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Workers Are Treading Water

US household incomes saw a small uptick in 2017. But for the working class, the larger picture remains largely bleak.

A Walmart in Gladstone, Missouri. (Walmart / Wikimedia)

The U.S. Census Bureau released its 2017 report on income, poverty and health insurance this morning. The poverty rate dropped, and the median household income rose. Good news, right?

Not entirely. The improvements actually represent a slowdown of growth trends from prior years, suggesting that, at least for working people, the post-recession recovery process is flagging. And if that’s true, then it’s a grim sign, because many working people are in worse financial shape than they were before the 2008 financial crisis, or have just barely recouped their losses. And even before the crisis American workers had been experiencing wage stagnation, eroded labor protections, and rising living costs for decades. The improvements published in the Census report are far from signaling that the economy is functioning well for the majority of people.

The median household income may have risen a bit in 2017, but it’s still lower than it was before the economy collapsed. And while the poverty rate fell by 0.4 percentage points in 2017, that left 12.3 percent, or 39.7 million people, still below the poverty line. We can call it an improvement, but we’d be missing the forest for the trees.

So why has the already slow and uneven recovery begun to lose steam for workers? The answer is political. “Today we have tight labor markets, but it’s not enough to spur meaningful growth for working people,” said Heidi Shierholz of the Economic Policy Institute (EPI). This is largely because collective bargaining power and labor standards have been decimated by decades of anti-worker policy, she explained, making it difficult for workers to take advantage of the potential windfall a tight labor market has to offer.

As a result of these and other policies — like tax cuts for the rich and austerity for everyone else — economic growth since the recession has been lopsided. “Overall growth in the economy is not reaching ordinary families,” Shierholz said. “There’s been a major upward redistribution of wealth, and inequality has grown dramatically.” The gap between the top percentiles and the bottom increased in 2017, as did the gap between the top and the middle, showing how inequality grew even as workers received minor bumps in pay. And not all workers received pay bumps to begin with — median annual earnings for full-time workers actually dropped in 2017.

Valerie Wilson, also of EPI, elaborated on the relationship between unimpressive income growth and wealth accumulation. “Wealth is even harder to recover than income,” she said. “You can go back to work to recover income, but it takes wealth to gain more wealth.” Sluggish income growth thus bodes poorly for the prospects of working people recovering the wealth they lost in the crisis, or building wealth they never had to begin with. This asymmetry has long-term implications for the racial wealth gap as well, given that black household wealth is already just a fraction of the wealth of white households due to a long history of racist policies, from redlining to mass incarceration — and has suffered on top of that from disproportionately slow post-recession income growth.

Overall, note Elise Gould and Julia Wolfe of EPI, “Those in the top 10 percent are the only part of the income distribution to have significantly passed their pre-Great Recession income levels.” The 2017 data indicates that this isn’t likely to change without some major policy interventions. Whatever those interventions may be — from ambitious corporate taxes, to universal social programs, to a strong labor law reform agenda — they must be designed to elevate and empower ordinary working people at the expense of the wealthy few. Otherwise, the trend will continue, and the rich will get richer while millions continue to stagnate.