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The 2018 Poverty, Income, and health coverage results: a tale of three forces.

Summary:
This morning, the Census Bureau released new data on health insurance coverage, poverty, and middle-class incomes. While the data are for last year, they shine an important light on key aspects of families’ living standards that we don’t get from the more up-to-date macro-indicators, like GDP and unemployment. As the economic recovery that began over a decade ago persisted through 2018, poverty once again fell, by half-a-percentage point, from 12.3 percent to 11.8 percent. Other results from the report show that anti-poverty and income support programs lifted millions of people out of poverty, including 27 million through Social Security alone. Though the real median household income—the income of the household right in the middle of the income scale—increased slightly less than 1 percent

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This morning, the Census Bureau released new data on health insurance coverage, poverty, and middle-class incomes. While the data are for last year, they shine an important light on key aspects of families’ living standards that we don’t get from the more up-to-date macro-indicators, like GDP and unemployment.

As the economic recovery that began over a decade ago persisted through 2018, poverty once again fell, by half-a-percentage point, from 12.3 percent to 11.8 percent. Other results from the report show that anti-poverty and income support programs lifted millions of people out of poverty, including 27 million through Social Security alone. Though the real median household income—the income of the household right in the middle of the income scale—increased slightly less than 1 percent last year, the increase was not statistically significant. Median earnings of full-time men and women workers both rose significantly, by over 3 percent for each (for reasons discussed below, sometimes earnings rise significantly but income does not).

Health coverage, however, significantly deteriorated last year, as the share of the uninsured rose for the first time since 2009, from 7.9 percent to 8.5 percent. In total, 27.5 million lacked coverage in 2018, an increase of 1.9 million over 2017. This result is partially driven by actions of the Trump administration to undermine the Affordable Care Act (note that Medicaid coverage was down by 0.7 percentage points), and in this regard, it should be taken as a powerful signal of the impact of conservative policy on U.S. health coverage.

Taken together, the poverty, income, and health coverage results tell a tale of three powerful forces: the strong economy, effective anti-poverty programs, and the Trump administration’s ongoing attack on affordable health coverage. A strong labor market is an essential asset for working-age families, and the data are clear that poor people respond to the opportunities associated with a labor market closing in on full employment. Anti-poverty programs are lifting millions of economically vulnerable persons, including seniors and children, out of poverty. But while a strong labor market and a responsive safety net help to solve a lot of problems, the history of both U.S. and other countries shows that it takes national health care policy to ensure families have access to affordable coverage. The ACA was and is playing that role, but efforts to undermine its effectiveness are evident in the Census data.

Poverty, Income, Inequality

The Census provides two measures of poverty: the official poverty measure (OPM) and the Supplement Poverty Measure (SPM). The latter is a more accurate metric as it uses an updated and more realistic income threshold to determine poverty status, and it counts important benefits that the OPM leaves out. While the two measures often track each other, year-to-year, that wasn’t the case last year, as the SPM rose an insignificant one-tenth of a percent, from 13.0 to 13.1 percent, while the OPM fell a significant half-a-percent, from 12.3 to 11.8 percent. Because the SPM has a higher income threshold than the OPM, 4.4 million more people were poor by that more accurate measure.

Because it counts anti-poverty policies that the official measure leaves out, one particularly useful characteristic of the SPM data is that it breaks out the millions of people lifted out of poverty by specific anti-poverty programs. For example, refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit lifted about 8 million people out of poverty in 2018; SNAP (food stamps) lifted 3 million more out each, and Social Security was the most powerful poverty reducer, lifting 27 million out of poverty in 2018, 18 million of whom were elderly (65 and older).

As noted, median household income, inflation-adjusted, rose less than a percent last year, a statistically insignificant change (meaning a change that is statistically indistinguishable from no change at all). Yet, real median earnings of full-time, full-year workers rose more than 3 percent for both men and women. It is hard to square these results, but they are not that unusual and probably have something to do with the changing composition of households and the fact that the median male worker is different from the median female worker and neither are necessarily in the median household. Note, for example, that family households (basically, two or more related people) and non-family households (people living alone) both rose significantly last year. But when the Census smushes them together, we get an insignificant increase.

I conclude from this and other information in the report, like the fact that the number of full-year workers rose 2.3 million, or the evidence showing real wage gains last year for middle and low-wage worker, that the strong labor market helped to boost family incomes in 2018 (though as I show below, these gains are slowing over time). Another key factor pushing up wage growth at the low end of the pay scale were the minimum wage hikes that occurred in 18 states in 2018, affecting 4.5 million workers, according to EPI.

