The economy is strong. The unemployment rate is super low – historically low for blacks and Hispanics. Poverty in our nation is falling. Now, we can add to this list of good news that household incomes hit a record high in 2018. We can attribute this to good economic policies and demographic changes.
New data from the Census Bureau finds that median household incomes increased by nearly 1 percentage point from 2017 to $61,937. While the annual percentage increase was smaller than the previous few years, it’s the highest since the Census began fully tracking this metric in 2005.
That’s not all.
Here are 3 takeaways of how incomes are growing for American families:
Over half of U.S. states (31) also saw their median household incomes top 2005 levels. Just six (including Puerto Rico) saw lower median incomes.
Household median incomes rose for every racial group from 2017 to 2018: Asian (+2.1 percent), black (+1.5 percent), Hispanic (1.5 percent), and white (1 percent).
Young households had the fastest income growth: Under 25 (+2.9 percent), 25-44 (+2.4 percent), 45-64 (1.4 percent), over 65 (0.4 percent)
Across the country families of all races and ages are enjoying the blessings of this economy. Americans feel it. According to CNN polling from August, nearly two out of three Americans (65 percent) rate the economy as very or somewhat good.
The Trump administration’s focus on deregulating the economy to untangle businesses from unnecessary and costly regulations along with cutting corporate and individual taxes has led to a rise in employment and incomes.
Although incomes for poor households rose, they also rose for wealthy households leading to a continued rise in income inequality.
The Washington Post and many other outlets have focused their attention on the continued increase in income inequality based on a slight uptick in the Gini index. It notes:
“When the Census Bureau began studying income inequality more than 50 years ago, the Gini index was 0.397. In 2018, the Gini index rose to 0.485. By comparison, no European country had a Gini index greater than 0.38 between 2017 and 2018.”
That may be true, but how many European countries are home to the world’s millionaires and billionaires?
The U.S. dominates all other nations as the home to the most billionaires: 705 billionaires who have a collective wealth of more than $3 trillion.
That says something about the entrepreneurial spirit, tax code, and regulatory environment here compared to other nations.
There’s a sinister belief on the left that if the wealthy are gaining, it’s because the poor are losing. However, poor Americans are moving into the middle class and middle-class families are moving up the economic ladder.
Economists differ in their explanation of the growing income inequality. Some attribute it to demographic differences (older Baby Boomers have bigger salaries and more assets compared to Millennials and Generation Z who are at the other end of the pay scale), and others to the tax cuts.
What seems most likely is that during the ten-year economic expansion, those who held property and stocks benefited from the growth of property values and the stock’s rise–particularly after President Trump took office.
Income inequality may be growing but this is still the best nation to start from the bottom and achieve a comfortable life — even become a billionaire. The motivation to be successful is one we should encourage. Let’s stop obsessing over the billionaires and start boosting opportunity for the poor.