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 2009 (the most recent annual data). The lines represent the average household incomes by quintile along with the average for the top five per cent 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 71.5%. But real medical costs grew by a stunning 241%.
But the growth in medical costs pales in comparison to the growth of college tuition and fees, up 596% since 1980. Mind you, that’s 596% above the core rate of inflation, which increased by a “mere” 160.4% 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 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.
A Footnote on Medical Costs
The next chart 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 UNC, Inc. research, here is a direct link to the report in PDF format.
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