It's true that the median family income has been rising pretty consistently, though it's rising at a slower rate since the 70's. But how much of that is merely due to the fact that women are entering the workforce?
Elizabeth Warren has the data and it's fitting the pattern of the post Bretton Woods stagnation. She offered a lecture called "The Coming Collapse of the Middle Class" and she compiles some extremely informative data. I wish I could find the slides themselves and can't seem to, but I'll provide a time stamped link to the portion in the Youtube clip that shows one of the slides in the video.
And here it is. Median income for married couples and also for fully employed males from 1970 to 2005. Family income is up. But the median fully employed male is actually earning $800 less than his father did a generation ago. That despite the staggering gains in productivity that have occurred since that time.
Here's another interesting fact. What are Americans doing with the extra money that they have with the two income earners? Buying fancy clothes? Buying expensive cars and homes? Buying all kinds of cool electronics? The savings rate is down dramatically. Revolving debt (basically credit card debt) is up. Is it because Americans are irresponsible?
The data is surprising. Americans are spending 32% less on clothes. Food, including eating out, bottled water, etc is down 18%. Appliances? Down 52%. Per car costs? Down 24%. Electronics spending is up of course. A mere $300/yr it went up, which is not a lot. On net typical consumption went down. A few things went up. Dog food. Alcohol. But overall in terms of ordinary consumption costs are dropping.
So what's going on? Where is spending rising? Take an ordinary 3 bedroom 1 bath house. 76% more expensive today. Mortgage rates are down, but housing costs were up. The median house grew. From 5.8 rooms to 6.1 rooms. And the median family did pick up either a second bathroom or a third bedroom, but not both. That's counter intuitive because we've all seen the new houses being built. They are huge. But what that tells you is the new housing market had shifted in service to more wealthy people, not entry level earners.
What about health insurance? Warren looked specifically at healthy families with an employer provided health insurance plan. So this is skewed towards the more fortunate people but it allows an apples to apples comparison. The family pays 74% more.
Car costs are up 52%. Per car costs are down, but the median family has gone from being 1 income to 2 income and thus has gone from being a 1 car family to a 2 car family.
Child care is a new expense picked up by the two income family that wasn't there before, so that's a large addition.
Finally the tax rate has gone up about 25%. We do have progressive taxation, which means the first dollar of the second earner is taxed after the last dollar of the first earner, so that means the tax rate for the family unit has increased.
With regards to these 5 major costs, notice that they are kind of fixed. I mean, you don't have to buy clothes every month, or appliances. You need food but it's possible to eat cheaper if you like. But there's no backing off on a mortgage, health care, day care, taxes, and car payments. Month in and month out it's kind of fixed.
Family income is up. But when this two income family has actually paid down their fixed expenses for the month we reach a startling realization. They actually have less money available than the single income family had in 1970. Why did savings drop from about 11% to about zero? Why is credit card debt up? People have less available in terms of flexible expenditures. That's the deregulated, union busting, tax cutting miracle that we've experienced over the last 35 years.