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US Household Incomes Grew In 2017, Yet Inequality Worsens

Twenty dollar bills are shown in this photo, Aug. 23, 2017.
Erik Anderson
Twenty dollar bills are shown in this photo, Aug. 23, 2017.
US Household Incomes Grew In 2017, Yet Inequality Worsens
US Household Incomes Grew In 2017, Yet Inequality Worsens GUEST: Peter Brownell, research director, Center on Policy Initiatives

Our top story on Midday edition figures on income and poverty levels in California have been released by the U.S. Census Bureau. And despite the economic recovery one in five California residents still lives in poverty. One of the highest poverty rates in the nation here in San Diego. The numbers show a mixed bag with household incomes up but only because more family members are working. Joining me to explain the numbers is Peter Brownell research director at the Center on Policy Initiatives a San Diego think tank that advocates for economic justice for working families. And Peter welcome back. Thank you Maureen. So what do the latest figures from the Census Bureau tell us about the poverty in San Diego. Well what they show is that in the city of San Diego where we focused that poverty has been holding steady for the last over the last year. The new numbers came out yesterday and it's thirteen point one percent overall for individuals in the city which is identical to what it was last year and about what it was before the recession started. We do see some areas that are a little bit more concerning. In particular there was a jump up in child poverty to a little over 18 percent. So that's one of the sort of biggest areas of concern I would say. And that poverty rate of thirteen point one that's higher than the national rate isn't it. Yeah it is. The national rate is about twelve point three percent. I think is what they just came out with so yeah we're not doing as well as the national level. And then I think the other thing to really keep in mind is when we're talking about these official poverty rates to one size fits all measure for the whole country. So when we say we're higher than the national rate that that's just in terms of our income levels it's not really taking into account the high cost of living here. What are the income levels that define poverty. Yes so it's set by family size. So for example for a family of four with two adults and two children the poverty threshold is twenty four thousand eight hundred fifty eight dollars for a single individual. It's 12000 488 dollars. So anyone below that is considered in poverty whether they're here in San Diego or in Biloxi Mississippi. And you mentioned that there were significantly more children living in poverty in San Diego. In this report than in the previous report. Can you talk about that and why that might be. That's a good question. I mean I think obviously one of the biggest reasons that that may be just is that we've seen the gains are mostly focused the gains in household income have been through more people in the household working. And obviously when you have children it's harder to devote as many hours to work. So it could be sort of a balancing act for parents taking care of their children and not able to sort of participate in those gains that we're seeing not through higher pay but through more participation more people working more want more hours. You talk about more people working but in comes individual incomes being sort of stagnant. Yeah I mean so the earnings for full time year round workers have basically you know they've slightly increased in current dollars. But once we factor in inflation we're looking at the third year in which there are slight declines in the actual purchasing power of the earnings for a full time year round worker in the city. That's kind of what we're looking at is you know incomes are increasing or earnings are increasing somewhat but not as fast as inflation and so people are basically losing ground. And as you say those household incomes are up because more people in the household are working not necessarily because they're earning more money. Exactly. So yes so household incomes are up at the same time that people are earning less annually and that that is explained by the increases in the number of people per household working in one of the. I mean one of the examples that we looked at was among households growing among individuals 65 and over. So that's an area where we've seen a big jump you know before the recession it will end 2017 before the recession of people 65 and over about 16 percent. We're working obviously because that's the age that retirement starts and now we're looking at 20 percent working. So there's been a pretty big increase in the number of people just using that example of people that you wouldn't necessarily expect to be continuing to work that are in much larger numbers. I'm going to ask you what you think is behind some of these numbers. I mean the unemployment rate in California is at four point two percent. The economy has largely recovered from the recession. California is the fifth largest economy in the world. So are Californians struggling strictly because of the high cost of housing the high cost of housing is a huge part of it. And that's you know the Census Bureau has its official poverty measure which as I mentioned is a one size fits all measure. They also have a supplemental poverty measure that takes into account on the one hand differences in expenses and particularly the cost of living as well as other forms of income that aren't factored in like food stamps or things like that are that also help families meet their basic needs and California of the 50 states. California has the highest poverty rate by the supplemental poverty measure. They don't produce that at a county level but only only Washington D.C. has a higher higher poverty rate using the Supplemental Poverty Measure. So that's you know driven pretty much entirely due to the high cost of living in California. Let's look to the future. Congress is considering a proposal to cut funding to SNAP that's federal food assistance program known in California as Cal Fresh. There's also an effort to reduce health insurance coverage under the Affordable Care Act. What would be the effect on poverty in California if those programs worked. Yes so the Supplemental Poverty Measure like I said it does take into account funds that are or you know food that family receives through food stamps. That's one of the top five programs in terms of reducing the actual poverty is measured under the supplemental poverty measure. And similarly one of the things that's sort of the biggest driver in increasing one of the other biggest drivers on the expense side is medical expenses so yes so both of those would have a huge impact on families here in their ability to meet their basic needs. I've been speaking with Peter Brunelle research director at the Center on policy initiatives. Peter thanks. Thank you. Maureen.

