Middle-class income rose to the highest recorded levels in 2017 and the national poverty rate declined as the benefits of the strong economy lifted the fortunes of more Americans, the U.S. Census reported Wednesday.
Crossing the $61,000 mark signals the American middle-class may have finally earned more than it did in 1999, although the Census Bureau cautions that median income last year was not statistically different from 1999 or 2007, the last year before the recession. A change in methodology in 2013 makes precise comparisons difficult. All the income figures have been adjusted for inflation and are reported in 2017 dollars.
Middle-class household income has been rising steadily for the past several years as the economy has rebounded from the deep recession and millions of Americans have found jobs again. The extra pay from having another person in the home employed again or working additional hours is the largest factor contributing to rising income, the Census Bureau said.
"We’re continuing to see a shift from part-time to full-time work, so some of that could explain an increase in income,” said Trudi Renwick, an assistant division chief at Census Bureau.
The Census Bureau also reported that the U.S. poverty rate declined modestly to 12.3 percent, the lowest level in more than a decade and a sign the economic devastation from the Great Recession is subsiding.
But by other measures, the economy is still not working as well as it could for everyone. Inequality remains near the highest levels in the modern era, according to various metrics the Census Bureau tracks, and the share of Americans without health insurance stalled last year after several years of progress to extend coverage to more people under the Affordable Care Act.
The percentage of Americans without health insurance was essentially unchanged from 2016 to 2017 — staying at about 8.8 percent, or 28.5 million people — despite the overall economic boom. That marks a leveling off in the decline in the number of Americans without insurance — a number that trended steadily downward from 2010 to 2016, in part due to the implementation of the Affordable Care Act.
What it will take for more Americans to get ahead is higher hourly wages, said Jared Bernstein, former chief economist to vice president Joe Biden and a senior fellow at the left-leaning Center on Budget and Policy Priorities.
Much of the income growth in recent years is from people getting jobs again, but economists across the political spectrum agree that wage growth has been disappointing and that the working class would likely be doing even better if pay and productivity would rise.
“Income growth was dominated by putting people back to work after the Great Recession and not wage growth," said Douglas Holtz-Eakin, head of the right-leaning American Action Forum and a former economic adviser to GOP presidential candidates.
Incomes for full-time male and female workers declined slightly last year, the Census Bureau found, a reminder that wage gains have been sluggish and mostly wiped out by rising prices for gas, rent and other necessities.
Holtz-Eakin added that the latest Census Bureau income data is for 2017, before President Trump and GOP leaders in Congress passed tax cuts and scaled back regulations on businesses in an effort to boost economic growth, productivity and wages.
Democrats counter that the tax cuts are mainly helping the wealthiest Americans, and that the GOP wants to do additional tax cuts and scale back the safety net at a time when inequality remains high and many working poor are still struggling.
Last year, 39.7 million Americans were living in poverty, a number that did not decline much from 2016. While the poverty rate is now at the lowest level since 2006, it is still a full percentage point above the rate in 2000, the last time unemployment was this low.
“That surprises me. I was expecting better improvement with the economy,” said H. Luke Shaefer, of the University of Michigan. “It’s something experts and policymakers should take a look at.”
The poverty rates for African-Americans and Hispanics also remain substantially higher than for whites and Asians although the unemployment rates for African-Americans and Hispanics have come down swiftly. Twenty-two percent of African-American households and 19.4 percent of Hispanic households live in poverty compared to 11 percent for whites and 10.1 percent for Asian-Americans, the Census Bureau reported.
“It’s not that growth is failing to reach the middle and low-income entirely. It’s just that there is so much inequality that these folks aren’t getting ahead as quickly as they should,” said Bernstein.
Economists have been worried about why wage growth has been so sluggish lately, but Americans are compensating for that by working longer hours or having another family member find employment. Job openings hit a record high in July, the Labor Department reported this week, and there are now more jobs available than unemployed workers.
Median household income is generally viewed as the best gauge of how a typical middle-class home is faring financially, although households can vary in size from a single person to multiple adults and children residing under the same roof. The average U.S. household has 2.6 people.
Clarification: This story has been updated to make clear that although household median income of $61,372 is the highest ever recorded by the Census Bureau, officials caution the figure is not to be treated as statistically different from previous highs reached in 2007 and 1999. Precise comparisons aren't possible due to a change in methodology in 2013.