A Rising Tide Does Not Lift All Boats
New Census Data Show Progress on the Margins
By: Derek Thomas and Gaurav Gupta-Casale
The U.S. poverty rate fell from 12.3 percent in 2017 to 11.8 percent in 2018 and the number of Americans living in poverty declined by 1.4 million (down from 39.7 million to 38.1 million) according to new data released by the U.S Census Bureau.
Even as poverty declined, growth in median household income stagnated and inequality is the highest on record. Following a strong increase of 5.1 percent in 2015, growth in median incomes slowed in subsequent years before stalling out last year. Meanwhile, high-income earners continue to capture a disproportionate share of the nation’s economic growth. The rising tide that is the longest economic expansion on record is not lifting all boats.
In places like New York City, robust economic growth driven by a strong labor market and wage growth alongside progressive policies designed to bring low- to middle-income households aboard – such as increases in the minimum wage and universal pre-k – have led to reductions in poverty and increases in median household incomes. However, enormous structural inequities exist, such as gaps in median income by race and ethnicity, and income inequality in the City did not budge, and is more uneven than New York State overall, where inequality is greater than every other U.S. state.
To truly lift all boats, a great deal of work remains both locally and nationally.
Poverty in New York City declined from 18 percent in 2017 to 17.3 percent in 2018. That’s nearly 2 percentage points below the poverty rate in 2006, prior to the Great Recession.1 While the City as a whole experienced a reduction in poverty, no borough by itself saw a rate decline and Staten Island stands out as the only borough with poverty rates above pre-recession levels.
Poverty rates for children under 18 in New York City fell from 25.2% in 2017 to 23.8% in 2018. By borough, Manhattan is the only borough to experience a decline, down from 23 percent in 2017 to 18.9 percent in 2018.
While any reduction is meaningful, New York City’s poverty rate is more than five percentage points higher than the national rate, and the child poverty rate is seven percentage points higher.
To be sure, the national poverty rate is itself a low bar, falling well short of measuring the income required for a basic standard of living. According to the OECD – who benchmarks poverty at half the median income for 39 nations – the U.S. had the fourth highest poverty rate in 2018 and the seventh highest child poverty rate.2
Beyond the Official Definition of Poverty – Basic Living Standards
Created more than a half-century ago, the Federal Poverty Level (FPL), which sets a threshold for poverty for a single adult at $12,490 a year, is a woefully inadequate measure of well-being. Instead, in a high-cost city such as New York, three times the federal poverty level (300 percent FPL or $37,470 annually) is a more realistic and quantifiably accurate3 threshold for measuring basic living standards, such as safe and secure housing, a quality education from cradle to post-secondary, access to nutritious food, quality healthcare, emergency savings, and the changing necessities required to participate in society.
Applying this more sensible yardstick, the data reveal that the share of individuals living above 300 percent FPL increased from under half (49.2 percent) in 2017 to more than half (50.7 percent) in 2018. (This shift appears to be driven by population declines, rather than individuals climbing the economic ladder.4)
Median Household Income
For the second straight year, median household income grew in New York City. From 2017 to 2018, median income increased by 2.3 percent ($1,436), even stronger than the 1.3 percent growth in 2017. After adjusting for inflation, the median income is up 9.9 percent ($5,700) since 2006, before the recession.
As expected, New York City’s minimum wage increases have translated to higher earnings, particularly for people of color. From 2017 to 2018, Black workers saw an increase of 4.3 percent ($1,995) and Latinx workers saw an increase of 3.5 percent ($1,508).5
Nevertheless, structural injustices exist; while recent years found progress towards closing racial and ethnic median income gaps, the median income for White households in 2018 ($94,162) was nearly double that of Black households ($48,142) and more than double that of Latinx households ($44,458).
Across boroughs, Brooklyn and Queens both experienced growth in median income – increases of 5 percent ($2,890) and 4.9 percent ($3,238) respectively. In 2018, median incomes in the Bronx were less than half of the median income in Manhattan, while Brooklynites made a little more than a third of the median income in Manhattan.
