of analysis to low-end incomes, which rose by 22 to 28 percent or 32 to 44 percent, depending on how you value Medicare and Medicaid benefits, Winship concludes by acknowledging that most people have found Bronze Age income growth disappointing, and he promises an explanation for why that’s the case in his next installment.