Thursday, September 21, 2017

2016 Poverty and Income in the United States

By Katie Thomas, Project Associate 

Last week, the U.S. Census Bureau released 2016 data on income and poverty in the United States. These estimates are intended to gauge the overall well-being of the country. The high-level summary of statistics reveals that the median household income was $59,039 in 2016 and that there was a real over-the-year increase of 3.2 percent. At the same time, the poverty rate fell by 0.8 percentage points with roughly 2.5 million fewer people living in poverty than there were in 2015. Combined, the two measures are positive outcomes and indicate that residents, on average, are better off than they were the previous year.

A deeper dive into the data reveals some more interesting findings. For example, the main reason that household incomes have increased is due to the fact that there were simply more people working in 2016 than there were in 2015. With an unemployment rate of less than five percent and the number of jobs continuing to grow, individuals are finding employment. The Census estimates that last year there were 1.2 million more people with earnings and 2.2 million more individuals working full-time, year-round. This suggests that in addition to more people finding jobs, there was also an increase in the number of workers that were able to find full-time employment as opposed to part-time work. As a result, the adage that a job is the best antipoverty program proves true with fewer people living in poverty in 2016.

Household Income at Select Percentiles*

Source: United States Census Bureau
*Income in 2016 CPI-U-RS adjusted dollars.

So, what are some of the issues highlighted in the report? For one, income inequality continues to be a challenge. When adjusted for inflation, household income for the bottom tenth of households was roughly eight percent less than it was in 2000. At the other end of the income spectrum, household income at the 95th percentile was 11.3 percent higher than it was in 2000. More recent trends do indicate that income growth over the past five years has been more equitable among the top 90 percent of households but still show a growing gap for the poorest of households.

Secondly, despite healthy growth in the labor market and household income, wage growth remains stubbornly slow. Typically, the main source of income for low-income households is through wages, whereas higher income households also tend to acquire income through investments and other sources. As such, the nation’s slow wage growth is more acutely felt by individuals at the lower income levels. As of August 2017, the Bureau of Labor Statistics reported that average hourly earnings had increased by 2.5 percent over the previous 12 month period. Wage growth of 2.5 percent outpaces inflation, but just barely. When wages grow at a faster pace than inflation, workers see their standards of living raise and employees at all income levels and wage rates are able to benefit from the overall economic growth.

Additional data with a breakdown of income and poverty by race and Hispanic origin, geographic regions, gender, age, and other characteristics can be explored in the report. For local level data, 2016 income and poverty statistics for school districts, counties, and states is expected to be released in December 2017. For now though, 2015 estimates are available at their website. The Census Bureau provides an interactive data and mapping tool that is pretty user-friendly and can be explored here.

The recent income and poverty report by the Census Bureau shows that progress is being made but there is still more work to do. Additionally, it highlights the importance of having quality data available to be able to gauge the economic well-being of the population. As the next decennial census of the U.S. population is gearing up for 2020, federal budget uncertainty regarding funding for the census have unfortunately raised concerns about the Bureau’s ability to conduct a reliable count of the population and its characteristics. The decennial census, especially, is critical as all of the following decade’s data will use the 2020 Census as the baseline for future surveys. Also, among other uses, the decennial census provides vital data to measure the effectiveness and progress of the many programs and projects that rely on its data, in addition to helping policymakers and elected officials make informed decisions.

The U.S. Government Accountability Office (GAO) – an independent, nonpartisan agency that works for Congress – put the 2020 Decennial Census on its list of High Risk areas, or federal programs that are “vulnerable to waste, fraud, abuse, and mismanagement, or that need transformative change.” Ultimately, it is critical that the Bureau have the proper funding so that it can hire the necessary workers and implement the essential IT systems and other innovations that are needed to produce a cost-effective and reliable enumeration. Fortunately, there’s still time to save the 2020 decennial Census, but that will depend on if our elected officials make funding for the Census a top priority. It’s certainly something to keep an eye on in the coming weeks as Congress negotiates the 2018 federal budget.