The Census Bureau reported today the good news that poverty in 2016 fell by 0.8 percentage points to 12.7 percent for all persons. Poverty declined because of the continuing economic recovery from the Great Recession: the 2016 annual unemployment rate was 4.9 percent compared to 5.3 percent in 2015. And the number of full-time, year-round workers increased by 2.2 million. Although median earnings of male and female workers did not increase significantly between 2015 and 2016, low-wage workers benefited from higher state and local minimum wage increases. In 2015, 21 states and the District of Columbia increased their minimum wage rates, and seven additional states raised their minimum wages in 2016. In addition, 18 cities and counties raised their minimum wages in 2016.
Despite these gains, poverty is too high—the 2016 rate is about what it was in 2007, 12.5 percent, and is still above the 2000 rate, 11.3 percent.
Median household income also increased, by 3.2 percent to $59,039. Yet median household income is about the same as it was in 1998 and median earnings for men working full-time full-year are still lower than they were in the 1970s.
A focus on a single year’s changes neglects the big picture: the poor and the median full-time worker and household were better off at the end of Bill Clinton’s administration 17 years ago than they are today. Yet the incomes and wealth of the economic elite are much higher now than at the start of this millennium, and stock market indices are at all-time highs.
We have been living in an era of stagnating incomes for most Americans, as the gains from economic growth continue to be captured by the economic elite. A rising tide stopped lifting all boats in the 1970s because of fundamental economic changes, including employer practices that hold down wages, technological changes, and globalization.
In spite of these economic realities, the Trump administration and Republicans in Congress pretend that they have a magic bullet that can dramatically increase economic growth and lift all boats again. The magic involves schemes to reduce taxes on the rich and pay for them by reducing government social spending on Medicaid, food stamps, school lunches, and other programs that aid those who have not benefited much from economic growth for decades. Indeed, many state legislatures controlled by Republicans have passed laws that roll back minimum wage increases that were legislated by cities and counties with Democratic majorities.
We should accept economic realities and reject magic. There are many bipartisan policies that could reduce poverty—for example, expanding the earned income tax credit which makes work pay for low-wage workers and more spending on badly-needed infrastructure and early childhood education, which would both expand employment now and raise future productivity.
The economy has failed to benefit the poor and most workers over the last quarter century. Pursuing policies that enhance economic growth is important, but unless we do more to help families with low earnings, economic growth will continue to mainly help the rich get richer.