WHAT IF THE MARKET IS WORKING MORE OR LESS AS IT’S SUPPOSED TO?

In 2015, median U.S. household incomes rose by 5.2 per cent. That was the fastest surge in percentage terms since the U.S. Census Bureau began keeping records in the 1960s. Women living alone saw their incomes rise by 8.7 per cent. Median incomes for American Hispanics rose by 6.1 per cent. Immigrants’ incomes, excluding naturalized citizens, jumped by over 10 per cent.

The news was especially good for the poor. The share of overall income that went to the poorest fifth increased by three per cent, while the share that went to the affluent groups did not change. In that year, the poverty rate fell by 1.2 percentage points, the steepest decline since 1999.

The numbers for 2016 have just been released by the U.S. Census Bureau, and the trends are pretty much the same. Median U.S. household income rose another 3.2 per cent, after inflation, to its highest level ever. The poverty rate fell some more. The share of national income going to labour is now rising, while the share going to capital is falling.

In a well-functioning economy, workers are rewarded for their productivity. As output, jobs and hours worked rise, so does income. Over the past two years, that seems to be exactly what’s happening.

The evidence from the past two years strongly supports those who have argued all along that income has not decoupled from productivity. A wide range of economists,