After the economic damage of 2008 financial crisis, median American household income has finally returned to pre-crisis level, a massive achievement in the country’s decade-long economic recovery.
Average household Wages Increase
According to the Census Bureau’s report on Wednesday, the median household income in the United States climbed up to $61,372 last year, a figure that is almost identical to the median in 2007 when the nation was on the cusp of the financial crisis.
The landmark report was also hailed by the Trump Administration. The White House Council of Economic Advisers said in a statement that Americans are finally starting to feel the effects of the strengthening economy. The statement added that actual numbers are even better than what the report suggests.
But some experts have voiced their concerns over the slow economic growth in 2017 in comparison to previous years. According to the report, median income only increased by 1.8 per cent last year, whereas the growth was much rapid in 2015 and 2016 at 5.2 per cent and 3.2 per cent respectively. If this trend continues, 2018 could see an even smaller income growth than last year.
Middle-Class Families Left Behind
Majority of the income gains were fueled by a surge in employment rather than increase in salaries.
Comparing earning figures in the past couple of years shows that the average salary of full-time employees has gone down in 2017, but the drop was offset by an increase in employment rate as more and more people started entering the job market.
This raises serious questions about the report’s findings, especially for middle class families who haven’t experienced any significant increase in income or quality of life.
Economist Heidi Shierholz from Economic Policy Institute says that the labor markets will need to break free from the current trend in order to prompt meaningful growth in wages. She adds that the report simply gives political parties something to talk about in the weeks leading up to November’s midterm elections.
Republicans, who are burdened with an unpopular president, are eager to take credit for the report’s findings for political gains. Republican Ted Budd, has even called the report ‘great news for the middle class’.
But Democrats argue that it is only the wealthy Americans who have pocketed the benefits of the economic growth. In the 10 years from 2007 to 2017, economic output has increased by 16 per cent, whereas the median income has largely remained unchanged.
The disparity was noted by economist Jared Bernstein of Center on Budget and Policy Priorities who said that the report only showed a widening gap between economic growth and middle-class wages, which have been treading water for the past decade.
The wealthy have made massive gains while the poor have fallen behind. The Census Bureau showed that the median income on the 90th percentile has increased by 7.5 per cent over the past decade whereas it has fallen by 4.5 per cent on the 10th percentile.
There is also a large disparity in incomes by race. In 2017, the median household income for African-Americans was 2.9 per cent lower than in was 10 years ago. On the other hand white households experienced a 1.5 per cent increase in incomes over the same period. Median income increased by 6.7 per cent for Hispanic households, according to Economic Policy Institute.
According to Census Bureau’s report, the number of people with health insurance remained the same in 2017 in comparison to a steady increase in the previous years. As off last year, 8.8 per cent of the U.S. population, or 28.5 million people, did not have health insurance.
The finding was particularly surprising since the number of Americans with full-time jobs has been on a steady incline while health insurance levels have stagnated.
Normally, you would expect a higher employment level to be followed by better health insurance coverage. A probable explanation for this effect is President Trump’s persistent efforts to topple the Affordable Care Act which prevented any meaningful progress in the healthcare sector in 2017.