Poverty declined modestly in 2016; government programs continued to keep tens of millions out of poverty
From 2015 to 2016, the official poverty rate fell by 0.8 percentage points, as household income rose modestly, albeit unevenly, throughout the income distribution. This was the second year in a row that poverty declined, and at 12.7 percent, the official poverty rate in 2016 was statistically the same as it was in 2007, just prior to the Great Recession. The poverty rate remains significantly higher than the low point of 11.3 percent it reached in 2000.
Since 2010, the U.S. Census Bureau has also released an alternative to the official poverty measure known as the Supplemental Poverty Measure (SPM).1
The SPM corrects many potential deficiencies in the official rate. For one, it constructs a more realistic threshold for incomes families need to live free of poverty, and adjusts that threshold for regional price differences. For another, it includes as income many resources available to poor families, such as Medicare, food stamps, and other in-kind government benefits.
As shown in Figure A, a larger proportion of Americans are in poverty as measured by the SPM than the official measure reports. (Importantly, however, researchers who constructed a longer historical version of the SPM found that it shows greater long-term progress in reducing poverty than the official measure.) In 2016, the SPM declined by 0.6 percentage points to 13.9 percent. Under the SPM, 44.6 million Americans were in poverty last year, compared with 40.7 million Americans under the “official” poverty measure.
New census data show strong 2016 earnings growth across-the-board, with black and Hispanic workers seeing the fastest growth for second consecutive year
Today’s Census Bureau report on income, poverty, and health insurance coverage in 2016 shows that median household incomes for all race and ethnic groups increased between 2015 and 2016. Encouragingly, groups that, by and large, had seen the worst losses in the years since the Great Recession saw the biggest earnings gains for the second consecutive year. Real incomes increased 5.7 percent (from $37,365 to $39,490) among African Americans, 4.3 percent (from $45,719 to $47,675) among Hispanics, 4.2 percent (from $78,143 to $81,431) among Asians, and 2.0 percent (from $63,747 to $65,041) among non-Hispanic whites. The increase in incomes was statistically significant for all groups except Asians, resulting in some improvement of racial and ethnic income gaps between 2015 and 2016. The median black household earned just 61 cents for every dollar of income the white median household earned (up from 59 cents), while the median Hispanic household earned just 73 cents (up from 71 cents). Meanwhile, households headed by persons who are foreign-born saw an increase in incomes of 4.9 percent between 2015 and 2016 (from $52,956 to $55,559), compared to an increase of 3.3 percent (from $57,896 to $59,781) among households with a native-born household head.
Real median household income, by race and ethnicity, 2000–2016
| Year | White | Black | Hispanic | Asian | White-imputed | Black-imputed | Hispanic-imputed | Asian-imputed | White | Black | Hispanic | Asian |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2000 | $63,589 | $41,349 | $46,229 | $65,836 | $42,217 | $44,789 | ||||||
| 2001 | $62,775 | $39,952 | $45,504 | $64,994 | $40,791 | $44,086 | ||||||
| 2002 | $62,583 | $38,732 | $44,173 | $70,224 | $64,795 | $39,545 | $42,797 | $75,793 | ||||
| 2003 | $62,340 | $38,681 | $43,055 | $72,677 | $64,543 | $39,493 | $41,714 | $78,440 | ||||
| 2004 | $62,147 | $38,240 | $43,546 | $73,067 | $64,344 | $39,043 | $42,190 | $78,861 | ||||
| 2005 | $62,427 | $37,933 | $44,213 | $75,101 | $64,633 | $38,729 | $42,836 | $81,056 | ||||
| 2006 | $62,417 | $38,063 | $44,983 | $76,484 | $64,622 | $38,862 | $43,582 | $82,549 | ||||
| 2007 | $63,576 | $39,261 | $44,775 | $76,521 | $65,822 | $40,085 | $43,380 | $82,589 | ||||
| 2008 | $61,906 | $38,147 | $42,266 | $73,173 | $64,093 | $38,947 | $40,949 | $78,975 | ||||
| 2009 | $60,929 | $36,454 | $42,557 | $73,244 | $63,082 | $37,219 | $41,231 | $79,052 | ||||
| 2010 | $59,948 | $35,361 | $41,423 | $70,735 | $62,067 | $36,103 | $40,133 | $76,344 | ||||
| 2011 | $59,130 | $34,392 | $41,216 | $69,499 | $61,220 | $35,113 | $39,932 | $75,011 | ||||
| 2012 | $59,599 | $34,835 | $40,777 | $71,754 | $61,705 | $35,566 | $39,507 | $77,444 | ||||
| 2013 | $60,036 | $35,647 | $42,205 | $69,098 | $62,158 | $36,395 | $40,890 | $74,577 | $62,158 | $36,395 | $40,890 | $74,577 |
| 2014 | $61,095 | $35,891 | $43,082 | $75,331 | ||||||||
| 2015 | $63,747 | $37,365 | $45,719 | $78,143 | ||||||||
| 2016 | 65041 | 39490 | 47675 | 81431 |
Note: CPS ASEC changed its methodology in 2013, hence the break in the series. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. White refers to non-Hispanic whites, black refers to blacks alone, Asian refers to Asians alone, and Hispanic refers to Hispanics of any race. Comparable data are not available prior to 2002 for Asians. Shaded areas denote recessions.