The income of a median U.S. household rose for a third straight year in 2017 as solid economic growth helped put more people into full-time jobs. But income inequality also worsened as the wealthiest Americans enjoyed even larger pay increases.

Incomes for a typical U.S. household, adjusted for inflation, rose 1.8 percent, from $60,309 in 2016 to $61,372. The proportion of Americans living in poverty also dropped for the third straight year, to 12.3 percent from 12.7 percent.

The figures suggest that the nation's very low unemployment rate — 3.9 percent — is forcing businesses to convert more part-time workers to full-time status. And with the ranks of the unemployed dwindling, companies are hiring more people who previously weren't looking for work. During 2017, the unemployment rate averaged 4.4 percent, the lowest level in 17 years.

The number of people with jobs rose by 1.7 million in 2017, the Census report said. And the number of workers with full-time permanent jobs increased by 2.4 million.

"We're continuing to see that shift from part-time, part-year work to year-round, full-time work," Trudi Renwick, an assistant division chief at the Census Bureau, said.

At the same time, the data underscores the lasting damage the Great Recession did to the majority of American families. U.S. households are still earning essentially the same that they did in 2007 just before the Great Recession. And their inflation-adjusted median income remains slightly below the record in 1999 of $62,000, Census said.

"The income of a typical household today is about where it was 18 years ago," said Robert Greenstein, president of the Center for Budget and Policy Priorities.

The median is the point at which half the households are below and half are above. In can be a more telling measure than the average, which is distorted by extremely high incomes among the wealthiest households.

Last year's median income increase was slower than gains of 5.1 percent in 2015 and 3.1 percent in 2016.

Some of that slowdown reflected sharply higher inflation, which was just 0.1 percent in 2015 and 1.3 percent the following year. It rose to 2.2 percent in 2017.

Higher prices for gas, housing and other goods and services are eroding income gains even more this year. Consumer prices increased 2.9 percent in July from a year earlier, matching June's pace as the fastest in six years.

Wealthier Americans pulled further ahead last year. Even steady growth over the previous eight years hasn't been enough to counter long-running trends to greater economic inequality. Income growth was strongest for the richest 5 percent of households, rising 3 percent to $237,034. For the poorest one-fifth of the population, incomes rose just 0.5 percent.

"Well-worn patterns of inequality re-emerged, with stronger growth at the top," said Elise Gould, a senior economist at the Economic Policy Institute, a liberal think tank. "While any reduction in poverty or increase in income is a step in the right direction, most families have just barely made up the ground lost over the past decade."

As a result, the wealthiest 5 percent received 3.9 times the income earned by the median U.S. household. That's the highest on records dating back to 1967. In 2007, before the Great Recession, that multiple was 3.5.

The income gap between black and white households also widened, though Latinos narrowed their gap with whites. The median income for a white household rose 2.6 percent to $68,145 even as the median for African-American households slipped 0.2 percent to $40,258. Latino household incomes, however, jumped 3.7 percent to $50,486.

Asian households remain the wealthiest, with a median income of $81,331, though that was 2.2 percent lower than in 2016.

The wage gap between men and women stayed the same, with women working full-time earning just 80.5 cents for every dollar earned by a male full-time worker.

In the past three years, the poverty rate has fallen 2.5 percentage points. Still, nearly 40 million Americans remain poor by the Census Bureau's count.

Census also considers the impact of various government assistance programs on reducing the ranks of the poor. The agency found that the food stamp program, formally known as SNAP, lifted 3.4 million people out of poverty. Rental subsidies did the same for 2.9 million.

President Donald Trump and House GOP leaders have proposed cuts in both those programs, Greenstein said, as well as Medicaid.

"Were such cuts to be enacted, we would almost certainly see increases in poverty as a result," he said.

The Census report found no significant change in the proportion of Americans without health insurance last year, even though President Donald Trump and the Republican-led Congress spent months trying to repeal the Obama-era Affordable Care Act.

An estimated 28.5 million people remained uninsured in 2017, or 8.8 percent of the population, according to the Census. Had the Republican repeal succeeded, that number could have increased by 20 million people or more over time.

The Census report did find that 14 states had notable losses in coverage, while 3 states experienced gains. All the states with gains had taken full advantage of the Obama health law by also expanding their Medicaid programs.

But so had most of the states with coverage losses, including Massachusetts, whose state-based overhaul had been a template for the Obama law.