CALCULATE INCOME GROWTH OF MARKET

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CALCULATE INCOME GROWTH OF MARKET

Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 914 votes

How do you correctly calculate the income growth of a market over 10 years?

 a) add the percentage change of the personal income for last 10 years divided by 10

b) (2016  personal income- 2006 personal income)/ 2006 personal income

c) (2016 personal income- 2006 personal income)/ 2016 personal income 

d) other 

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  • Aaron K.
    Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
    8y

    If you are trying to predict for the future you can't.  

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  • Jason MalabuteBusiness Member
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    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 914 votes
    8y
    Originally posted by @Aaron K.:

    If you are trying to predict for the future you can't.  

     no what I'm saying is if the personal income of msa in 

    year 1= 100

    year 2= 200

    year 3= 150

    year 4= 400

    year 5= 500

    how would you measure the growth over the 5 years?

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  • Ray Johnson
    Irvine, CA · Member since 2016 · 545 posts · 614 votes
    8y

    @Jason Malabute many Quantitative Analyst conduct these studies in conjunction with economist, the problem you face are the limitless variables that can be used to skew the data to reflect what you want of what you don't want to see.

    You can go far down the rabbit hole on this topic, keep in mind that there are thousands of variables associated with wage growth.

    A simple at one variable when trying to project wage growth:

    The most obvious is the cost of capital that companies use to expand or continue operations. As cost of capital continues to increase (which it will) this expense gets bigger for companies to fund operations which means less of an increase in payroll expense if a company wants to maintain a certain income to expense ratio and is not in a large income growth phase.

    The other side of this same coin will have labor and inflation analyst that will say when the cost of capital increases, companies will experience the an increase in operations cost or cost of goods produced. These economist say the company will or should raise the cost of goods or talented personnel hired so companies can maintain the same or better bottom line. 

    This will allow for wages to increase so people can maintain the same cost of living in line with inflation, As we all know the cost of living has outpaced wages so this assumption doesn't always pan out either.

    Also look at various regions of the US, There's a reason why some of in CA get surprised when we come across someone that isn't making a six figure income and in other parts of the US people are surprised if someone is making more than 80K a year and they think that's really high. Wage growth is also regional and occupation based as well.

    Not sure what it is you're trying to associate wage growth with but this is such a vast topic you'll have to have a more precise target if you're trying to make wage growth a useful quantitative and qualitative tool.

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