There was a time, not too long ago, when I eagerly awaited economic data releases from US governmental statistical agencies—including monthly employment releases, quarterly GDP estimates, and annual census data on income and poverty. I’ve always found digging through data tables and charts to be a good way to break through political and policy rhetoric, to ground and nuance problems, and to test assumptions.
I still dig in on occasion, but more often find myself thinking about longer-term economic trends and how our foundation partners can improve that trajectory. But this month, when the Census Bureau released new data on income, poverty, and health insurance coverage, I reverted to my old ways, wondering if the news was really as good as the media was reporting.
We’ve seen dramatic improvements in key areas
The good news: median incomes rose by 5.2 percent last year—the largest single-year increase in both percentage and dollar amount since the US started tracking the data in 1967. The Census Bureau report showed that 3.5 million fewer people fell below the poverty line compared with the previous year, and 4 million fewer people lacked health care coverage. These are dramatic improvements, especially considering that progress was seen across demographic groups, gender lines, and ages. And for the first time since 1999, we have seen improvement in all three of these measures in the same year. Though more progress is needed, this is all very good news.
The boost in incomes and reduction in poverty are likely the result of a tighter labor market finally affecting families’ bottom line—both because more people have jobs and because pay has increased. On the latter, the report shows that incomes of full-time, year-round workers increased for both men and women by 1.5 and 2.7 percent, respectively. Boosts in the minimum wage in many states may also play a role, and workers are better able to negotiate higher wages with a lower unemployment rate. Recovery from the recession is still ongoing, but seven-plus years of expansion seem to be firmly taking hold. Since, despite growing productivity, median wage rates have been largely stagnant since the 1970s, this is significant—but we’ll still have to wait and see if this is just a blip or part of a larger shift.
Safety net programs make a real difference to the incomes of poor families
The improvement in the number of people without health insurance is easy to pin down: The Affordable Care Act is clearly having an impact, with two years of dramatic reductions in the number of uninsured, especially in those states whose leaders chose to expand Medicaid coverage for low-income residents. This shows that federal and state policies can indeed have a positive impact on people’s lives. A supplemental measure of different definition of poverty helps us understand this in more detail.
While the traditional measure looks at before-tax cash income—including income from employment, savings, and cash assistance from some programs—the supplemental measure includes the impact of tax policy, as well as additional, noncash benefits (such as nutrition assistance) from many efforts that aim to assist those with low incomes. This supplemental measure also looks at other obligations families have, including taxes, work and child care expenses, and out-of-pocket medical expenses. The measure also uses a different income threshold for determining whether a family is in poverty—taking into account, for example, geographical differences in housing costs. Overall, this measure shows a slightly higher percentage in poverty when compared with the “official” rate: 14.3, versus 13.7.
This measure allows us to analyze various “what if” scenarios to find the impact of various policies. For example, if we remove Social Security payments from calculations, we find an additional 27 million people living in poverty. When we consider the impact of things like refundable tax credits, nutrition assistance (including school lunches), and housing subsidies, we see that they account for millions of people reaching above the poverty threshold. On the expenditure side, we see that the cost of out-of-pocket medical expenses led to over 11 million people being classified as poor—and so it’s clear that there is room to improve the health care system so that an illness doesn’t lead to financial hardship. Again, these results show that safety net efforts can and do have a significant impact on the incomes of millions of families near or below the poverty line.
The progress we’ve made, and what remains
We still have a ways to go. For example, significant gaps persist in incomes across gender, race, and ethnicity. And not surprisingly, income inequality remains a pressing long-term challenge. We also need to concentrate on places that are left behind—which include areas of concentrated poverty within cities as well as many rural areas. Inequality takes many forms, and the rural-urban divide is a driver of many kinds of disparities, including in income, health, and broader economic opportunity. While there has been much discussion about how to make our cities more competitive and globally connected, we need to have honest conversations and look for innovative solutions for a wide range of locations.
So what should we take away from the deep dive into the data? The census report serves as a reminder that the macroeconomic environment is critical to the well-being of people across the income scale. To ensure both income and employment gains, we need a tighter labor market—which can be supported by accommodative monetary policy, as well as by federal investments in things like infrastructure. The report is also a reminder that economic and social disparities remain, and progress can be uneven. Concentrating efforts on places that are left behind is central to reducing these disparities. Finally, the report shows that efforts that directly benefit low- and moderate-income families—through tax policy or in-kind benefits—can reach millions of people and lift them out of poverty.
Which brings me to the main takeaway from the report as a whole: Yes, progress is possible!