Real income, real wages are rising under Bidenomics
Though Republicans continue to harp on the (falling) inflation, real income is rising, especially for low-income families
In the Republican debate (held without the frontrunner, Trump), Senator Tim Scott falsely said the following: “We all need to understand Joe Biden’s Bidenomics has led to the loss of $10,000 of spending power for the average family.”
The truth is that real disposable personal income per capita (a metric produced by the Bureau of Economic Analysis at the Commerce Department) has increased from $45,470 in January 2021 to $46,795 in July 2023. While this means it has only increased slightly, it is false that real income has fallen. Real income per capita has also increased compared to the pre-pandemic level ($45,186 in January 2020). All this in constant 2009 dollars (so the nominal amounts are higher; $59,553 in July 2023).
Another similar measure, real gross domestic product (GDP) per capita, has increased more robustly, from $56,993 in the first quarter of 2020 to $60,852 in the second quarter of 2023 (measured in constant 2012 dollars). The graph below illustrates this.
Some pundits (and Republican critics) say that while overall the economy might be better, given the very unequal income distribution in the United States, lower income workers might be doing worse.
However, the opposite is true: real wages have actually increased more for production and non-supervisory personnel.
The median weekly real earnings for all full-time employees have increased from $359 in the second quarter of 2022 (after the distortions created by the pandemic ceased) to $365 in the second quarter of 2023. As mentioned, the COVID pandemic created a huge distortion, as many low-income workers were let go, causing a spike in the median real earnings, but this was only due to the fact that many of the lower-income workers lost their jobs. A fair comparison would be to the pre-pandemic era; the median real earnings were $362 in the fourth quarter of 2019. So, again, there was a slight improvement (but certainly not a reduction).
But what is significant is that real wages for production and non-supervisory employees increased MORE than that of the whole work force. The real average hourly earnings for production and non-supervisory employees increased 2.2 percent for the year ended in June 2023, compared to 1.2 percent for employees as a whole.
This is longer term trend; the lowest quintile of the income distribution saw an increase of their after-tax income of 94% since 1979 (including transfers). While the richest quintile saw an even greater increase of 120%, at least income distribution did not become worse. A CBO report showed that the distribution of after-tax income was steady in the decade before the pandemic.
This may respond to two factors:
a) there was a DECREASE in immigration during the Trump administration, that became even worse during the pandemic. According to a “Forbes” article, “Economists Giovanni Peri and Reem Zaiour found there were 2 million fewer working-age immigrants because of the pandemic and U.S. immigration policies during the Trump administration”. This, combined with the death toll of the pandemic itself (1.27 million excess deaths through May 2023), effectively reduced the labor force by more than 3 million people. This helps explain both the low unemployment level and the higher average wages.
b) While the federal minimum wage has remained stuck at $7.25 per hour since 2009, many states and jurisdictions have increased the minimum wage substantially. There are four States with a minimum wage of $15 per hour or higher (California, DC, Massachusetts and Washington), and overall there are 30 States with a minimum wage higher than the federal one. This may be one of the factors pushing inflation, but also the increase in the real income of low-income workers.
One final element to take into consideration is that the U.S. (under Biden) has performed much better than the other G-7 countries. The U.S. has had the strongest economic recovery, with GDP back on its pre-pandemic growth path (while some other countries remain below the pre-pandemic level); inflation in the U.S. has fallen to the lowest level of the G-7 countries; unemployment has remained under 4 % for 18 months; 13.4 million jobs have been created since Biden took office; the share of working age Americans who have jobs is at a 20-year high.
So why is there the persistent perception that the economy is not doing well, that real incomes are falling, that the economic performance of President Biden is not well evaluated? I suppose it must be because many Republicans receive their information solely from Fox News, Newsmax, and other right-wing media.
Source: U.S. Bureau of Economic Analysis, Real gross domestic product per capita, retrieved from FRED, Federal Reserve Bank of St. Louis