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American Incomes Were Rising, Until The Pandemic Hit

Sep 15, 2020
Originally published on September 15, 2020 4:14 pm

Household income in the United States rose sharply last year while poverty declined — fruits of a record-long period of economic growth that ended abruptly when the coronavirus pandemic struck.

An annual report from the Census Bureau shows median household income jumped 6.8% in 2019, to $68,700. That's the highest since the government started keeping track in 1967.

The poverty rate declined to 10.5% — the lowest since records began in 1959.

Analysts caution that both income and poverty measures may have been skewed by the challenges of conducting interviews during the pandemic. Fewer people completed the survey than in years past, which likely resulted in artificially boosting the income measure while depressing the poverty rate. Were it not for those survey problems, the Census Bureau estimates, median household income would have risen just 3.8% and the poverty rate would have registered as 11.1%.

Even with that caveat, the report provides a frozen-in-amber snapshot of how a long period of job growth and low unemployment padded the pocketbooks of American families.

With rising wages and more people working last year, median household income rose for every racial group and every part of the country.

Many of those gains were almost certainly erased this year, though, when the pandemic took hold in the U.S., throwing tens of millions of people out of work. Unemployment soared this spring to its highest level since the Great Depression. African American and Latino workers were especially hard hit.

While the job market has improved in recent months, it's still far from the conditions that drove last year's income gains.

"Because of the pandemic, we are going to be struggling again to get back towards full employment," said Elise Gould of the left-leaning Economic Policy Institute. "Policymakers should take heed of the policies that had gotten us to where we were in 2019 — albeit more slowly than we should have — to get us back on that road to full employment"

Even before the deadly coronavirus struck, more Americans were going without health insurance. The uninsured rate climbed to 8% in 2019, largely due to a drop in Medicaid coverage. Virginia, which expanded Medicaid last year, was the only state to see an increase in health insurance coverage.

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SACHA PFEIFFER, HOST:

The pocketbooks and bank accounts of American families were getting fatter right up until the pandemic hit. A new report from the Census Bureau shows just how well the average household was doing before calamity struck this spring. The report says median household income jumped to its highest level in decades last year while poverty fell. That's the result of a record-long economic expansion that ended abruptly earlier this year. NPR's chief economics correspondent Scott Horsley joins us now.

Hi, Scott.

SCOTT HORSLEY, BYLINE: Hi, Sacha.

PFEIFFER: And, Scott, even though this report was just released today, I understand it's already dated since it doesn't look beyond 2019. But is there anything we can still learn from it?

HORSLEY: Yeah. The lesson here is that a good job market really helps families, and last year's job market was really good. You know, we capped off a decade of solid growth. That pushed the unemployment rate down to a 50-year low. More people were working. Wages were rising. And as a result, the median household income jumped to almost $69,000, the highest in real terms since the government started keeping records back in 1967. At the same time, the poverty rate fell for the fifth year in a row to just 10.5%. That's the lowest in 60 years. This would really be a report to celebrate if the conditions it described had not unfortunately been wiped out by the pandemic.

PFEIFFER: Right. And, Scott, how widespread were last year's gains?

HORSLEY: Median income rose and poverty declined in every racial group and in every part of the country, so that is encouraging. However, income is still very unequal in this country, and that has only been underscored by the pandemic. Last year more than half the total income in the country went to the richest 20% of households while the bottom 20% got just 3% of the income. So that is a very lopsided distribution, and it didn't really change last year.

Another caveat is the census survey behind this report was disrupted, as so many things have been, by the pandemic. Fewer people answered the census-takers than in years past. And as a result, the Census Bureau suspects that skewed the numbers a little bit. Without that disruption, it's likely the official poverty rate would have been a bit higher, and the median income reported would have been a little bit lower.

PFEIFFER: And, Scott, you know that household income is one measure of well-being, but health insurance is another. What does this report tell us about that?

HORSLEY: Despite the strong economic conditions last year, the number of people going without health insurance grew by more than a million, primarily because of a drop in Medicaid coverage. The state of Virginia was the only state that saw increased coverage last year after lawmakers there agreed to expand Medicaid. Nationwide, about 8% of the public had no health insurance at all in 2019. And unfortunately, that number probably grew this year, which is not what you want in the midst of a deadly pandemic.

PFEIFFER: And would you recap for us what things look like now nine months into 2020?

HORSLEY: Sure. Tens of millions of people lost their jobs during the spring. Unfortunately, the losses were concentrated among those who could least afford it. African American and Latino workers were especially hard-hit. Many of the industries that were most affected were low-wage to start with. At first, government relief payments, like the extra $600 a week in unemployment benefits, did help to cushion that blow. But, of course, now some of those benefits have expired, and there has been no agreement in Congress to extend them.

The job market has recovered somewhat in recent months, but we're still a long way from healthy. So on the one hand, you can look at the snapshot of last year as kind of a cruel reminder of how far the economy has fallen. On the other hand, this can serve as kind of a beacon of why we want to get back to full employment and the broad-based gains that come along with it.

PFEIFFER: That's NPR's Scott Horsley.

Scott, thank you.

HORSLEY: You're welcome.

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