In a previous post I illustrated the growth of household incomes since 1967 based on Census Bureau data. Let's trim the timeline and compare the growth of two major household expenses — medical costs and college tuition and fees.
The first chart below shows the real (inflation-adjusted) annualized income growth from 1980 to 2010 (the most recent annual data). The lines represent the average household incomes by quintile along with the average for the top five percent of households.
The next chart shows the real growth of medical costs over the same time frame. The top 5% of households saw their real incomes increase by 67.1%. But real medical costs grew by a stunning 254.2%.
But the growth in medical costs pales in comparison to the growth of college tuition and fees, up 636.6% since 1980. Mind you, that's 636.6% above the core rate of inflation, which increased by a "mere" 164.7% over the same time frame.
Medical costs are incurred to varying degrees by all households. A critical factor in determining the "pain" of these costs is the ratio of household medical costs to total expenses.
College tuition and fees are another matter in several respects. Not all households incur these costs, and they happen over relatively short periods of time. Also, the costs may be split between households — parents, children and occasionally grandparents — and financed over time. But one hypothesis we might formulate from the data is that college expenses for lower-income families create an enormous debt burden. Unless the education purchased helps to move its recipient into the higher income quintiles, its value is no bargain.
The 2010 Turn for the Worse
The table at right shows the grim change from 2009 to 2010 for household incomes versus these two key expenses. Five of the six household income categories suffered losses, with the lowest quintile and the top 5% faring the worst. Only the second quintile eked out a microscopic gain. Meanwhile medical costs grew by 3.4% and college tuition and fees by 5.2%.
If any one wonders why the consumer confidence indicators are as such dismal levels, this table offers a persuasive explanation.
A Footnote on Medical Costs
The chart below is from USA, Inc., a non-partisan report that looks at the U.S. federal government (and its financials) as if it were a business.
Are we getting our money's worth for our skyrocketing medical costs? Apparently not.
For anyone who is unfamiliar with the USA, Inc. research, here is a direct link to the report in PDF format.