Income Growth Did a Lot to Push Poverty Rates Down

I think my quick-off-the-dime post on the new official poverty rates didn’t give enough credit to household income increases as a reason they virtually all declined. Progressive analysts quickly heralded the significant income growth the new report shows.

The “typical family’s income,” i.e., the median for all households, increased by a record amount, whether you look at the dollars or the year-over-year percent, said Center on Budget and Policy Priorities President Robert Greenstein.

The one-year real-dollar growth was greatest for the bottom fifth of the income scale, the Economic Policy Institute reported, while stressing that all but the top five percent still haven’t fully recovered from the Great Recession.

So here’s a brief look at the income side of the ledger — and a few policy-related remarks.

The “typical family” gained a bit over $2,800, making for an estimated 5.2% increase. All the major types of households the Census Bureau reports on, e.g., married couples, single-mother families, gained in varying amounts.

Likewise all the major race/ethnicity groups. Most of those that had suffered the worst losses during the Great Recession gained the most, EPI later noted. But the percent gains didn’t vary much. So the gaps remain very large.

The median income for black households, for example, was roughly $26,000 less than the median for white non-Hispanic households — and the median for Hispanic households $17,800 less.

But the median for Asian households topped them all at $77,166. This confirms the underlying disparities I noted in reporting the Asian poverty rate.

We also see continuing marked disparities between married couples with children and single-parent families — single-mother families especially.

Their median income was about $37,800, as compared to $84,626 for the married couples. The estimated increase for both was about the same. So at least single-mother families seem not to be losing ground, though a far higher percent still lived in poverty.

Some Republicans predictably accentuated the negative. “Billions of dollars” invested each year, “but more than 43 million people continue to live in poverty,” said the House Ways and Means Committee Chairman.

But public policies do help account for the income gains — and thus the lower poverty rates. Greenstein cites several.

First off, the labor market is getting tighter — a factor economist/blogger Jared Bernstein stresses. Employers have generally found they have to pay more to get (and keep) the workers they need.

The Federal Reserve has done its share by keeping interest rates very low, rather than raising them, as it often has when the unemployment rate drops to a level that could trigger more than a miniscule inflation increase.

Second, employers in 23 states and the District of Columbia had to raise wages for their lowest-paid workers due to minimum wage increases. More local governments set their minimum wages above their state’s level — or had earlier passed laws requiring increases.

Minimum wage increases generally have what economists call “spillover effects,” i.e., raises employers put in place to preserve differences between their lowest-paid and somewhat better-paid workers.

So the recent increases almost surely help explain the higher median household incomes, perhaps especially the boost for the bottom fifth.

Yet “there is more to be done,” as the Coalition on Human Needs headlined its executive director’s response to the Census Bureau’s official and supplemental poverty measure reports. Even more to be done than the measures she singles out, as she would be the first to say.

I’ll follow her lead because once one really gets into what policymakers could do to raise incomes enough — and for enough people — to make poverty a rare, brief experience a post (or statement) turns into a treatise.

She does, however, make two points I’ll borrow because they speak to how I’ve gone at the new Census figures. One addresses the disparities in both poverty rates and incomes.

Steps like a federal minimum wage increase, funding to expand affordable child care and reforms in the Earned Income Tax Credit “wouldn’t just have the effect of lifting all boats.” They’d address income inequalities — not only between non-Hispanic whites and racial and ethnic minorities, but between men and women.

The other point is that we need to do all we can to ensure that our policymakers do no harm. Those grumblings about the billions foretell further efforts to cut federal anti-poverty programs until they can be drowned in a bathtub.

 

 

One Response to Income Growth Did a Lot to Push Poverty Rates Down

  1. […] earlier cited two public policies that almost surely help explain the marked growth in median household incomes […]

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