U.S. Household Incomes Growth Rates

U.S. Household Incomes Growth Rates
March 9, 2011

I've received several emails commenting on my growth of household incomes posted earlier this week. In response to my observation about the higher annualized growth rate of the bottom quintile, Bruce Ollodart, the president of American Actuarial explained this phenomenon as the result of affirmative action, minimum wage laws, women entering the labor market, and the rise of minority protections.

Bruce also included some interesting comments on the comparative growth rates of the household segments. In the chart above I've illustrated the real linear growth rates for the bottom quintile and top 5% of households — 0.52% and 1.5% respectively. What a difference a percent makes! Of course these two population averages started out with significantly different annual incomes.

But we normally think of our raises in nominal terms. So if we add the average 4.25% inflation rate over the period, the nominal raises for these income segments would be around 4.75% and 5.75%, respectively.

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