Income is up, poverty is down, but neither are back at pre-recession levels
The Census Bureau released its annual poverty report Tuesday and it brought a dose of welcome news: after years of stagnant wages, incomes finally went up in 2015. The 5.2 percent rise marked the first annual increase in median income since 2007, before the Great Recession.
Income gains were spread across all four geographic regions (the West, Midwest, Northeast and South), across age groups and almost all races (except for asians), said Census officials. Those in the bottom fifth income group saw their incomes rise the fastest in 2015.
Income gains across the board.
10th percentile +7.9% (ie poor)
90th percent +2.9%
95th percentile +3.7% pic.twitter.com/IgFUBDeyK8
— Justin Wolfers (@JustinWolfers) September 13, 2016
In explaining the rise in median household income, Trudi J. Renwick of the Census Bureau pointed to growth in employment and in the number of full-time, year-round workers.
“There was an increase in real median wages of 1.5 percent for men and 2.7 percent for women,” said economist Sheldon Danziger, president of the Russell Sage Foundation.
With improving incomes, 3.5 million people climbed out of poverty in 2015, pushing down the official poverty rate to 13.5 percent. The 1.2 percentage decrease in the poverty rate is the biggest drop since 1999.
“[The Great Recession put us] in a deep hole, and this one year almost single handedly got us out of the hole,” said economist Lawrence Mishel of the left-leaning Economic Policy Institute.
But, if we look back to where we were before the recession and as far back as the 1990s, we still have a ways to go.
The median household income was $56,516 in 2015. While that’s up substantially from $53,700 in 2014, we’re still far from the peak in 1999 when the median household income was $57,900.
“Poverty is higher than it was in 1999, family incomes are lower than what they were in 1999, inequality is a lot higher than it was in 1999,” said Danziger.
The good news is that the economy is on the right track. As economist Justin Wolfers recently noted, August was the 71st month of straight job growth, and with decreasing unemployment, wages should continue to rise.
The Census Bureau also put out a separate report on the supplemental poverty rate which incorporates how government programs, such as Social Security and food stamps, affect poverty.
The supplemental poverty rate also declined, from 15.3 percent in 2014 to 14.3 percent in 2015.
According to the report, Social Security benefits continue to play a pivotal role in keeping many Americans out of poverty — 26.6 million to be exact, including 17.1 million seniors (those 65 and above).
Social Security remains the biggest poverty reducer. 26.6 million fewer people in poverty because of it. pic.twitter.com/1idm2rTdXT
— Elise Gould (@eliselgould) September 13, 2016
Danziger says the supplemental report is critical to documenting the positive effects these government programs have in reducing poverty.
“Some of these [government programs] don’t get counted in the official rate, and people say, ‘Oh my goodness, we’re spending all this money on food stamps, and yet poverty is high,” said Danziger. “Thinking that we ought to be cutting back food stamps is not a good idea when the report shows that are about 5 million fewer people in poverty because of food stamps and about 1.2 million fewer because of school lunch.”
“It’s a balancing act,” said Robert Doar at the conservative American Enterprise Institute, noting that the Obama administration has placed too much focus on increasing assistance as the primary way to help those who are struggling and not enough on getting poor Americans to work.
“[Poor Americans] don’t want their situation to resolve by transfer payments. They want a job,” he added. “And when they have a job, they are just far less likely to be poor.”