American Community Survey Data
Inequality did not budge in New York City. Across boroughs, only in Staten Island saw inequality reduced.
A report from 2018 found that New York State was among five U.S. states where the top one percent captured a larger share of income than they did in 1928 at the height of the Gilded Age. New York State also has the dubious distinction of having the largest income gap among all states — in 2015 the top 1 percent earned 44 times the income of the bottom 99 percent on average. As the report notes, “this reflects in part the relative concentration of the financial sector in the greater New York City metropolitan area,” where the top one percent earned 39.4 times more than the bottom 99 percent.
Beyond the Official Definition of Poverty – Basic Living Standards
Nationally: A dramatic course correction is required in Washington D.C. President Trump’s budget proposals , regulatory and rule-making attacks on food assistance and support for immigrants, and trillions of dollars in deficit-financed tax giveaways to the powerful and profitable corporations – as if they aren’t enough – follow a full decade of federal budget austerity.
We at FPWA are working alongside our city, state, and national allies and the City’s congressional delegation to:
- Right-side a decade of federal budget austerity which has resulted in the loss of hundreds of millions in federal aid to New York City to support children, older adults, and the workforce, and deliver effective poverty fighting tools and other critical services to communities around the City;
- Advance the expansion of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) through the Working Families Tax Relief Act. The Act represents a meaningful step in addressing the vast racial and ethnic income disparities that exist today in two ways:
1) The EITC targets workers in low-paid occupations and who have lower wages within a given occupation – workers who are more likely to be women of color, and
2) The Act would make the CTC, like the EITC, fully refundable – that is, if filing the credit brings an individual’s tax liability below zero, the IRS would send them a check for the difference. Because the current structure of the refundability feature doesn’t extend fully to low-income workers who are more likely to be women of color, they would disproportionately benefit from the expansion of a fully refundable credit.
Locally: New York City has been a bellwether for progressive public policy in the U.S., reducing hardship and boosting incomes for low- to middle-income households, and the State recently made strides in passing landmark rent reforms. However, much remains to be done to combat the wage stagnation we have seen in low-wage jobs this past decade and help close median income gaps.
We at FPWA are working with Strong Nonprofits for a Better New York to advocate for increased State investment in the human services workforce, which is about 20% of New York’s workforce and is largely employed under State contracts with nonprofit providers. This workforce is 81 percent women, 46% people of color, and among the lowest-paid in the State. There is no hope of narrowing median income gaps if these workers cannot, at bare minimum, earn a salary that can keep up with the increasing cost of living. Yet, these workers have not seen a salary increase in nearly a decade. Therefore, we seek the reinstatement of the statutory human services workforce cost-of-living adjustment for the State’s human services contracts.
1 Any reporting on declines or increases in this report refer to statistically significant changes from 2017 to 2018. Reporting unchanged or stagnating rates/amounts refers to changes that are not statistically significant.
2 The OECD defines poverty as “the ratio of the number of people (in a given age group) whose income falls below the poverty line; taken as half the median household income of the total population.”
3 According to the 2018 NYC Self Sufficiency Standard report, a single adult requires an annual income of $32,050 in the Bronx, $36,206 in Brooklyn, $48,921 in Manhattan, $37,065 in Queens, and $33,941 in Staten Island to meet their most basic needs such as childcare, housing, food, etc. The population-weighted average income required for basic needs across New York City is $38,065 – just over 300% FPL ($17.21 per hour). See here for what’s included in the federal poverty measure and here for technical notes on the Standard.
4 The number of individuals living below 300% FPL declined by 237,090 in 2018 while the number living above 300% FPL increased by 12,645 according to ACS, Table B17002 – the total population of which was 8,258,024 in 2018.
5 To ensure consistency with Census definitions, White refers to non-Hispanic Whites; Black refers to Blacks alone; Latinx refers to Hispanic-Latino.