Despite the improving economy since the recession of 2008-2009 and although household income has begun to recover, the median household income in the United States still remains about 6% below the level that it was at when the recession began. As you can see from the graph generated using FRED, since the end of the recession, real household income has declined for nearly all population groups.
That is, for all but the most highly educated and affluent Americans, incomes have stagnated. In fact, the figures reveal that the income of the median American household today, adjusted for inflation, is no higher than it was for the equivalent household in the late 1980s. At the end of 2007, the real median household income was nearly $54,000. Five years later, in 2012, it was now just over $51,000.
Since the recession ended in 2009, those that have experienced income gains are almost entirely the top percent of earners. Those at the bottom percentage, on the other hand, have been affected by factors such as high rates of unemployment and nonexistent wage growth; thus seeing a decline in their household income. If minimum wage were to increase, this could help out households with lower incomes, especially those that are below the median.
An increase in minimum wages would also lead to an increase in purchasing power for these middle class and lower class households. While a little income inequality could be a good thing, too much income inequality does not allow for the middle class to get anywhere, no matter how hard they work. This can contribute to the slow recovery of the economy in that there is not enough purchasing power in the middle class and thus not enough demand for the goods and services available. So, if productivity rises and wages do not, we have an oversupply and the economy can’t function.
Not only did we see a drop in household income, but the share of people living in poverty hit 15.1%, the highest level since 1993, and a staggering 2.6 million more people moved into poverty, the most since Census began keeping track in 1959. Just think about all the high school graduates who were looking to go straight into the workforce or even college graduates looking for their first full-time job. The poverty level would even be higher if so many 20-30 year olds were not living at home with their parents. “It’s premature to say this is a permanent change, however,” says economist Michael Pakko. “We’re still dealing with a severe recession and a slow recovery.”