Like the man said, important numbers are coming out tomorrow. But, I can hear you thinking, if they’re out tomorrow, why do we have to talk about them today?
Fair question. It’s because these data tend, IMHO, to not get enough attention. That’s because they’re for last year (2015) and, thus, don’t move markets. Also, this Census Bureau report is not like the monthly jobs report we all know and love, where you can look at the unemployment rate and the payroll jobs number and call it a day (not that I’d ever do so!). These data provide tons of results — e.g., the three variables listed in the title by age, race, gender, region, and much more — so the report can be a bit overwhelming. There are also some tricky methodological issues to consider.
Given all that, let me say a few words of preparation for tomorrow’s 10 a.m. release, after which I’ll post something here ASAP (like I said, it takes a bit to sort through all the numbers; if I can post by noon, I’ll consider myself as having crushed it and will listen for your applause).
First, allow me to be really reckless and make some predictions (“reckless” in that these numbers are hard to forecast, and you’ll be able to see how right or wrong I was in just a few hours!).
— I suspect the poverty rate will fall in 2015, by at least half a percentage point (and possibly more), i.e., from 14.8 to 14.3 percent. That would be a statistically significant decline.
— Similarly, I expect median household income to rise 1 percent to 2 percent, also significant.
— I’m especially confident that the share of the population that is uninsured will continue its recent sharp decline.
Why so confident regarding that last bit? Because other, more timely data have shown just that. Now, let’s talk policy for a second. I don’t mean to be dramatic, but given that health care reform — Obamacare, if you prefer — is a complex policy thrown into a complex sector in a complex world, I think an objective person would be hard-pressed to find a more dramatic example of a policy having its intended consequence of reducing the share of Americans without health coverage. No one’s saying the Affordable Care Act doesn’t need some work — recalibration is how I think of it. But trust me when I tell you, that trend reversal you see in the figure below — a trend I believe will be further corroborated in tomorrow’s data — is one of the greatest successes of modern politics and policy.
What about the other predictions? What’s behind them?
First, low inflation. Average inflation in 2015 was just about zero (falling energy prices), and that does two important things to these data. It means that nominal gains in wages and incomes much more easily become real gains. If inflation is up 2 percent and your paycheck goes up 2 percent, you’re no better off in terms of buying power. But if inflation is zero, your real paycheck is up 2 percent.
Also, the Census Bureau defines poverty as family income below a threshold, and that threshold is adjusted each year for inflation. In 2015, the thresholds hardly rose at all, so even a small bit of nominal income growth could push more households above the line. (BTW, the 2015 poverty threshold for a single parent with two kids is about $19,000. And, yes, that’s not at all a realistic threshold in many parts of this country.)
Second — and as you’d imagine, this one’s big for me — the improved labor 2015 market. No, we’re not yet at full employment, but the tightening in the job market (in tandem with low inflation) demonstrably raised the employment and pay of low- and middle-income workers last year.
A final, important word about the Census Bureau poverty results. To make matters just a bit more complicated, two different measures of the poverty rate will be released tomorrow, the official measure and the supplemental poverty measure (SPM).
The latter is a superior metric because it uses updated thresholds and, more so, because it includes numerous anti-poverty policy measures that the official rate ignores, like the cash value of nutritional support and the refundable tax credits that have been extremely effective at lifting working families out of poverty (or nearer to the threshold).
Because the official rate leaves out so many of the policy interventions we’ve ratcheted up over time, it fails to show the progress we’ve made through expanding programs like pro-work, refundable credits. Thus, it allows conservatives to echo the old Reagan line, demonstrably wrong, as you’ll see in a second, that “we fought a war on poverty and poverty won.”
Not that the “war” is over — far from it. But the figure below compares the official rate to the SPM over time. The key findings are:
— While the official rate is about the same as it was in the mid-1960s, the SPM is about 40 percent lower (it has fallen from about 26 percent to about 16 percent).
— The ability of public policy to offset the impact of recessions on the poor has grown over time (this is another underappreciated policy advance, I’d argue). The figure shows that the early 1980s and early 1990s downturns led to poverty increases even in the SPM. But during the uniquely deep Great Recession, the SPM was essentially flat. For the record, that’s not only the usual countercyclical stuff in play (e.g., unemployment insurance), but also the extra discretionary measures implemented as part of the Recovery Act.
So, I expect two punch lines coming out of tomorrow’s report. One, policy and full employment are really, really important if we want the recovery to reach middle- and low-income people. Two, for all that, it has taken a very long time to get this far, as inequality remains a damaging wedge between overall growth and more broadly shared prosperity. And we’ve still got a very long way to go.
A potential third punch line is a punch at yours truly if the numbers turn out to be a lot more downbeat than I expect. Stay tuned!