Americans notched solid financial gains in 2016 for a second straight year as household incomes rose, poverty fell and fewer people went without health insurance, signaling an end to the stagnation that had lingered since the Great Recession.
The median U.S. household income climbed 3.2% to $59,039, the Census Bureau said Tuesday. That followed growth of 5.2% in 2015, the largest on records dating to 1968. The combined increase over the past two years is the biggest such rise since the 1960s.
"Real median household income has finally completed its nine-year slog of digging out of the ditch," says IHS Markit economist Chris Christopher.
The median, inflation-adjusted income of $59,000 last year surpassed the level in 1999 as the highest on record, but Census officials discouraged that comparison because the method for measuring income changed in 2014.
The number of Americans living in poverty fell to 40.6 million from 43.1 million, lowering the poverty rate to 12.7% from 13.5% and placing it just marginally above the prerecession level.
John Bouman, president of the Sargent Shriver National Center on Poverty Law, called the decline "welcome," but added, "Poverty remains a persistent problem in this country, afflicting tens of millions of people."
The number of people without health insurance declined by 900,000 to 28.1 million. The share of Americans without coverage dipped to 8.8% from 9.1% the prior year.
The report underscores that in the final two years of the Obama administration, low- and middle-income Americans made noticeable progress after struggling in the early years of the economic recovery.
Arguing that former President Obama had left working Americans behind, President Trump in his campaign appealed to a base of blue-collar households with an agenda centered on tax cuts and a get-tough trade policy aimed at reclaiming manufacturing jobs. But Trump also has proposed cutting federal assistance for low-income households and rolling back the Affordable Care Act, which has provided health insurance to millions more Americans.
"Tuesday’s Census report comes as the president and congressional Republicans are advancing a cruel policy agenda that would decimate key anti-poverty programs, like federal food assistance and refundable tax credits," Bouman says. "If those proposals become law, they would undermine the quality of life and chances at upward mobility of millions of struggling Americans."
But Michael Tanner, senior fellow at the conservative Cato Institute, says federal aid programs "are making poverty less miserable but they're not enabling people to rise above poverty."
While incomes rose last year, that's chiefly because the economy added 2.2 million full-time workers, says economist Elise Gould of the left-leaning Economic Policy Institute. Median, inflation-adjusted earnings largely tread water. The Census Bureau’s income measure also includes bonuses, Social Security, public assistance payments, and interest and dividends from investments, among other sources.
Incomes climbed higher for Americans at every level, but the gains were sharpest for those at the top. Income increased 2.6% for the bottom fifth of earners, 4.4% for the next lowest group and 2.8% for middle-income households. Those in the top fifth saw incomes increase 4.4%, and the top 5% realized a 5.6% gain.
As a result, the share of all income going to middle-class Americans sank to the lowest on record, widening the wealth gap, notes Jared Bernstein, who was Vice President Biden's economic adviser and is a senior fellow for the Center on Budget and Policy Priorities.
"in the near-term, inequality continues to grow," he says.
Women earned 80% of male pay on average last year, up nearly a percentage point and the first statistically significant increase since 2007.
Advances in pay were broad-based across racial groups. The median income for whites increased by 2% to $65,000; for blacks, by 5.7% to $39,500; and for Hispanics by 4.3% to $47,700. Incomes were virtually unchanged for Asian households, but they were the highest at $81,400.
"The solid economy is helping to close the racial gap," Bernstein says. The tight labor market is prodding employers to hire lower-skilled and disadvantaged workers who had been left on the sidelines.