Median Income Rises—But That’s Far from the Full Story

Median Income Rises—But That’s Far from the Full Story

On Wednesday, the Census Bureau announced that median income had reached its highest recorded level in 2017, while the poverty rate declined. The report inspired glowing coverage from mainstream news sources, while President Trump predictably took credit.

But rosy as those numbers sound, they’re far from the full picture. While the Census Bureau’s 2017 data on poverty, income, and health insurance coverage does highlight a modest uptick in median income, that uptick looks far less impressive when adjusted for inflation.

“It’s true that the median income level … is the highest on record—but that’s not as unique an achievement as it sounds. That claim could be made in 13 or 14 previous [annual] reports,” Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities (CBPP), said in a call with reporters. It’s also not as if median income is the highest it’s ever been in real terms. Adjusted for inflation (and for the redesign of the census survey), we are finally at pre-recession income levels—in other words, people are making about as much as they did in 2007 and 2000 (and actually, a bit less). Plus, median income rose much slower in 2017 than it had been growing in recent years. Median income grew 5.1 percent and 3.1 percent in 2015 and 2016, respectively.

And even if we forget about inflation, last year’s income growth wasn’t exactly a pay raise for many workers. Importantly, real wages have stayed mostly flat, so the increase in median income is largely due to workers putting in more hours, which they were able to do because of a tight labor market.

But while workers are earning about what they made in 2000, corporate profits, productivity, and general growth are all way, way up. Bernstein noted that in the past 17 years, GDP is up almost 40 percent, productivity is up 35 percent, and real corporate profits have almost doubled. All of this suggests that income inequality is roaring right alongside the booming economy.

Indeed, said Bernstein, household income at the 95th percentile grew 3 percent, to $237,000—much faster than median income’s growth of 1.8 percent.

Bernstein pointed out that we can “recognize good economic things that happen for middle- and low-income families when the economy closes in on full employment.” But those positive numbers do little to bridge the widening gap between overall growth and the economic realities faced by millions of working families.

The poverty rate also fell for the third straight year, from 12.7 percent to 12.3 percent, evidence of a recovering economy. The number of people living below the official poverty line remained the same—39.9 million people, including 12.8 million children.

But even those numbers need context. The census’s official poverty threshold is flawed in many ways, and doesn’t accurately portray the well-being of families in need. This is part of the reason the census introduced what’s known as the Supplemental Poverty Measure (SPM). The SPM counts consumption of things like food and housing as well as income from assistance programs, and overall gives a more complete picture of poverty. (You might be thinking, why not just turn to something like the SPM, then, if the official poverty measure is flawed? Well, the 2017 SPM is 13.9 percent, and who wants to be the president who increases the number of people counted as impoverished?)

Data from the 2017 SPM show that public assistance programs helped millions of people earn enough to keep them out of poverty. According to the Economic Policy Institute, Social Security did the most to combat poverty, keeping 27 million people above the poverty line. Tax credits like the Earned Income Tax Credit kept another 8.3 million people out of poverty, food stamps kept out 3.4 million, and unemployment insurance another 542,000. Rent subsidies, CBPP notes, lifted 2.9 million people out of poverty. In all, data from CBPP show that 44 percent of those who would have been poor in 2017 weren’t—because of the social safety net.

These are, of course, some of the very programs that the Trump administration has been aiming to cut. And new tax cuts—Tax Reform 2.0, which House Republicans recently introduced—would only widen the gap between rich and poor.

Like the tax cuts of 2017, these new tax cuts would also raise the deficit. And this ballooning of the deficit has in the past, as now, been used as a reason for Republicans to further cut assistance programs that low-income people—without a higher minimum wage, without strong unions, and without work supports like child care—need to simply get by.

Taking a closer look at the census data reveals a disconnect between the experience of working families and how the economy is faring as a whole—and the GOP is poised to make this disconnect worse.