Incomes Rising a Bit
Terry H. Schwadron
Sept. 22, 2017
Reports that middle-class incomes rose about 3.2% in the last year is being described as great news. Indeed, for a country that elected Donald Trump out of concern that American incomes were slipping dangerously, it is good news.
But the fact is that prices, too, are growing, particularly for things as diverse as college tuition, home costs, cable television bills, $1,000 Iphones, travel, even at the gas pump that the advances seem to disappear quickly. Add to that, the increases being bandied about in health care costs, prescription drugs, education are in such amazingly large increments that any single-digit percentage increase in wages seems puny.
The Census Bureau said median household income rose to $59,039, a 3.2% increase over last years and the second consecutive year of gains. The poverty rate in the country, which takes a fairly arbitrary look at minimal income and applies it across the country, without regard to local cost structures, declined to 12.7%, as did the percentage of people who had no health insurance — to 8.8%. All of that is on the good news side, especially given where we all were in 2008 on the brink of world economic collapse.
Take a deeper look, and you will find that discrepancies among blacks and whites continue: Median income among African American households was $39,490 as compared with that for whites at $65,000 and $81,000 for Asian Americans.
And the median income altogether are at about the levels last seen in 1999.
Still, that seems enough for the Fed, the Federal Reserve governors, to talk seriously about slowly bringing up interest rates by the end of the year and to stem issuance of government bonds. They see the economy growing at about 2.4%, up from 2.1%, enough to justify applying a few brakes. This comes at the same time that the White House is depending on growth rates in excess of 3% a year or more, their justification for spending in deficit territory because growth pays for everything, according to President Trump.
No wonder people are complaining at the ballot box. Of course, Team Trump will take credit for the improving wage numbers, though the data make clear that the improvements came about through the Obama years, which had a tough statistical hill to climb. Now with money loosening, with job availability improving and with the job-creating attitudes in the Trump government, those figures are likely to continue improving.
Of course, the Census Bureau didn’t track the monetary fates of the 1 percent. We know that those figures have shot up at way more than 3.2%. Arguably, they don’t need tax cuts and other incentives to do better; they need the incentives to keep their money and investments in the United States, perhaps. Indeed, the top fifth of wage earners took home more than half of all overall income, a record.
The median income increased since 2014 because millions more Americans found full-time jobs, but there is little evidence that employers are rushing to offer raises to those who already are employed. Without more wage gains, without consideration of minimum wage increases, without assigning workers full-time hours, momentum towards better household income could slow. Specifically, with the general Republican attack on health care costs, in the name of protecting individualism, huge new costs will undercut these household gains.
In general, economists talk of a more difficult time in adding jobs at a time of overall low unemployment rates, and companies openly talk about difficulties in finding appropriately educated, trained workforces for their increasingly automated processes. So, as good as the numbers sound, there are signs of worry out there. In return, President Trump promises that a combination of tax cuts, infrastructure investment, renegotiated trade deals and the repeal of Obama administration regulations will deliver a burst of job creation and attendant economic growth. Just how successful those efforts will be is in serious question, of course, since the Congress clearly shows that its interests and those of the President differ in many respects. And the President has shown himself notoriously a generalist when it comes to legislation, sketching only the wispiest outlines for his economic goals.
Still, In President Trump’s first seven months, the U.S. economy has added about 25,000 fewer jobs per month than it did during the last seven months of Barack Obama’s presidency. In a more positive sign, the gross domestic product grew at an annual rate of 3% in the second quarter of 2017, according to a federal report issued in late August.
For now, though, the economy is returning to pre-recession levels, as indicated by several benchmarks. The national unemployment rate was 4.4 percent in August, just about the same as pre-recession levels. And in July, U.S. employers had generated enough jobs to restore national employment to where it stood before the recession started in 2007, even after accounting for population growth in the intervening decade.
Still “consumer confidence” polls suggest Americans are optimistic for continued improvement in household income. A Gallup poll this week found that 64% of Americans think their “standard of living” is improving, the highest percentage since the financial crisis, while only 19% feel their standard of living is declining.
From a statistical point of view, it is difficult to take even the two-year improvement piece as definitive. There are too many variables out there, too many uncertainties. And it certainly doesn’t feel as if we all are getting ahead. It still looks as if the rich are getting richer, and the rest of us are paddling to stay above water.
Keep paddling; they think we’re swimming.