Inequality Persists Despite U.S. Progress on Incomes and Poverty

  • Gaps narrow but remain wide by earnings level, gender, race
  • Increase in incomes may reflect more growth in jobs than wages

NYU Stern's Peter Henry discusses his research on income inequality

Steady U.S. economic growth helped household incomes climb to a record and reduced poverty last year, according to Census Bureau data released Tuesday. Yet inequality remained evident across income levels, race and gender, indicating there’s work to be done to improve the lot of all Americans.

Median inflation-adjusted household income increased 3.2 percent from a year earlier to $59,039, the bureau said in an annual report. The poverty rate declined to 12.7 percent, representing 40.6 million Americans, from 13.5 percent in 2015.

Last year’s rate wasn’t “statistically different” from the 12.5 percent pre-recession level in 2007, the Census Bureau said. Still, more adults age 65 and older were in poverty, the only major population group to suffer a setback. And the Gini index, the most common measure of income inequality, was a record 0.481 in 2016.

Even with the overall progress on incomes, the gap between the top and bottom earners has widened since the recession. Since 2007, average inflation-adjusted income has climbed more than 10 percent for households in the highest fifth of the earnings distribution, and it’s fallen 3.2 percent for the bottom quintile. Incomes of the top 5 percent jumped 12.8 percent over the period.

Incomes also improved as more people found regular positions. The number of full-time, year-round workers rose by 2.2 million last year from 2015, signaling a shift from part-time work status, the Census Bureau said. About 74.8 percent of working men with earnings were in full time, year-round jobs, while 62.2 percent of women were.

At the same time, much of the overall increase in median incomes was due to a rise in income earners per household rather than higher earnings, according to Jed Kolko, chief economist at Indeed, a job-listings website. Median earnings for full-time, year-round workers were up just 0.5 percent, “echoing the sluggish wage growth in the monthly jobs report,” he said in a note, adding that earners per household increased 0.4 percent and were 1.2 percent more likely to be working full time than in 2015.

Average hourly earnings of private workers on nonfarm payrolls have failed to show a sustained acceleration, rising about 2.2 percent annually during the expansion that’s now in its ninth year.

While the gender gap is moving in the right direction, the improvement is gradual. Men earned slightly less last year than in 2015, while women’s median incomes picked up a tad. Still, the 2016 median income of $41,554 for women was lower than $51,640 for men.

Median incomes for black and Hispanic households grew at more than double the rate of white households in 2016. But the earnings level showed the persistence of a stark, discouraging divide: non-Hispanic whites earned $65,041 last year while blacks made $39,490.

— With assistance by Vince Golle, and Alexandre Tanzi

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