by CHQ Staff
A few weeks ago, the Census Bureau released the 2018 Income and Poverty in the United States report, but you probably didn’t see anything about it because it received scant attention in the establishment media because it reported such positive results mostly attributable to President Trump’s economic policies. Instead, what little media attention that the report received focused on a meaningless measure of income “inequality.”
Between 2017 and 2018:
- Real median family income up 1.2%
- Real median earnings up 3.4%
- Full-time, year-round workers up 2.3 million
- Poverty rate dropped from 12.3% to 11.8%; childhood poverty fell faster; net 1.4 million people left poverty
- Income in the bottom 80% of households was up significantly
According to an Aaron Brown article for RealClear Markets, 2018 worked for everyone. The economy did well, and all the real measures of economic well-being were improved, however, you wouldn’t know that from the headlines in the establishment media.
Among the articles Brown cited:
- Ben Holland wrote at Bloomberg under the headline, “Census Says U.S. Income Inequality Grew ‘Significantly’ in 2018” and suggested the culprit was, “the impact of President Donald Trump’s end-2017 tax bill, which was reckoned by many economists to be skewed in favor of the wealthy.”
- Business Insider’s take was “US income inequality jumps to highest level ever recorded” , and quoted Professor Timothy Smeeding, “Wages remain low, there is a lack of childcare for single-parent families, and so on.”
- Mike Schneider’s AP headline was “Census: US inequality grew”.
Those are just three examples cited by Mr. Brown, who says the sentiments were echoed in many other news outlets, and chewed over by many opinion columnists, prompting Brown to ask, “How did people get things so wrong?”
Mr. Brown attributes the dismal headlines and reporting to a misunderstanding of what is known as the Gini coefficient (a measure of income inequality, higher numbers mean more inequality) which actually fell from 0.489 to 0.486.
Usually when the Gini index falls, incomes go down for everyone; it’s been 20 years since we’ve seen this big a decline in the Gini index when incomes went up noted Mr. Brown.
However, the news coverage didn’t seem to jibe with the numbers. The real good news about income, earnings, employment and poverty was overlooked entirely to focus on the more abstract Gini coefficient.
When income and employment go up, and poverty goes down, that’s unalloyed good. The Gini coefficient is more complicated. It mainly fluctuates based on how financial markets are doing, because, as Brown noted, top earners depend largely on investments, and those are more volatile than the salaries that underpin middle-class incomes.
Many top earners compensation is dependent on financial markets—executives with stock options and profit shares, Wall Street professionals with market-dependent bonuses, business owners paid out of profits.
Therefore, if the Gini coefficient goes up, meaning more inequality, that generally means financial markets did well, so the rich got richer. If the Gini coefficient goes down, that doesn’t mean society got more equal in any substantive or long-term sense, observed Brown, it just means that the stock market was down that year.
However, as we noted above, 2018 worked for everyone, so why the downbeat headlines?
Perhaps reporting good economic news would be considered support for Trump and might reduce enthusiasm for anti-poverty spending speculated Mr. Brown.
And he may have a point: Some writers took not the one-year Gini calculation [which went down] but the five-year. The most recent five-year Gini, covering 2014 – 2018, is higher than the previous five-year, 2013 – 2017, basically because the 2018 number was higher than the 2013. But this increase happened from 2016 to 2017, so it’s old news today, noted Brown. Other writers compared the one-year number released by the Census Bureau in 2017 (0.482) to the 2018 number of 0.486. But the methodology changed this year, and the 2017 number to compare to the 2018 was the 0.489 cited above.
If all of this is confusing, especially the focus on the Gini coefficient, then we suggest you join us in celebrating the great Trump economy with these highlights from the report:
The 2018 real median income of family households and nonfamily households increased 1.2 percent and 2.4 percent, respectively, between 2017 and 2018 (Figure 1 and Table A-1). This is the fourth consecutive annual increase in median household income for family households.
Between 2017 and 2018, the real median earnings of all workers increased 3.4 percent to $40,247 (Figure 4 and Table A-6).
The 2018 real median earnings of men ($55,291) and women ($45,097) who worked full-time, year-round increased by 3.4 percent and 3.3 percent, respectively, (Figure 4 and Table A-6) between 2017 and 2018. The 2018 female-to-male earnings ratio was 0.816, not statistically different from the 2017 ratio.
The number of full-time, year-round workers increased by 2.3 million, between 2017 and 2018. The number of men and women full-time, year-round workers increased by about 700,000 and 1.6 million, respectively.
The official poverty rate in 2018 was 11.8 percent, down 0.5 percentage points from 12.3 percent in 2017. This is the fourth consecutive annual decline in poverty. Since 2014, the poverty rate has fallen 3.0 percentage points, from 14.8 percent to 11.8 percent.
In 2018, for the first time in 11 years, the official poverty rate was significantly lower than 2007, the year before the most recent recession.
In 2018, there were 38.1 million people in poverty, approximately 1.4 million fewer people than 2017.