Inequality.org

A project of the
Institute for Policy Studies

Blogging Our Grand Divide

What Explains Median Wages Rising?

New Census data show rising incomes and shrinking poverty. But it’s not quite time to bust out the champagne.

Good news can be elusive when reporting on the steady rise of inequality. So its heartening to see that median household incomes in the past year jumped more than 5 percent in the past year, now up to $56,500 according to a just released Census report.

The income boosts were felt across economic spectrum, a sharing of gains rarely seen since the shared prosperity decades between 1947 and 1977.

There was a sharp decline in the poverty rate and an expansion of the number of households with health insurance coverage, an undeniably positive development.

screen-shot-2016-09-15-at-11-53-03-amIn the aftermath of the 2008 economic meltdown, wages for most workers have been stagnant leaving most families out of the promised benefits of continued economic growth. Even as unemployment rates fell, wages have been slow to recover.

Meanwhile the share of income and wealth flowing to the top 1 percent of households has accelerated. In fact, the top 1 percent took more than 90 percent of all new income in the five years following the 2008 financial crisis.

Before we break out the champagne, its worth noting that we have a long way to go to get onto a sustainable path to shared prosperity. Real incomes for most Americans are still smaller than the late 1990s. The median income has still not returned to its 2007 pre-recession level and is still 2.4 percent lower than 1999. And whole regions of the U.S. are not sharing in the advances, including rural America.

The stars have aligned for rising wages –with extremely low energy costs and low unemployment. But a huge amount of these wage gains are going to pay for increased health insurance and college costs, keeping most earners in a budgetary vice.

Much of these wage gains are paying for increased health insurance and higher ed costs, keeping most earners in a budgetary vice.

It was amusing to see The Wall Street Journal trumpet on page one, “Family Incomes Rise After Lull.” For decades, the Journal’s editorial page denied the data, and later when it was undeniable, dismissed the relevance of inequality.

The reality is, however, income and wealth inequality is more extreme in the U.S. than in almost any other advanced industrial economy. And these inequalities are now deeply entrenched and not easily reversed. Since 2008, the homeownership rate –one real indicator of economic security and well-being–has been on a downward trend.

To shift our national trajectory from its current direction — leading to an economic apartheid society governed by a hereditary aristocracy of wealth –-we need a solid decade of rising incomes and declining concentrations of wealth.

The work to raise wages must continue. Over 40 percent of the country earns less than $15 per hour despite the Fight for 15 movement’s efforts at the municipal level to raise wages. Voters in Arizona, Colorado, Maine and Washington will vote on whether to increase their living wages this November. But we need a national increase in the minimum wage to reach into communities and states that have not shared equally in the most recent income boost.

And we must make deep investments in expanding opportunity and wealth for those excluded. Restoring progressive income tax rates and closing estate tax loopholes would generate revenue that could be invested in public infrastructure and accessible higher education. These are the kinds of investments the U.S. made after World War Two that set us a path of prolonged shared prosperity.

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