American families finally got a big pay raise. Why it might not feel like it.
After eight lean years, Americans finally got fatter paychecks in 2015 — their first significant hike since 2007 and the biggest since record keeping began in 1968. The U.S. median household income rose 5.2% to $56,516, the U.S. Census Bureau reported Tuesday.
"This is a big deal," President Obama said Tuesday at a rally for Hillary Clinton in Philadelphia. “Across every age, every race in America, incomes rose and the poverty rate fell. In fact, the typical household income of Americans rose by $2,800, which is the single biggest one-year increase on record," he said.
However, the income of the typical U.S. home still hasn't managed to rise above where it was before the last recession. In 2007, median household income — the point at which half would make more, while the other half would make less — was $57,423, adjusted for inflation. And incomes peaked in 1999 at $57,909, also adjusted for inflation, the bureau says in its report, "Income and Poverty in the United States: 2015."
"We lifted 3.5 million people out of poverty," Obama said. "The uninsured rate is the lowest it has been since they kept records. The pay gap between men and women shrank to the lowest level ever."
Even though the number of people living in poverty shrank to 43.1 million from 46.7 million, the largest drop since 1968, there's room for improvement, said House Ways and Means Committee Chairman Kevin Brady, R-Texas.
“Today’s report is another disappointing confirmation that too many Americans are still struggling to provide for their families and reach their full potential," Brady said. "The federal government invests billions of dollars each year in programs to help low-income Americans — but more than 43 million people continue to live in poverty. It shouldn’t be this way in America.”
Gary Burtless, an economist at the Brookings Institution, calls the reduction in poverty "fairly sharp." He wonders, though, whether the increase in household income is spot on. He notes that the Census Bureau's household income findings, based on population surveys, have trailed behind the increases found in another indicator: the Bureau of Economic Analysis’ National Income and Product Accounts. Where Census data found incomes down 1.1% from 2013 to 2014, the BEA report had them up 2.1%, he says.
"This year is an odd, and in some sense encouraging, exception in that it turned up more income improvement than I think probably occurred last year."
A breakdown of median incomes by race: Asian household incomes remained stable and were the highest at $77,166; white household incomes rose 4.4% ($62,950), Hispanic incomes rose 6.1% ($45,148); and black incomes rose 4.1% ($36,898).
By age, households maintained by those ages 45-54 had the highest median income at $73,857, up 4.2%; but households run by those ages 35-44 saw the biggest jump, up 7% to $71,417. And by gender, overall, men working full-time made more than women, but women saw a slightly larger increase in 2015. Median earnings for men rose 1.5% to $51,212, while women's earnings rose 2.7% to $40,742.
The fact that median incomes were higher before the recession than today suggests that the recovery remains "somewhat slow and sluggish,” said Aparna Mathur, an economist with the American Enterprise Institute. There continues to be a “slack” in the economy "with a large number of workers who are long-term unemployed or in involuntary part time jobs. When this slack in the labor market diminishes over time, more households will see rising incomes, higher than before the recession."
Contributing: Gregory Korte in Philadelphia.
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