Comparing Presidents, the Prime Earning Demographic and Real Median Income – Part 2

This post looks at the prime earning demographic and whether that can explain some of the patterns in real median income we observe in Presidential administrations since Ike. What’s the prime earning demographic? According to the Census, since 1983 it has been the 45 – 54 year old cohort. Before 1982, it was the 35 – 44 year old group (with one exception, 1978, which we will disregard).

This is a follow-up to yesterday’s post where I looked at real median income and 45 – 54 year olds… I wrongly assumed that 45 – 54 year olds were the prime demographic through the entire post WW2 era. Apologies.

The point of the post is simple…if demographics are the explanation for the extremely fast increase in real median income during the JFK/LBJ and Clinton administrations noted in my post on real median income, presumably we’d expect to see much more of these prime-earning folks wandering around during those administrations than at other points. Similarly, given the drops in real median observed during the Carter, GHW, Nixon/Ford, and GW administrations, we’d expect to see a lower percentage of these high earning folks during those administrations. So let’s see.

Demographic data from 1980 to 2005 comes from here, and demographic data going back to 1952 was obtained from here. Real median income also comes from the Census .

So here’s what the prime earning population as a percentage of the total population looks like over time.

Note… the big drop is the year the prime earning group changed from one cohort to another.

Here’s a summary…

(Only 6 years of the Reagan admin was used because of the change in cohorts.)

Well… Clinton did have the fastest growth rate in the high earning folks… so maybe some of his real median income performance is due to that. But he was followed by GHW, Carter, and GW… under whom real median income growth was, well, not exactly growth for those of us who consider growth to be movement in a positive direction. JFK/LBJ, under whom real median income grew faster than under any other administration, actually had the biggest decrease in the prime earning demographic. So for whatever reason, it doesn’t seem like the percentage of the population in the prime earning demographic doesn’t seem like the driver of earnings in any given administration. Some figures…

Yes, there is a positive correlation between the change in the percentage of the population that is made up of this prime demographic and the percentage change in the real median income, but its not particularly high. Interestingly enough… the correlation hits its peak some six years out… the change in the percentage of people in the prime earning demographic in any given year is correlated with percentage changes in real median income six years later.

And now a graph.

So… the excellent performance of the real median income during the JFK/LBJ, Clinton, and to a lesser extent Reagan years doesn’t seem to be explained the prime demographic? And as we’ve noted in earlier posts, economic performance is also not explained by the Congress, the recessions, lags, etc. Which brings us back, as always to… either its policy or its quite a coincidence, but almost all of the series we’ve looked at so far (economic or social) have JFK/LBJ and/or Clinton at the top of the heap.

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