To account for the redesign of the CPS ASEC survey, when the difference between the original data for 2013 and the redesigned data for 2013 is small in magnitude (less than a 1 percent difference) and statistically insignificantly different, data for 2013 is an average of the original and redesigned data. When the difference between them is relatively large in magnitude (1 percent or greater) or statistically significantly different, we display a break in the series and impute the ratio between them to historical data.
Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Table H-5 and H-9)
Based on EPI’s imputed historical income values (see the note under Figure A for an explanation), real median household incomes for all groups, except Hispanics, remain below their 2007 levels. Compared to 2007, 2016, median household incomes are down 1.5 percent (-$595) for African Americans, 1.2 percent (-$781) for non-Hispanic whites and 1.4 percent (-$1,158) for Asians, but increased 9.9 percent ($4,295) for Hispanics. Asian households continue to have the highest median income, despite large income losses in the wake of the recession.
Income growth in 2016 is strong, but not as strong as 2015 and more uneven
Today’s report from the Census Bureau shows strong across-the-board improvements to household incomes in 2016. Household incomes rose 3.2 percent, after an impressive 5.2 percent gain in 2015; non-elderly households saw a similar rise of 3.6 percent this year after gaining 4.6 percent the year before. However, inflation-adjusted full-time annual earnings for men fell slightly in 2016, 0.4 percent, while women working full time saw an earnings increase of 0.7 percent. Men’s earnings are still below their 2007 level (by 1.1 percent points), while women’s earnings are now 2.3 percent above. Better across-the-board earnings growth would have made this year’s income report unambiguously excellent news, much like the 2015 report. This year’s report is mostly encouraging, but wages need to make strong and sustained gains before we can rest easy about how the economy is working for typical American households.
While the gains in household income are not as impressive as the previous year, they nonetheless represent significant improvements. Part of this year’s slowdown in income growth relative to 2015 simply represents a small inflation bounce back. In 2015, plunging energy prices led to essentially zero inflation. In 2016, inflation rebounded to a still-low 1.3 percent. Besides representing a small slowdown in the pace of income growth, this year’s report reminds us that the vast majority of household incomes (when corrected for a break in the data series in 2013) have still not fully recovered from the deep losses suffered in the Great Recession—the bottom 80 percent of households had incomes in 2016 just at or below those of 2007 (while those in the top five percent are now 8.7 percent ahead). One more year of modest growth will likely bring the broad middle class back to pre-recession incomes.
By the Numbers: Income and Poverty, 2016
Jump to statistics on:
• Earnings
• Incomes
• Poverty
• Policy / SPM
This fact sheet provides key numbers from today’s new Census reports, Income and Poverty in the United States: 2016 and The Supplemental Poverty Measure: 2016. Each section has headline statistics from the reports for 2016, as well as comparisons to the previous year, to 2007 (the final year of the economic expansion that preceded the Great Recession), and to 2000 (the historical high point for many of the statistics in these reports.) All dollar values are adjusted for inflation (2016 dollars).
Earnings
Median annual earnings for men working full time fell 0.4 percent, to $51,640, in 2016, although this change was not statistically significant. Men’s earnings are down 1.1 percent since 2007, and are still 0.6 percent lower than they were in 2000.
Median annual earnings for women working full time rose 0.7 percent, to $41,554, in 2016—also statistically no different than women’s earnings in 2015. Women’s earnings are up 2.3 percent since 2007, and are 8.5 percent higher than they were in 2000.
