Thursday, February 5, 2015

Trends in per capita real adjusted gross income: updated through 2013

 - by New Deal democrat

On Monday personal income and spending for December were reported, with the most noteworthy monthly news being that it confirmed the prior retail sales report that consumers primarily saved rather than spent their gas price savings (although December was higher than every other month except November).

Secondly, real personal income finally rose above the December 2012 spike (just prior to the "fiscal cliff") to set a new record:

Now let's adjust by population (blue) and by the civilian labor force (red), on an annual basis:

Whether we adjust by population as a whole, or by just the labor force, per capita real personal income has generally grown throughout the last 20 years.

Although it is not nearly as broad a measure as the Bureau of Economic Statistics' "personal income" metric, another way in which per capita income might be looked at is as real per capita adjusted gross income, i.e., the income reported to the IRS on tax forms.

While this is not kept graphically by either the IRS or the St. Louis FRED, I have created the following table showing real adjusted gross income from 1993 through 2011 (the last year available at the IRS site), adjusted per capita both by population, and by the size of the civilian labor force (+those not in the labor force but who want a job now).  The second measure is not perfect, but does make a reasonable approximation of taking into account the wave of Boomer retirements (all figures in $Trillions):

YearPop adjusted CLF adjustedYearPop adjusted CLF adjusted 
avg 1993-20005.4715.258avg 2001-08 6.1386.148



20126.1946.388avg 2006-136.1416.213

As with other measures, I suspect that shifting income forward from 2013 to 2012 due to concerns about tax law changes at the time of the "fiscal cliff" largely explains the decline shown in the IRS data in 2013 from 2012.  Since part-timers as well as full-timers are included in the number of people who reported wages and salaries, I also suspect that the big increase in the percentage of part-time workers beginning with the onset of the Great Recession is largely responsible for why the result for years 2009-13 is almost uniformly lower than that of years 2004-08.

Since the IRS separately breaks out the reporting of wages and salaries, another interesting way to slicing their data is to divide the total amount of wages and salaries reported, divide by the number of returns, and then adjust for inflation.  The resulting figure gives us the average real wage or salary of all persons reported to the IRS.

In theory this should be identical or nearly identical to the BLS's  "aggregate wages paid" index from the monthly jobs report, adjusted for inflation. Aggregate wage information is only available on the St. Louis FRED site from 2007 on, but here's what that looks like:

Now let's compare real average wages reported to the IRS (first column below) with real aggregate wages from the monthly jobs report (second column):

2004   $54,373            
2005   $54,514            
2006   $55,187 (high)
2007   $54,850               112.4
2008   $54,315               110.3
2009   $53,462               105.8
2010   $53,504               106.0
2011   $52,969 (low)     107.4
2012   $54,370               109.8
2013   $53,791               112.8
2014   n/a                       115.8

Based on the aggregate wages data from 2014, I expect the IRS data to show a significant increase in real per capita wages in 2014 when they are reported a year from now.

 That being said, there is no doubt that overall the results are consistent with longer term stagnation in real wages.