Pro-Growth Economic Policies Benefit Previously Left Behind Americans the Most
Dec 16, 2019
Since the 2016 election, the economy has added more than 7 million jobs, far exceeding the 1.9 million predicted by the Congressional Budget Office in its final pre-election forecast. These gains have brought Americans off the sidelines into employment, as shown in the figure below. The prime-age labor force has grown by 2.1 million people since the election, reversing losses under the prior administration’s expansion period, which totaled approximately 1.5 million people. This evidence suggests that the labor market’s revival over the past three years is not a continuation of past trends, but instead a result of President Trump’s pro-growth policies.
The Trump Administration’s policies are not only leading to more jobs, but also to higher pay. For 16 straight months, annual nominal wage growth has been at or above 3 percent, a level not reached since the Great Recession, and continues to outpace inflation. Importantly, wage growth for many disadvantaged groups is now higher than wage growth for more advantaged groups, as is the case for lower-income workers compared to higher-income workers, workers compared to managers, and African Americans compared to whites. These income gains mark a fundamental change compared to those opposite trends observed over the expansion before President Trump’s inauguration, contributing to reduced income inequality. When measured as the share of income earned by the top 20 percent, income inequality fell in 2018 by the largest amount in over a decade. The Gini coefficient, an overall measure of inequality in the population, also
fell in 2018.
Employment and earnings gains continue to pull people out of poverty and means-tested welfare programs, increasing self-reliance through economic activity while decreasing reliance on government programs that incentivize people to limit their hours or stop working to qualify. The number of people in poverty decreased by 1.4 million from 2017 to 2018, and the poverty rates for blacks and Hispanics reached record lows last year. Food insecurity has fallen and, as of August 2019, there are nearly 7 million fewer people participating in the Supplemental Nutrition Assistance Program (food stamps) than at the time of the 2016 election. Additionally, the caseload for Temporary Assistance for Needy Families (TANF) fell by almost 700,000 individuals and the number of individuals on Social Security Disability Insurance has fallen by almost 380,000 since the 2016 election. Similarly, Medicaid rolls are decreasing even as the U.S. population increases. Our analysis shows that this decrease is predominantly due to a reduction in the number of Medicaid-eligible individuals because of income growth, not eligibility restrictions.