Median annual earnings for men working full time in 2016: $51,640
Change over time:
- 2015–2016: -0.4%
- 2007–2016: -1.1%
- 2000–2016: -0.6%
Median annual earnings for women working full time in 2016: $41,554
Change over time:
- 2015–2016: 0.7%
- 2007–2016: 2.3%
- 2000–2016: 8.5%
Policy Watch: Two more foxes nominated to run hen houses in the Trump administration
Two officials with a history of anti-worker behavior nominated to be worker advocates
Late last week, President Trump announced his nominees to several key positions at the Department of Labor (DOL). Trump nominated Cheryl Stanton to serve as his Wage and Hour Division (WHD) administrator, a position responsible for enforcing our nation’s basic wage protections. Since 2013, Stanton has headed the South Carolina Department of Employment and Workforce, an agency that does not handle wage enforcement. Much of her career has in fact been dedicated to representing employers, not workers, in wage and hour cases. Stanton has also faced her own wage and hour litigation. The Center for Investigative Reporting recently revealed that she was sued last year for failing to pay her house cleaners. If confirmed, Stanton will be tasked with holding employers accountable when they steal workers’ wages. Her history of siding against workers certainly raises the question of how vigorously she will approach this task.
Trump also nominated former coal mining executive David Zatezalo to head the Mine Safety and Health Administration (MSHA). Zatezalo formerly served as chief executive of Rhino Resources, a coal company that had numerous clashes with MSHA officials during the Obama administration. Following the Upper Big Branch mine disaster on April 5, 2010, MSHA stepped up its enforcement efforts, and identified a number of health and safety violations at Zatezalo’s company. In fact, in 2011, MSHA sought a federal court injunction against Zatezalo’s company. If confirmed, Zatezalo will be charged with ensuring safety standards in our nation’s mines. Twelve coal miners have died on the job to date this year.
What to watch for in the 2016 Census data on earnings, incomes, and poverty
Next Tuesday will see the Census Bureau’s annual release of data on earnings, income, poverty, and health insurance coverage for 2016, which will give us a better picture of how working families are—and are not—recovering from the Great Recession. While it may seem a bit odd to still be talking about recovery a full 9 years after the Great Recession started, even as of 2015 median incomes for American households still had not gotten back to their pre-Great Recession peaks. Worse, in the full business cycle of 2000-2007, household incomes never fully recovered to the pre-recession peaks reached in 2000. This means that the slow early-2000s recovery and expansion, combined with the damage done by the Great Recession, has led to nearly two decades of lost income growth for typical American households. Next week’s release will help us chart the progress in clawing back these lost decades—paying particular attention to differences in the recovery across racial and ethnic groups.
Last year, annual earnings and household incomes rose significantly for the first time since 2007. At the same time, the official poverty rate sharply fell. These long-awaited and impressive across-the-board improvements were welcome news after the lengthy downturn. Furthermore, most of these gains were experienced by workers of both genders and workers and households of all races and ethnicities. Despite these significant improvements, by 2015 household incomes had still not fully recovered from the deep losses suffered in the Great Recession. One more year of modest growth should bring the broad middle class back to pre-recession incomes. It is important to note, however, that some of the improvements we saw last year were driven by very low inflation (0.1 percent), mostly due to falling oil prices. While still low by historical standards, inflation was 1.3 percent between 2015 and 2016, which should moderate some of the gains expected in next week’s report.
A NAFTA renegotiation game-changer, until the Trump administration squanders it
Since the beginning of his presidential campaign, Donald Trump has railed against the North American Free Trade Agreement (NAFTA) as being a bad deal for working Americans. He promised that if he was elected, he would renegotiate NAFTA and secure a “much better deal for all Americans.”
So it’s not surprising that earlier this week, the leader of a prosperous country engaged in NAFTA renegotiations demanded changes to increase workers’ leverage, provide a bulwark against downward wage pressure, and prevent his country’s manufacturing sector from being undercut by weak labor standards. But was this leader Donald Trump? Nope. It was Justin Trudeau of Canada.
Even more striking, the reported change that Trudeau’s government has requested to stem downward pressure on Canadian wages is one that beefs up American labor standards. Yes, the low-wage, low-standard country that Trudeau’s government is correctly concerned about as they renegotiate NAFTA is the United States.
The requested change is ambitious: Trudeau’s government wants an end to so-called “right to work” (RTW) laws in American states. This would clearly be good for American workers. In a nutshell, “right to work” laws have nothing to do with helping people find work—instead they simply ban contracts requiring that workers benefiting from labor union representation pay their fair share for this representation. This ban makes it extraordinarily difficult for workers to join together and form unions in RTW states. As a result, these states have substantially fewer union members and less collective bargaining. The economic evidence shows that RTW laws do not boost employment or economic growth, but do suppress wages.
