Earlier this week, the Census Bureau reported that the real median household income increased 5.2 percent, from $53,718 in 2014 to $56,516 in 2015. That’s the first annual increase since 2007, and the biggest increase since the ’60s, when the government started tracking household incomes.
Poverty also declined last year, falling 1.2 percentage points in the largest decline since the ’60s. There were 3.5 million fewer Americans living in poverty in 2015, compared with 2014.
“A combination of forces fueled the gains, including an improving job market, low inflation and rising wages, particularly for low-earning workers who may have benefited from state and local initiatives to boost minimum wages,” writes Jim Tankersley at The Washington Post.
Full-time, year-round workers increased by 2.4 million in 2015, according to the Census Bureau. Incomes were higher for most demographic groups last year than the year previously, and none had lower median income in 2015 than 2014. In addition, poverty rates declined for most groups.
The Census Bureau also reported that the number of people without health insurance for the entire year declined to 29 million from 33 million in 2014.
Where Will Income Go From Here?
“A 5.2% increase in incomes is spectacular: At that rate, incomes would double in 14 years,” writes Salim Furth at The Wall Street Journal. “But several one-time factors, unlikely to recur, went into the increase.”
Furth argues that the rise in employment accounts for less than a fifth of the increase in median household incomes, while the drop in energy prices was a larger factor: “Unlike productivity growth, which drives long-run growth and works gradually, price decreases (and increases) are felt more quickly, and alter household budgets sooner.”
However, some economists are predicting that 2017 will show further income growth. Chris Christopher, head of consumer economics for IHS Global Insight, tells Reuters that he expects “incomes to continue to gain ground through 2017 with higher employment and modest inflation.”
The PayScale Index, which measures the change in pay for employed US workers, forecasts 1.6 percent wage growth for Q3 2016.
Even if income continues to rise, it will take some time for the economy to fully recover from the scars of the Great Recession.
“If 2015 marked the start of the recovery for household incomes, then it was a strong start — significantly stronger than expected by even optimistic economists,” writes Ben Casselman at FiveThirtyEight. “But the economic recovery is now more than seven years old, and economists are increasingly concerned about the possibility of another recession in the coming years. It will take several more years like 2015 to fill the gap left by the recession.”
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