When it comes to financial media, be careful when reading just the headlines. This is the headline from a CNN story – “Americans see biggest monthly income drop in 20 years.” See: http://money.cnn.com/2013/03/01/news/economy/income-spending-saving/
The story features the statistic that incomes dropped almost 4% from December to January, which is a huge number and suggestive of something seriously wrong. The real story is that when normalized gross incomes are slightly up in January – about a 0.3% increase. But because Social Security taxes are now back to historical levels and 2% more is taken-out of paychecks now, naturally take-home pay is down. Plus, there was billions of dollars of dividend income distributed in December to avoid the Obama tax hikes, so December’s income numbers were already skewed much higher. So as with most financial statistics, it’s always a little more complicated that just one number or one headline.
Probably a better headline is “Most people are bringing home about 2% less – but you already knew that.” Actually, that’s not even an accurate headline. Because 2% off your gross earnings is about a 2.5% to 3.0% reduction in take-home pay. (If in 2012 you made $1,000 a week and 1/3 goes to taxes, health care, deductions, etc., you took home $667. If you now are taxed $20 more per week for Social Security in 2013, that’s a 3% bite out of your real pay, but you already knew that… )