Someone asked me to post them, so here they are:
First, just so this doesn’t get lost in the mix, let me say why I think these data are so important. After all, given that they’re for last year, they don’t exactly move markets. What’s the big deal?
The big deal is that these Census data give us the most granular look to date at the impact of the job market and public policy on the living standards of low- and middle-income families. You can get an update on the stock market every minute. We learn about the extent of child poverty once a year.
So, what does this granular look show us? Bob took you through some of the results we view as important, so let me add some brief observations on what’s behind these historically notable improvements.
Of course, there’s the tightening job market. In 2015, employers added almost 3 million jobs, on net. The unemployment rate fell almost a point overall, and almost two points for African-Americans. The real hourly pay of mid-wage workers went up 2% in 2015 compared to less than half that in 2014.
You know the old adage: when the economy sniffles, the least advantaged catch pneumonia. Well, that works in reverse, too. The benefits of closing in on full employment disproportionately flow to the least advantaged.
So we find in today’s data that while households throughout the pay scale saw real gains, the largest gains accrued to those households at the bottom of the income scale. I’m sure you’ve heard the topline income number: real median HH income up 5.2 percent, the largest one-year gain on record in this series, which starts in the mid-1960s, and the first real gain since 2007.
But real HH income went up 8 percent at the 10th percentile and 6 percent at the 20th percentile. Poverty rates for whites fell about one percentage point; the rate for blacks and Hispanics fell twice that much (though from much higher levels).
Meanwhile, income gains at the 90th and 95th percentiles were between 2 and 4 percent, below those of lower income households. This too is a familiar pattern of the benefits of full employment. It’s not that tight labor markets don’t help the wealthy. It’s that they tend to do well in good times and bad, while less well-off households depend on tight job markets to give them the bargaining clout they otherwise lack.
So a big part of the story today is that strong labor markets make a big difference in helping to connect low- and middle-income working families to the broader economy. That also points the way forward. I’m glad to see a great year in these data, but middle- and low-income HH’s need a lot more than one good year.
Another factor behind today’s very positive results is public policy. This is most evident of course with the health coverage results, as the fingerprints of health care reform are all over the sharp improvement in coverage we see both in today’s Census Bureau data as well as in other data sources.
In other words, in 2015, after six years of an economic expansion, both the economy and public policy were finally pulling for the middle class and the poor. Given the powerful forces of inequality pushing the other way, the results show the extent to which this one-two punch–full employment and progressive policies–can lift the living standards of working families.
While Bob and my review of the Census data has been largely positive I want to offer two caveats. First, one good year does not reverse decades of stagnation. This fact is particularly visible in the real median earnings trend of ft/fy men. In 1979, these guys earned about $52,000 per year in today’s dollars. In 2015, they earned about $51,000 (which includes their 1.5% real gain last year). The trend for women is much more favorable over time, which implies some partial closure of the gender pay gap, but their median pay has been largely flat since 2000 (which includes their solid 2.7% in 2015). So let’s be careful not to overlook the deep, long-term challenges still facing many middle-income workers.
Finally, inflation was very low last year, about 0.1%. Such uniquely low price growth helped to boost real incomes and lower poverty rates last year. This year, inflation has climbed a bit and is running slightly north of 1%. To be clear, based on continued improvement in the labor market, as well as the continuation of important, progressive policies, including the Affordable Care Act and minimum wage increases, I expect the positive trends you see today to be ongoing as we speak. But based on higher inflation, next year’s report may not be quite as stellar as this year’s version.*
*[I did not say this on the call, but there’s also likely to be a strong “regression to the mean” effect: outlier results are often followed by ones that are somewhat attenuated.]