Household income falls as 46 million in poverty
Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) — There were 46.2 million Americans in poverty in 2011, as median household income decreased, according to a Census Bureau report released Wednesday illustrating the toll from ongoing labor-market weakness.
In 2010 there were 46.3 million in poverty. Meanwhile, the poverty rate remained high, ticking down to 15% in 2011 from 15.1% in 2010.
“Poverty remains very problematic,” said Harry Holzer, a public-policy professor at Georgetown University. “[The data] is not something to celebrate, but it’s nice that it didn’t go up.”
After rising for three years, neither the number of people in poverty nor the poverty rate was statistically different in 2011 from the prior year, Census said.
A gauge of consumer sentiment reaches its best level in four months, led up entirely by brighter expectations.
Meanwhile, real median household income decreased 1.5% to $50,054 in 2011, and a measure of income inequality increased on an annual basis for the first time since 1993, Census reported. Median income last year was down almost 9% from a recent peak in 1999, and is lower than when the recession began.
“It is clear that more work remains to rebuild economic security for our middle class,” said Rebecca Blank, the U.S. Commerce secretary, in a statement. “The fact that our wealthiest continue to see economic gains while the middle class continues to struggle to recover from the Great Recession underscores the fact we must enact policies that help rebuild our economy not from the top down, but from the middle out.”
Those without health insurance decreased to 48.6 million in 2011 from 50 million in 2010. Expanding government health-insurance for kids, and enacting the Affordable Care Act have led to more coverage, Blank said. For example, there was a significant drop in the uninsured rate for people between 19 and 25, as the ACA allows children up to 26 to stay on a parent’s plan.
The poverty report could have political implications.
The data will be a “difficult burden on the president’s path to re-election,” said Ron Christie, a Republican political strategist. “It is hard to overlook the fact that 1 in 7 Americans are at or below poverty,” he said.
In a statement Wednesday afternoon, Romney campaign spokeswoman Andrea Saul said the report “confirms that the American Dream remains out of reach for too many families ... Mitt Romney’s pro-growth agenda will revive our economy, spur job creation, lift families out of poverty, and create a better future for our country.”
Persistent jobs weakness taking a toll
Although the Great Recession officially ended in mid-2009, the number of unemployed remained high last year, reaching over 13 million in December, compared with almost 14 million at the beginning of 2011.
Surges in unemployment increase poverty as those who lose jobs take income hits, young workers face tough competition, and wage gains are slowed, said Lawrence Katz, an economist at Harvard University.
Exhausting unemployment-insurance benefits has also hurt many workers, he added.
“The persistence of high unemployment since the technical end of the Great Recession in 2009 further eroded wage growth and led many long-term unemployed to lose contact with the work force and to eventually exhaust unemployment benefits further shifting some into poverty,” Katz said.
While unemployment insurance has lowered the poverty rate, the effect may taper as benefits expire, said Georgetown’s Holzer.
“More and more workers and families are seeing their [unemployment insurance] expire after 99 weeks, so its effect in limiting poverty might be getting a bit smaller this year and next, but it no doubt remains very important while unemployment remains so high,” Holzer said.
The stakes are high for the nation’s poor as the next president faces substantial fiscal challenges.
“Austerity will increase poverty both through cuts in programs, like unemployment insurance extensions, and through job loss,” said Heidi Shierholz, an economist at the Economic Policy Institute, a liberal-leaning think tank based in Washington.
“Romney will push for much greater austerity than Obama, though I think we’ll be battling austerity no matter who is in office.”
Poverty report details
The average poverty threshold for a family of four in 2011 was $23,021. Those with money income under that threshold would be considered to be in poverty.
Poverty hits children particularly hard. In 2011, the poverty rate for children was about 22%, compared with 14% for those between 18 and 64, and 9% for those at least 65.
The official poverty measure released Wednesday uses money income before taxes, such as earnings and unemployment compensation, but does not include noncash benefits, such as Food Stamps and public housing. In November, the Census Bureau is scheduled to release a supplemental poverty measure that does take into account benefits such as Food Stamps.
The Census report also showed that inequality increased in 2011. One gauge showed that inequality increased 1.6%, the first annual gain in the almost-two-decades of available data. Another view of inequality shows that the top 5%’s share of aggregate income widened last year. The data are part of a longer trend of growing inequality, and it’s worrisome that so many are being left behind, said Harvard’s Katz.
“The bottom 95% of households are for the most part still stuck in a stagnant economy,” Katz said. “Poverty has stopped rising, but the typical household is in worse position than they were in 2007, and only the upper end is seeing a true recovery.”