One in Seven Americans Lived in Poverty Last Year
Thursday, September 16, 2010 at 3:13 pm
Today, the Census Bureau announced that one in seven Americans lived in poverty last year. Reporting income and poverty statistics for 2009, the Bureau said median income did not change substantially, remaining around $49,800. But the poverty rate climbed to 14.3 from 13.2 percent. That means that during 2009, 43.6 million people lived on less than the equivalent of $21,756 for a family with two adults and two children.
[Economy1] “Last year we saw the depths of the recession, including historic losses in employment not witnessed since the Great Depression,” President Obama said in a statement in response. “[The data] illustrates just how tough 2009 was: Along with rising unemployment, incomes failed to rise for the typical household, the percentage of Americans without health insurance rose to 16.7 percent, and the percentage of Americans living in poverty increased.”
He also hailed the Recovery Act, or stimulus, programs that kept 2.3 million Americans above the poverty line.
On a call with reporters, Heidi Shierholz, an economist with the Economic Policy Institute, described the statistics as “yet another reminder of the severity of the Great Recession,” which started at the end of 2007, ended sometime last year and has been followed by a sluggish recovery.
“Most simply, the labor market is the core building block of family incomes,” she said, explaining that the precipitous rise in the unemployment rate has fed the increase in poverty. “The big jumps in poverty and declines in income are no surprise, given the deterioration of the labor market.”
Between 2007 and 2009, the unemployment rate climbed from 5.8 to 9.3 percent — the biggest two-year increase on record. And economists project that the average annual unemployment rate will continue to rise through 2011 — an unprecedented four year, year-on-year increase. For that reason, Shierholz said that the poverty rate will likely increase for the next year or two as well.
The statistics contained within the report are striking. The proportion of Americans living in “deep poverty,” with incomes less than half of the poverty line, hit a record high of 6.3 percent — meaning nearly 20 million Americans live on less than $11,000 a year for a family of four. One third of black children live in poverty, and more than 20 percent of all children live in poverty. The number of people without health insurance increased for the first time ever, to 50.7 million, up more than 4 million since 2008.
The stimulus did help save more than 2 million families from poverty, and most provisions did not come into their full effect until 2010. For instance, the poverty rate declined for the elderly, whose Social Security benefits got a bump in 2009 due to an American Recovery and Reinvestment Act provision. “Today’s report is ugly,” Shierholz said. “Without ARRA it would have been a lot uglier.”
The United States measures poverty by pre-tax income. Therefore, salary, wages and cash income such as unemployment insurance benefits count, but non-cash benefits like food stamps do not. (It should be noted, though, if unemployment insurance is a person’s only income, he or she falls below the poverty line.)
Many social scientists argue the government should make the poverty threshold a function of how much a family or individual spends, rather than how much they make. Say, for instance, both earners in a wealthy two-earner household lost their jobs one year. They might live off of savings, draw down their retirement accounts and take out a line of credit to keep their heads above water. But they would still count in the poverty statistics due to their lack of earnings.
The measure skews the picture in other ways, as well. Bruce Meyer, a professor at the Harris School of Public Policy at the University of Chicago, argues, “[The poverty measure] does not do a good job of capturing differences in well-being across groups. It sharply increases the poverty rate of the elderly, even though other indicators of well-being show that the elderly are better off than other groups. It reduces (at least relative to other groups) the poverty rate of children, although other measures indicate they are more disadvantaged.”
But next year, the government is making the poverty measure more nuanced — adding a supplemental poverty yardstick. The new measure will take into account cost-of-living differences across the country. It will also weigh the cost of utilities, child care and health care, and the amount of federal and state assistance, including non-cash benefits like food stamps, a person or family receives.
That measure is expected to show many more families living in impoverished conditions. Indeed, the last decade has been punishing for lower-income and working-class Americans. In Congressional testimony last year, Rebecca Blank, undersecretary for economic affairs in the Commerce Department, noted that poverty did not fall during the economic expansion of the 2000s.
“[T]he poverty rate always rises steeply during recessions, but falls during expansions,” she said. “[P]overty fell by 1.5 percentage points during the expansion of the 1980s and by almost 3 percentage points during the expansion of the 1990s. In the recession of 2001, poverty went up as anticipated, but never really came down. Rather than falling, poverty rose by eight-tenths of a percentage point during the expansion of the 2000s, so that a higher share of the population was poor in 2007 than in 2001.”
Speaking on a call with reporters today, Lawrence Katz of Harvard concurred. Calling the Census report the “most detailed look to date of the human cost and the severity of this recession,” he noted the extended decline or stall-out in real incomes for most workers.
“For the typical American family,” he said, “a decade has gone by in which real incomes have fallen, and have fallen by five percent.” He noted that only households headed by workers with professional or advanced degrees withstood the period without income declines.
“People talk about a lost decade,” he said. “We’ve already had it.”
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