New data out Wednesday show that poverty fell and middle-class incomes rose in the U.S. last year, though not as quickly as in prior years (and a more accurate poverty gauge did not decline at all). Gains in health insurance coverage stalled in 2017, likely due, in part, to efforts by the Trump administration to suppress health insurance enrollment through the Affordable Care Act.
Just under 40 million Americans lived in families with incomes below the official poverty line last year, including 12.8 million children. (The U.S. child poverty rate is uniquely high among developed economies.) As shares of the population, the overall poverty rate was 12.3 percent, down from 12.7 percent in 2016 and the lowest poverty rate since 2006. For children, the poverty rate was 17.5 percent in 2017. (Though this is down from 18 percent in 2016, the decline was not large enough to be statistically distinguishable from no change in the rate.) While this is the third consecutive year of declines in the poverty rate, the declines in 2015 and 2016 were significantly larger: -1.2 and -0.8 percentage points, respectively.
While the poverty and income improvements are clearly welcome results, the absence of progress in health coverage is an unfortunate break in a highly favorable trend. After years of falling as the Affordable Care Act, and especially its Medicaid expansion, came online, the uninsured rate (the share of Americans without health coverage) was 8.8 percent last year, the same rate as 2016. As I detail below, efforts by the Trump administration to undermine the ACA are likely behind this stall in progress.
The real income of the median household — the one at the 50th percentile, or right in the middle of the income scale — rose 1.8 percent last year, to about $61,400 (2017 dollars), the third year in a row this indicator of middle-class living standards rose in real terms. However, like the change in poverty rates, the pace of 2017’s income gain was considerably below that of 2015-16. In those years, real median household income grew by 5.1 and 3.1 percent, respectively.
Faster inflation last year is one explanation. Although the job market improved in all three of these recent years, providing ample earnings opportunities for working families, inflation was faster in 2017 than in the prior two years, meaning nominal income — before adjusting for prices — needed to grow faster just to post the same percent gain in real terms. This year, even as mid-level wage growth may finally be accelerating, inflation is also picking up, suggesting 2018 real income growth may also slow relative to earlier years when inflation was unusually low.
Though changes in the census survey preclude “apples-to-apples” comparisons to income reports before 2013, the median household appears to have largely recovered its pre-recession level from 2007. The fact that this income recovery took a decade is a testament to the length and depth of the downturn, the initial weakness of the recovery, and the ongoing inequality problem that has long characterized the U.S. economy. In fact, as the second figure in this census packet reveals, real median household income is just about back to where it was in 2000, 17 years before today's data.
By definition, income inequality implies that overall income growth is distributed more to those at the top of the scale than to others. Though the census data exclude some key income components that drive inequality, such as the equalizing value of non-cash government benefits (like nutritional support) at the bottom of the scale and the dis-equalizing value of capital gains at the top, most of the data show little change in the high levels of inequality that have persisted in recent decades. One exception is the fact that the income of households at the 95th percentile grew 3 percent to $237,000, notably faster than the median growth rate of 1.8 percent.
Today’s release also includes an alternative measure of poverty that, while not the official rate, is superior to that rate because it more accurately measures both resources and costs faced by households, and its threshold has been updated to reflect consumption norms. One key attribute of this supplement measure is its inclusion of non-cash and post-tax anti-poverty benefits, such as the Earned Income Tax Credit (EITC), a valuable, pro-work wage subsidy that lifted over 8 million out of poverty last year but is not counted in the official rate.
This alternative poverty rate was 13.9 percent last year, essentially unchanged from 2016’s rate of 14 percent. This lack of progress in the more accurate poverty measure suggests significant swaths of the poor were still left behind, even in year 8 of this longer-than-average expansion.
As noted, the uninsured rate was unchanged compared to significant declines in prior years, from about 13 to 9 percent, a decline of almost 14 million in uninsured population. According to the Center on Budget and Policy Priorities, the Trump administration’s “cancellation of most federal outreach efforts toward the pivotal end of the open enrollment period for 2017 marketplace coverage, public confusion caused by year-long congressional and Administration attempts to repeal the ACA, and rising concerns among lawfully present immigrants who are eligible for [ACA-supported coverage]” are all implicated in this unfortunate development.
That said, the uninsured rate at least did not tick up, and it remains at a historic low point. The ACA remains the law of the land and continues to provide affordable coverage to millions who need it.
Overall, today’s report shows some real progress in a long and durable expansion. The data show an increase in millions more people taking advantage of the tight labor market and contributing to their families' incomes. However, gains have slowed relative to earlier years; poverty, more accurately measured, was unchanged; and the health-coverage stall is at least partly the result of willful policy that is actively undermining the living standards of families who would have otherwise gained coverage. In other words, the recovery is solid, positive, but from the perspective of many American families, uneven.