Working to Live or Living to Work?

The US economy is starting to feel wage pressure, with American median incomes (finally) back to levels last seen before The Great Recession.

So a happy end to 2016, eh? Not really. Even as incomes are rising so are expenditures. The chart below shows how much Americans spend on Health Care and Housing, divided by wages. Effectively, how much from each paycheque goes for the essentials. I’ve calculated this from recession to recession — the vertical gray bars across the horizontal (time) axis.

Its pretty clear that over the past twenty years or so life has been getting more expensive for Americans. Currently some 55% of their pay is going to the essentials; compare to the period immediately BEFORE The Great Recession and you’ll see it was some 50% and before that recession some 46%.

The chart also shows the effect of strong disinflationary forces in the commodity sector across the past two years, with a modest decline. Specifically, in 2011 the essentials cost Americans some 56% of their pay, 2012 55%, 2013 55% and 2014 54%.

Keep in mind health care inflation is running at an eight year high, roughly 5%, with a total cost of about $9K for per person in America.

Do you any money left over at the end of the month?

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