Thursday, September 10, 2015

Forecasting 2014 Median household income

 - by New Deal democrat

Next week the Census Bureau will release its report on 2014 median household income.

Since I have proposed that a reasonable and more up-to-date model for median household income of the 25-54 primary working age cohort is to take average hourly income and divide it by the percentage of those 25-54 who are employed (i.e., thier employment-poulation ratia), and then norm by inflation, I wanted to put out this forecast now, and we will see how it pans out next week.

The below graph gives two alternative values: red if the calculation is based on year-end values, and blue if the calculatioin is based on average values of the course of the year:

I believe the Census Bureau will use the average over the year, so the blue line is the more likely estimate.  As you can see, it makes a considerable difference which way we measure.

I'm not pretending that this estimate is exact.  As of 2013, the Census Bureau showed a decline of about 8% off the peak, whereas this estimate shows a maximum of 6% in 2011. But if my method works, we should see an increase in median household income in the prime working age group next week, as foreshadowed by the work of Prof. Emanuel Saez.