This blog is intended to go along with Population: An Introduction to Concepts and Issues, by John R. Weeks, published by Cengage Learning. The latest edition is the 13th (it will be out in January 2020), but this blog is meant to complement any edition of the book by showing the way in which demographic issues are regularly in the news.

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Tuesday, September 13, 2016

Median Income is Up, Poverty is Down: Good News or No News? UPDATED

Today the U.S. Census Bureau released a report detailing results on income and poverty, among other things, based on data collected in the Current Population Survey. Data refer to what was going on in 2015. Here are some of the highlights:
Median household income in the United States was $56,516 in 2015, an increase in real terms of 5.2 percent from the 2014 median of $53,718. This is the first annual increase in median household income since 2007, the year before the most recent recession. 
In 2015, real median household income was 1.6 percent lower than in 2007, the year before the most recent recession, and 2.4 percent lower than the median household income peak that occurred in 1999. (The difference between the 2007 to 2015 and 1999 to 2015 percentage changes was not statistically significant.)
In other words, median household income is up compared to the previous year, but for all intents and purposes it hasn't really changed since Bill Clinton left office.
The official poverty rate in 2015 was 13.5 percent, down 1.2 percentage points from 14.8 percent in 2014. In 2015, there were 43.1 million people in poverty, 3.5 million less than in 2014. The 2015 poverty rate was 1.0 percentage point higher than in 2007, the year before the most recent recession.
The poverty data are at least going in the right direction, but overall what are we to make of these findings? One set of answers was provided today by Sheldon Danziger, President of the Russell Sage Foundation in New York City (and thanks to RubĂ©n Rumbaut for sharing this with me):
A focus on the these very good 2014-15 annual changes misses the big picture: the poor and the median full-time worker and household were better off at the end of Bill Clinton’s Administration than they are today. Yet, the incomes and wealth of the economic elite are much higher now than at the start of this millennium, and stock market indices are near all-time highs.

We have been living in an era of stagnating incomes for most Americans, as the gains from economic growth continue to be captured by the economic elite. A rising tide stopped lifting all boats in the 1970s because of fundamental economic changes, including employer practices, technological changes, globalization.

In spite of the economic realities, many politicians act as if they have a magic bullet that can dramatically increase economic growth and lift all boats again. Their magic usually involves schemes that would reduce taxes on the rich and pay for them by reducing government social spending like food stamps.

But, if one focuses on economic realities instead of magic, the very opposite policies would do more to reduce poverty—more government spending on policies make work pay for those working at low wages, like increasing both the earned income tax credit and the minimum wage, and more spending on infrastructure and early childhood education which would both expand employment now and raise future productivity.
These are essentially the same arguments that Thomas Piketty has famously made, and with which I agree, as I have noted before. It is truly frustrating that politicians in Washington, DC, seem to see the world so differently. 

UPDATE: The Upshot in the NYTimes ran a story yesterday with a very similar theme:
But no matter how good 2015 seems to be, it cannot undo the years of decline since the recession. If you measure income growth from a longer horizon, 10 years, the picture changes drastically. In addition to greater variance in growth (because we’re taking a longer view), you see that the balance of growth tips toward the rich — and that 2015 does nothing to change that trend.
It’s this long view that helps explain the economic anxiety that many people are experiencing. Also problematic is the divide in real income growth between households in rural and urban areas. Households outside of metro areas saw their incomes fall 2 percent, while households in cities saw their incomes grow 7.3 percent. So while those who pay close attention to economic statistics may cheer about one good year, it’ll take more widespread growth to change how people actually feel.

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