Here’s one way to look at this relationship between labor markets and, in this case, poverty outcomes. It’s a scatterplot of unemployment against the change in poverty rates (using the OPM for which we have a long, consistent time series). It shows how low unemployment correlates with declines in the poverty rate and vice-versa. Why? Because able-bodied, poor people respond to tight labor markets, an important fact that pushes back on the alleged need for work requirements.

The 2018 Poverty, Income, and health coverage results: a tale of three forces.

Sources: Census, BLS

Unfortunately, over the past few decades, labor markets have not consistently provided the job and earnings opportunities that help to support income growth for families in the bottom half of the income scale and longer-term comparisons show real median income not too far above its pre-recession peaks in 2000 and 2007. Moreover, as inequality has increased, we cannot blithely extrapolate from positive macro-indicators, like unemployment and GDP, to indicators like poverty and median income that will often reflect less improvement in periods when growth disproportionately accrues higher up the income and wealth scale. Though these Census data are less comprehensive than some other sources of inequality data, they do show that in 2018, the highest fifth of households held more income (52 percent of it) than the bottom 80 percent. Though, as noted, the survey has changed over the years such that long-term comparisons should be made with care, in 1967, this share was 44 percent, meaning the bottom 80 percent controlled more income than the top fifth. This increase in inequality is solidly confirmed in much other data.

The table below brings the critical dimension of race into the analysis (note: none of the income changes shown for 2018 are statistically significant). Median household income growth was slower in 2018 relative to earlier years, particularly for Hispanic families. Note also how poverty rates for blacks and Hispanics are multiples of those of whites. The scatterplot shows that lower unemployment correlates with lower poverty, and the table shows this effect to be greater for non-whites, who, over this period, experienced larger declines in unemployment accompanied by bigger drops in poverty. For example, over this period both white unemployment and poverty fell about 1 percentage point. For blacks, the comparable declines are 3 points for both variables. Hispanic poverty was down almost 4 percentage points.

The 2018 Poverty, Income, and health coverage results: a tale of three forces.

Sources: Census, BLS.

Health Coverage

As noted, as soon as the ACA passed, the expansion of Medicaid coverage and premium subsidies through the exchanges quickly reduced the share of people without coverage. The discussion above—the one noting the increase in the uninsured rate—focused on the main national survey featured by the Census today (the ASEC). But due to its many discontinuities, to compare changes over time it is better to use the other survey results released by Census today, from the American Community Survey (ACS).

This figure clearly shows the historical coverage gains made by the ACA, but it also shows those gains fading in 2017 and this year, in 2018 (the 0.2 point increase in the uninsured rate last year is statistically significant).

The 2018 Poverty, Income, and health coverage results: a tale of three forces.

Source: ACS

In recent years, gridlock, dysfunction, government shutdowns, and the general unwillingness of Congress to deal with our fundamental challenges has led to a justified skepticism of our federal system. But it’s worth remembering that not too far back, this system passed and implemented the largest and most consequential change in national health policy since the advent of Medicaid and Medicare in the 1960s. And the results, in terms of increased coverage, were equally dramatic.

This insight makes today’s health coverage results extremely concerning, as they reveal the impact of policies to reverse those gains. This attack on affordable coverage, according to my CBPP colleagues, “began on President Trump’s first day in office, with an executive order calling on federal agencies to waive and delay ACA provisions “to the maximum extent permitted by law.”’ They include repealing the individual mandate, anti-immigrant measures that are likely leading immigrants to avoid publicly-provided coverage, cuts in ACA outreach and enrollment assistance, work requirements that hassle people off of the Medicaid rolls, and a wide variety of waivers and eligibility barriers designed to shrink public coverage and shift medical costs onto consumers.

What’s it all mean?

The Census report is a tale of three powerful forces. First, the momentum from the strong economy continues to boost work and wages for low- and middle-income people. Second, anti-poverty programs are reliably helping to lift millions out of poverty. Third, such gains can be reversed by policies hostile to them. It is thus extremely worrisome to consider actions the Trump administration is taking to reduce government support of poor households, especially those with immigrants. Such actions include work requirements that ramp-up administrative demand to hassle low-income people off of Medicaid and SNAP; the “public charge” changes that threaten to block legal immigrants from seeking support they and their children need, changes in poverty measurement designed to make it look like fewer people are poor (and thus reduce their eligibility for assistance), and changes to nutritional support also designed to kick currently eligible persons off the roles.

The economy and complementary work supports are helping many low- and moderate income get ahead. Significant gaps persist, especially with regard to race. But the underlying trends of poverty and income have been favorable. Health coverage tells a different story and we must be vigilant not to let these same political forces do to anti-poverty programs what they’re doing to health programs.

Jared Bernstein
Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, Executive Director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute, and between 1995 and 1996, he held the post of Deputy Chief Economist at the U.S. Department of Labor.

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