More good news on incomes

(Summarized from the LA Times)

According to the Census Bureau, the inflation adjusted level of median income jumped $1304 or 3.5% in 1998 to $38,885.  That makes four consecutive years of gains and the sharpest increase in more than a decade.  More interestingly, "virtually every type of household on which the government keeps tabs in every region of the country managed to hit new highs or maintain a previously achieved one."  For example, the median income of Latino households grew by 4.8% to $28,300, which is the highest income figure for Latino households in the two decades separate records have been kept on them.  Black households maintained their record median income of $25,400.  These broad income gains had the effect of pushing down the poverty rate by half a percentage point to 12.7 percent, the lowest level since 1979.  There were 1.l million fewer people in poverty in 1998 than in 1997.  The current poverty line is $16,600 for a family of four.

Some additional information courtesy of the Washington Post:  During the current economic boom, unemployment for blacks as a whole has fallen from 14.1 to 7.8 percent, and among black teenagers the fall is from 40.5% to 28.6%.  For Hispanics, the drop is from 11.3% to 6.5% today.  In the past three years, wages have risen 5.6% in real terms for all workers.  "Those in the bottom 25 % of the income distribution, though, have seen wage gains of 7.5% in the same period while those at the very bottom, the lowest 10 percent, have seen their income jump 9.1%."
 

Commentary:

In the context of the discussion of the income data on my "Economic Myths" page, it's important to remember that this is measuring monetary income and does not take into account benefit levels, nor the declining real cost of goods and services.  Thus, the Census Bureau data actually understates the real income gains Americans are achieving.  It is also worth noting that these gains, especially the drop in the poverty rate, are happening during an ongoing process of welfare reform.  A quick look at the data there show how the number of folks on welfare has dropped significantly (although it does vary from state to state) over the last few years.  Critics of welfare reform suggest that the folks going off welfare rolls are headed down into a deeper poverty.  While that's possible, it seems somewhat harder to believe when the poverty rate is down, unemployment is at 4.2%, and incomes are up across the board.  The current boom also seems to be quite widespread, given the data on the gains for minorities both in terms of income and employment.

Critics of the Census Bureau data point out that median income is only up 0.4% for this decade, which matches the 80s, but is less than any of the three decades before that.  The problem with this criticism is that, as noted above, the numbers focus only on monetary income, not total compensation, and ignore declines in the real cost of living.  The critics want to make it seem like people are not getting ahead as fast as they used to, but if one looks at consumption data, as noted on the economic myths page, we are doing much better than median income numbers make it seem.