Senate Banking Committee should vote no on Randal Quarles
Tomorrow the Senate Banking Committee will vote on the first Trump administration nominee to the Federal Reserve Board of Governors, Randal Quarles. As we’ve noted again and again in recent years, members of the Federal Open Market Committee (FOMC), which include Fed governors, have extraordinary power over American economic policy. A primary job for the FOMC is balancing the two prongs of the Fed’s “dual mandate”—the pursuit of maximum employment consistent with stability of prices (or at least stability of inflation). For too many years over recent decades the Fed has privileged avoiding any outbreak of above-target inflation over the need to pursue maximum employment and keep labor markets tight. This failure to target and achieve genuine full employment has been a key driver in the rise of income inequality and the failure of wages for the vast majority to meaningfully outpace inflation. Currently, this debate over full employment and the dual mandate centers over concerns that the Fed may have begun raising short-term interest rates too early and too rapidly, threatening to drag on the pace of economic recovery and progress in reducing unemployment.
Quarles has made it clear that he does not think that recent interest rate increases have proceeded too rapidly. In fact, he has made a conventionally conservative mistake in declaring that low interest rates are a “threat to financial stability.” This outlook should not come as a huge surprise. A key reason why the Fed in recent decades has privileged extreme inflation control over tight labor markets has been because the financial sector and wealth holders are extremely averse to inflation surprises. The financial sector dominates governance of the regional Federal Reserve banks, which supply 5/12ths of the votes of the FOMC. Quarles’ arguments against efforts to aggressively pursue genuine full employment are fully consistent with his background as a self-described “Wall Street lawyer.”
Withdrawing from KORUS: A good impulse, driven by bad reasons, whose potential will be squandered
The saying goes that even a stopped clock tells the correct time twice a day. This is a pretty good description of the Trump administration’s approach to trade policy: their analysis and motivations are almost never right, yet they occasionally hit on a decent idea. But then they move quickly off of it. This is illustrated perfectly in their recent moves regarding the Korea-U.S. Free Trade Agreement (KORUS).
News reports suggest that the Trump administration is preparing to withdraw from KORUS. The motivation for this seems more driven by Trump pique that the South Korean government is not rubber-stamping his preferred policy stance on the current tensions in the Korean peninsula, rather than on any coherent economic analysis.
Yet, it’s true that on pure economics, KORUS should be seen as a failure. The KORUS deal, approved in 2011, was supposed to result in rising U.S. exports. However, U.S. exports to Korea actually fell $1.2 billion between 2011 and 2016, while imports from South Korea soared—increasing the bilateral trade deficit by $14.4 billion and eliminating more than 95,000 jobs in the first three years alone.
The glaring omission in KORUS was failure to include enforceable provisions on currency policy. Korea is a well-known currency manipulator, and it also has the fourth largest current account trade surplus (the broadest measure of trade in goods, services, and income) in the world. Ending Korean currency manipulation and revaluing the won is the surest way to increase U.S. exports and stop the surge in Korean imports in the United States, demonstrating the value of this strategy for rebalance overall U.S. trade and helping to rebuild U.S. manufacturing. Recent estimates suggest that rebalancing U.S. trade will require Korea to revalue the won by at least 32.7 percent.
Ending DACA lowers wages and tax revenue, and degrades labor standards
This morning Attorney General Jeff Sessions announced that the Trump administration will “wind down,” and in six months, end Deferred Action for Childhood Arrivals (DACA), a Department of Homeland Security initiative put in place in 2012 that temporarily deferred the deportation of approximately 800,000 young immigrants who were brought to the United States as children. DACA has been an unqualified success and has benefited not only the DACA recipients themselves, but also the country and the economy.
The young immigrants who met the requirements and passed the necessary background checks for DACA were promised by the federal government that they would not be removed from the United States for two years at a time, as long as they kept applying to renew, kept a clean criminal record, and were either enrolled in school or graduated, or serving in the military or honorably discharged. Because of these requirements, we know that nearly all of the recipients are deeply integrated into their local American communities and labor markets.
Along with protection from removal, DACA recipients are entitled to receive an employment authorization document (EAD), allowing them to be employed in the United States legally, along with certain other benefits. More than 100 legal experts and 20 state attorneys general have recently argued that DACA is a lawful use of the executive branch’s prosecutorial discretion, and as I have written before, the granting of an EAD to deferred action recipients is clearly authorized by statute. Together this means that eliminating DACA is entirely a political decision and not a legal one. The impact of this political decision is significant: 800,000 young immigrants—many of whom have never known another country except when they were small children—will become instantly deportable and lose the ability to work legally and contribute to the United States, and will be effectively left without labor rights and employment law protections in the workplace.