Median Household Income Surged 5.2% In 2015 - Really?

1. Household Incomes Surged 5.2% in 2015, Largest Rise Ever

2. All Races & Age Groups Saw Their Income Go Up in 2015

3. If the Numbers Sound Too Good to be True, Maybe They Are

4. US Poverty Rate Fell to 13.5% in 2015, Now 43 Million People

5. Official Poverty Rate Doesn’t Include All Government Benefits


Today we’ll tackle last week’s annual report from the US Census Bureau on household income and the poverty rate in America in 2015. The report showed the largest annual jump in household income on record in 2015. The question is, was the big increase in household income due to a stronger economy, or was it due to the Census Bureau making changes to its methodology? I’ll give you the answer below.

Last week’s report also showed that the official poverty rate declined for all age groups and races last year. That’s certainly good news. But what we also learned is that if the Census Bureau calculated its poverty rate like most other developed nations, our poverty rate would be a fraction of the level reported last week. I’ll bet not one American out of 100 knows about this. I’ll explain it as we go along today.

Household Incomes Surged 5.2% in 2015, Largest Rise Ever

A surge in US incomes last year delivered the first significant raise for the typical family after seven years of stagnant or declining earnings – the result of sustained job growth finally lifting a broad swath of American households.

The median household income – the level at which half of households are above and half are below – rose 5.2% in 2015, or by $2,798 from a year earlier to $56,516, after adjusting for inflation, the Census Bureau reported last week.

The increase was the largest annual gain recorded since the yearly survey of incomes began in 1967, though it didn’t fully close the gap left by the last two recessions. Median household income stood 1.6% shy of the 2007 pre-recession level ($57,423) and 2.4% below the all-time high reached in 1999 ($57,909).

Median Household Income

“This is a big deal,” President Obama boasted last Tuesday at a rally for Hillary Clinton in Philadelphia.“Across every age, every race in America, incomes rose and the poverty rate fell. In fact, the typical household income of Americans rose by $2,800, which is the single biggest one-year increase on record,” he said.

Behind the pay hike is the big increase in employment, Census officials said. Some 3.3 million more Americans were working full-time, year-round in 2015, thus pushing up median income. Longer hours, higher wages and lower inflation also have contributed to the improvement.

One question now is whether a sustained upturn is under way, or whether these gains are likely to flatten as the economy nears full employment, especially given the continuing slide in worker productivity. At the current pace, median household income could surpass its 2007 level next year, ending a lost decade for many workers – if the latest figures are accurate.

All Races & Age Groups Saw Their Income Go Up in 2015

Here’s a breakdown of median incomes by race. Asian household incomes were the highest at $77,166; white household incomes rose 4.4% to $62,950; Hispanic incomes rose 6.1% to $45,148; and black incomes rose 4.1% to $36,898.

By age, households of those ages 45-54 had the highest median income at $73,857, up 4.2%; but households run by those ages 35-44 saw the biggest jump, up 7% to $71,417. And by gender, overall, men working full-time made more than women, but women saw a slightly larger increase in 2015.

The fact that median income was higher before the recession than today suggests that the recovery remains “somewhat slow and sluggish,” said Aparna Mathur, an economist with the American Enterprise Institute. There continues to be “slack” in the economy “with a large number of workers who are long-term unemployed or in involuntary part-time jobs. When this slack in the labor market diminishes over time, more households will see rising incomes, higher than before the recession."