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New Census Numbers Make it Official: 2000-2010 Was a Lost Economic Decade

Shawn Fremstad

12/09/2011

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This morning the Census Bureau released its annual report [http://www.census.gov/newsroom/releases/archives/income_wealth/cb11-157.html] on income-including median income, inequality, and income poverty-and health insurance coverage in the previous year. As expected given continued high unemployment, the report shows a substantial deterioration in Americans' economic security between 2009 and 2010, including substantial income losses for middle- and working-class Americans, and an increase in the number of Americans without health insurance. These declines cap off what can only be described as a "lost decade" [http://www.epi.org/publication/a_lost_decade_poverty_and_income_trends/] in economic terms. At the same time, things could have been worse. Both the 2009 Recovery Act [http://www.recovery.gov/About/Pages/The_Act.aspx] and the 2010 Affordable Care Act [http://www.healthcare.gov/law/introduction/index.html], as well as existing social insurance, moderated the declines.

Median Income and Full-Time Employment

Median household income declined between 2009 and 2010, even without adjusting for inflation. In real terms, median household income fell by 2.3 percent or roughly $1,150 (from $50,599 in 2009 to $49,445 in 2010). This is the largest one-year decline since 2007-2008 (-3.57 percent). Real median income in 2010 was 7.1 percent lower than its previous peak in 1999.

Among racial and ethnic groups, African-Americans households fared the worst-their median household income fell by 3.2 percent between 2009 and 2010, from an already low $33,122 to $32,068. (Asian Americans and Latinos also appear to have experienced substantial declines in income, -3.4 percent and -2.3 percent respectively, but the changes are not statistically significant.)

Census included income statistics for households headed by an adult with a disabilty (and poverty and health insurance statistics for adults with disabilties) for the first time in this annual report. These households experienced the largest decline in median income of any of the household categories in the annual report-their incomes fell by 8.5 percent between 2009 and 2010.

Health Insurance

The number of people with employer-based health insurance coverage fell by 1.5 million. Increases in public coverage and other forms of private coverage offset these losses somewhat. Overall, the number of people without health insurance (from any source) increased by nearly 1 million, from 49 million in 2009 to 49.9 million in 2010. Households with incomes below $25,000 were particularly hard hit - some 846,000 more people in these low-income households were uninsured in 2010 than in 2009 (part of the story here is that the number of people with households incomes below this level increased by nearly 2 million). One of the few bright spots was the decline in the number of young people (between the ages of 18 to 24) without health insurance. This is likely due to a provision in the Affordable Care Act that expanded coverage for this group starting in 2010.

Income Poverty and "Making Ends Meet"

The percentage of Americans with incomes below the federal poverty threshold increased from 14.3 percent to 15.1 percent, its highest level since the Reagan Administration, when the poverty rate hit 15.2 percent in 1982. Non-elderly adults with disabilities were the hardest hit among the demographic categories tracked by Census-their poverty rate increased by nearly 3 percentage points, from 25 percent in 2009 to 27.9 percent in 2010.

There is broad recognition that the current poverty line ($22,113 for a family of two adults and two children in 2010) falls far below the amount of income needed to "make ends meet" at a basic level. When established in the early 1960s, the poverty line was equal to nearly 50 percent of median income. Because it has only been adjusted for inflation since then, and not for increases in mainstream living standards, the poverty line has fallen to just under 30 percent of median income. As a result, to be counted as officially "poor," you have to be much poorer today, compared with a typical family, than you would have in the 1960s. Thus, for comparing today's income poverty numbers with those of the early 1960s, a better standard is half of median. As Census notes, some 22.1 percent of Americans fell below this very-low income standard in 2010, compared with the official rate of 14.3 percent. This is roughly the same as the official income-poverty rate between 1959 (22.4 percent) and 1962 (21 percent). (One big difference between these two eras is that poverty had already been cut in half between 1949 and 1959, and would continue to fall for another decade and a half; while over the last decade poverty has generally increased, and there has been little sustained progress on reducing it since this earlier period.)

Similarly, both public opinion research conducted by Gallup and other pollsters, and basic budget analyses conducted by the Department of Commerce and various non-governmental research organizations, suggest that the minimum amount needed to "make ends meet" at a basic level is around $45,000 to $50,000 for a family of four. While the Census report does not report data for such a standard, it does provide data on the number of people with incomes below 200 percent of the federal poverty line, which is a roughly equivalent income level. These figures show that just over one out of every three Americans (33.9 percent; almost 104 million people) in 2010 had income below 200 percent of the poverty line, and that the percentage of such people increased by .9 percentage points between 2009 and 2010, and by 4.6 percentage points since its lowest recorded level (29.3 percent) in 2000.

Impact of Social Insurance, Recovery Act and Other Policies

These numbers reflect some but not all of the provisions of legislation enacted in 2009 and 2010 to reduce unemployment and increased economic security. Without the infrastructure investments and various other provisions of the Recovery Act of 2009, unemployment would have been higher and incomes lower in 2010 than these figures show. Some elements of the Recovery Act, particularly increases in the Supplemental Nutritional Assistance Program and increases in the Earned Income Tax Credit and Child Tax Credit, are not reflected in these figures, but clearly bolstered the economic security of millions of working-class families.

Finally, health care reform, which will, among other things, ultimately extend public health insurance to nearly all currently uninsured Americans with incomes below 125 percent of the poverty line and provide subsidies for insurance up to 400 percent of the poverty line, has only begun to be implemented. Most of the expansions in coverage will not occur until 2014. One exception, as noted above, is that young adults did benefit from a new health care reform provision that allows them to stay on their parents' insurance policies until age 26.

- Shawn Fremstad is a senior research associate at the Center for Economic and Policy Research and an expert on issues of poverty and inequality.

Source: CEPR www.cepr.net.

(CEPR's GDP Byte is published quarterly upon release of the Bureau of Economic Analysis' report on the Gross Domestic Product. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 103 or e-mail chinku@cepr.net.)

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