The above-linked report – “Income and Poverty in the United States: 2014” – was published by the Census Bureau a couple of days ago. The news isn’t good. In spite of the supposed decline in unemployment and all the talk of economic recovery, the median household income fell once again and the poverty rate remained at or near the highest level in fifty years.
There’s tons of data to sift through in the report, so I’ll simply quote a few of the key findings of the report:
“Median household income was $53,657 in 2014, not statistically different in real terms from the 2013 median of $54,462 (Figure 1 and Table 1). This is the third consecutive year that the annual change was not statistically significant, following two consecutive years of annual declines in median household income.”
“Median household income … in 2014 … 6.5 percent lower than the 2007 (the year before the most recent recession) median ($57,357), and 7.2 percent lower than the median household income peak ($57,843) that occurred in 1999.”
“In 2014, the official poverty rate was 14.8 percent. There were 46.7 million people in poverty.”
“The 2014 poverty rate was 2.3 percentage points higher than in 2007, the year before the most recent recession (Figure 4).”
Median household income has declined every year since 2007, and even the median income in 2007 was less than the median income in 1999. This is the longest period of decline since the Census Bureau began tracking the data in 1967. From 1967 to 1999, the median household income (for all races) rose from approximately $42,000 to $57,843 – a increase of 38%. Since 1999, however, it has declined by 7.2%.
This is exactly what the inverse relationship between population density and per capita consumption would predict – that as our population density (including our “effective” population density) rises beyond a critical level, worsening unemployment and poverty is inescapable.
So what was it that happened after 1999 that threw median incomes into what increasingly appears to be a permanent state of decline? Our population density has been rising by about 1% a year for decades but our “effective” population density – the population density that we take upon ourselves when we combine with another nation through “free” trade – skyrocketed in 2000. That was the year that the Clinton administration granted China “permanent normal trade relations” satus, opening the door to “free” trade with China.
Look back at Chapter 7 of Five Short Blasts (especially Figure 7-5 on page 130), where we examined what happened to our effective population density as we combined our economy with other nations through “free” trade. The effect of trading with Ireland – the nation with whom we have the largest per capita trade deficit in the world – is negligible. They’re so small that it makes no change to our effective (combined) population density. Add Mexico to the list, and our density rises from 85 people per square mile to 118. Add Germany and it rises to 132. But, when China, with one fifth of the world’s population, is added to the mix, our effective population density rockets to 242! The downward pressure on our labor market and incomes suddenly becomes overwhelming.
As long as we continue to blindly apply “free” trade policy to all nations with no consideration of the effect of population density, the resulting downward spiral in our economy is inescapable. With each passing year, the data on incomes and poverty in America bears this out.