Today’s report from the Census Bureau shows impressive (and long-awaited) across-the-board improvements to household incomes over 2014–2015, as inflation-adjusted wages improved and unemployment fell (from 6.2 to 5.3 percent) while inflation was absent. Inflation-adjusted wages for women finally exceeded their pre-recession levels in 2015, rising 2.7 percent, while the 1.5 percent increase in men’s earnings leaves them just 0.7 percent down from 2007 levels. These findings reinforce the centrality of wage growth for reestablishing household income gains—as we argued in Raising America’s Pay—and the importance of lowering unemployment. This is for the simple reason that most households, including those with low incomes, rely on labor earnings for the vast majority of their income.

Despite gains in 2015, household incomes have still not fully recovered from the deep losses suffered in the Great Recession—the bottom 95 percent of households still had incomes in 2015 below those of 2007 (while those in the top five percent are now three percent ahead). One more year of modest growth will bring the broad middle class back to pre-recession incomes.

Non-elderly household incomes rebound

The Census data show that from 2014–2015, median household incomes for non-elderly households (those with a head of household younger than 65 years old) increased 4.6 percent, from $60,531 to $63,344. This increase is a superb and most-welcomed improvement. Median household income for non-elderly households in 2015 ($63,344) was 5.0 percent, or $3,304, below its level in 2007—roughly half the total loss that prevailed over the 2007–14 period. The disappointing trends of the Great Recession and its aftermath come on the heels of the weak labor market from 2000–2007, during which the median income of non-elderly households fell significantly, from $69,016 to $66,648, the first time in the post-war period that incomes failed to grow over a business cycle. Altogether, from 2000–2015, the median income for non-elderly households fell from $69,016 to $63,344, a decline of $5,672, or 8.2 percent.

Wages jump in 2015 following years of stagnation

The key driver of these income trends, besides lower employment and hours in the aftermath of the financial crisis, has been wage stagnation over the last dozen years. The continued fall in unemployment and the absence of any inflation yielded strong inflation-adjusted wage growth in 2015. For instance, the median man working full-time, full-year experienced a decent increase in real earnings of 1.5 percent, from $50,441 to $51,212, in 2015. In addition, the median woman working full-time, full-year saw strong growth of 2.7 percent, from $39,667 to $40,742. With these improvements, real wages for men and women have finally or nearly exceeded those in pre-recession 2007: men’s wages are still down, but only by 0.7 percent, while women’s wages are up 1.5 percent. Looking over a longer horizon, however, the trends are starkly disappointing. The median woman working full-time, full-year saw her earnings grow from $30,222 in 1973 to $39,799 in 2002, and then stagnate in the 2002–2007 recovery and during the recession since 2007, reaching only $40,742 in 2015. Since 1973, the median man working full-time, full-year has seen no sustained wage growth, with wages dropping from $53,364 in 1973 to $51,957 in 2002 and falling further over the 2002-07 recovery and the recession, before rising to $51,212 in 2015.

While the earnings of full-time, full-year women have improved since 1973, the closure of the gender wage gap has stalled over the last decade. The gender wage gap shrunk 17 percentage points during the 27 year period from 1973–2000, but only shrunk 5.8 percent points from 2000–2015. Women made 73.7 percent of men’s wages in 2000 and 79.6 percent of men’s wages in 2015. From 2014–2015, the gender wage gap fell 0.9 percentage points. Unfortunately, the little improvement that has occurred since 2000 was due mostly to men’s wages stagnating, rather than both genders seeing wage growth with women’s wages growing even faster.

Income gains and losses by income group

Low- and middle-income households have fared poorly in recent years because of faltering wages compounded by excessive unemployment and fewer work hours due to the Great Recession. Figure C allows us to track the extent to which households at various income levels have been able to recover from the Great Recession (looking at each income fifth and dividing the top fifth into those in the top 5 percent and the next 15 percent).

Households at the bottom of the income distribution experienced larger income declines as unemployment rose from 2007–2010, and failed to see improvements even by 2014. The income losses were greater the lower a household’s income, exacerbating inequality. With the income gains of 2015 we see that those in the top 5 percent are the only income group to have regained income levels enjoyed prior to the recession. Those in the bottom fifth had the fastest rise in incomes in 2015. While they still have incomes 5.2 percent below 2007 levels, this is a large improvement over 2014, when incomes were still 11 percent down from 2007. The middle fifth had incomes in 2015 that were 3.1 percent below those of 2007, a large improvement over 2014, when incomes were 7.8 percent below 2007 levels. One more year of normal income growth will restore middle-fifth incomes. Maintaining real wage gains and further lowering unemployment is the recipe for that reasonable outcome.