Opinion

Felix Salmon

The depressing income and poverty data

By Felix Salmon
September 10, 2009

There’s no good news in today’s data from the Census bureau. Unless you’re the kind of person who worries about inflation, that is: in that case you’re probably reassured that real median household income fell 3.6% between 2007 and 2008, from $52,163 to $50,303. That’s a drop of over $1,800: real money.

Naturally, the pain was concentrated in the poorer parts of the US: incomes in the South fell by 4.9% to $45,590, while incomes in the Northeast were unchanged at $54,346.

Oh, and the number of people in poverty increased by a whopping 2.5 million, to 39.8 million: 13.2% of the population, the highest poverty rate in over a decade. How poor do you need to be in order to be counted as living in poverty? Very poor:

As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the weighted average poverty threshold for a family of four in 2008 was $22,025; for a family of three, $17,163; for a family of two, $14,051; and for unrelated individuals, $10,991.

The poverty rate for children under the age of 18 is now an eye-popping 19%: basically one child in every five is living in poverty in the US. And even if a slow economic recovery is beginning to take hold, I can’t see that number declining much in the foreseeable future. Which is unconscionable, in the richest country in the world.

Update: Emily Monea and Isabel Sawhill of the Brookings Institution have a paper out which says that “the poverty rate will increase rapidly through 2011 or 2012, at which point about 14.4 percent of the country will be in poverty”, and that the number of children living in poverty could rise by 5 million, or 38%, to 18 million.

Update 2: David Leonhardt points out that real incomes fell over the course of the past decade, from $51,295 in 1998 to $50,303 in 2008:

In the four decades that the Census bureau has been tracking household income, there has never before been a full decade in which median income failed to rise. (The previous record was eight years, ending in 1986.) Other Census data suggest that it also never happened between the late 1940s and the late 1960s. So it doesn’t seem to have happened since at least the 1930s.

Comments
18 comments so far | RSS Comments RSS

Totally unconscionable – why are all those poor people having so many children? WTF is wrong with them? That kind of crappy decision-making is probably why they are so darn broke… (Or is your suggestion that the children cause the poverty somehow?

Posted by milo | Report as abusive
 

Could we please stop calling the US “the richest country in the world?” Seriously, this is laughable. Federal debt per household (including Social Security and Medicare expected benefit shortfall) is $546K. Personal debt per household is $122K. It’s not that 19% of children are living in poverty — we’re ALL poor — it’s just that no one has called in the debt. Yet.

Posted by doji_star | Report as abusive
 

45.7 Million Uninsured Breakdown
——————————————–
Illegal Immigrants = 9.3 million
Medicad Undercount = 6.4 million
Medicaid/SCHIP Eligible = 4.3 million
Childless Adults = 5.0 million
Over 300% of Poverty = 10.1 million
Remaining Uninsured = 10.6 million

Medicad Undercount – People who are on one of two government health insurance programs, Medicaid or S-CHIP, but mistakenly (intentionally or not) tell the Census taker that they are uninsured.

Medicaid/SCHIP Eligible – Eligible for free or heavily subsidized government health insurance (again, either Medcaid or SCHIP), but have not signed up.

Childless Adults – Adults between ages 18 and 34 and without kids.

Over 300% of Poverty – Do not fit into any of the above categories, and they have incomes more than 3X the poverty level.

Remaining Uninsured – U.S. citizens, with income below 300% of poverty, not on or eligible for a taxpayer-subsidized health insurance program, and not a childless adult between age 18 and 34.

Posted by xinunus | Report as abusive
 

There’s a lot of numbers in this article, and I find myself questioning lots of them.

First, the numbers are very specific. There are a lot of households in the US, and distilling the median income down to the dollar is very obscuring. A rounded number would be just as useful, and a range would more informative. I’m sure the math works out to such exact numbers, but every high school science student learns about the concept of “significant figures.”

Second, some of them are redundant. Unemployment is up. Many incomes have dropped to zero. That one factor will cause both the median income to be lower AND the poverty population to be higher. Emphasizing both like they’re independant thoughts is misleading. It makes it sound like wages have dropped, when it’s really something else entirely.

 

The USA is going down. The problem is that it’s rotten to the core. Big business bought all the politicians long ago and hijacked the country.

Posted by George | Report as abusive
 

There’s a really telling chart here of the median incomes from WWII to 1976 & from 1976 to today. Overall median incomes are lower in that latter period than the first but incomes for the top 1% sky-rocketed.

http://www.cbpp.org/cms/?fa=view&id=2908

Posted by Jessica6 | Report as abusive
 

doji_star:

First of all, the long-run deficit is only about 8 percent of GDP. Scary, yes, but not in and of itself a total catastrophe.

Now, the thing driving that 8 percent of GDP shortfall? The fact that health care is projected to double as a share of GDP over the next 30 years and consume HALF our economy by the 2080s. According to CBO, health care spending will grow so fast that consumption of non-health-care goods and services is projected to FALL starting in 2035. Now that’s scary.

So if you’re worried about that big, scary unrealized debt, then I hope you’re doing something about the ridiculous cost of health care in this country. It’s out-of-control growth in health care spending driving that long-run deficit, and Social Security almost not at all.

 

Poverty roughly means we cannot pay the bills, government provides food stamps and health insurance. The taxpayers are paying the services by commandment of the government. This is not God’s way.

We can overcome real poverty by turning to a garden paradise lifestyle that can solve our world problems like the energy crisis, reoccurring financial crises, war, immigration, climate change and social security inadequacies and keep us healthy and well fed. Man’s ways do not solve problems; they just push our money at it With trees, plants and pets that provide fresh food around us, we can stop the polluting of our air, land, water and food that is making us a diseased people and land. There is no good reason to continue the stress, bondage, and expense of the employment lifestyle. True freedom, independence and prosperity are found in a garden paradise lifestyle. It is the only sustainable lifestyle. It solves the world problems easily, fairly, inexpensively and beautifully.

 

Here’s the deal as I see it 30-something who would have a much harder time if I were entering the workforce today. Today’s young people, especially Gen Y, have a smaller share of the financial pie (income and assets) of any similar cohort in the past. Young adults are the ones of child-bearing age.

There are a couple points that come to mind:

(1) Financial benefits to the old (who may in fact be quite well-off) are huge. A 65 year old millionaire can get free medical and collect social security on the back of a younger underclass.

(2) Whereas in places such as Europe people generally leave the workforce after around 60, workers stay on much longer in America. When job creation is nil over a decade, this means that companies are not finding room for new hires.

(3) Where workers do find work in a larger, older corporation, they are unlikely to be compensated as well as in generations past, due to lavish benefits often still being paid to their predecessors, which they are unlikely to ever receive.

This is a catastrophe because there are the makings of a lost generation in America, who are on average poorer than their parents.

What are the solutions for overburdened young people, including those who are not poor?
- Live simply. Simpler house, car, staycations, etc.
- Ain’t no shame in receiving help, be it money, child care, or (temporary) housing from your elders. They had a lot of benefits that you won’t have.
- Engage in more non-economic activity. Example 1: Rather than two incomes taxed at a high rate with one income going largely to childcare and taxes, just go with one income and have a far higher quality of life. Example 2: Do your own cooking rather than eating out, do your own gardening, house-cleaning and repair work rather than hiring people for these things. The marginal tax rates on those last dollars of income will be very high.

Posted by Dan | Report as abusive
 

Mark Thoma points to this RAND – generated gem. (Did they come up with the “Ice-9″ codeword, by the way, for the frozen credit markets?)

http://www.rand.org/pubs/occasional_pape rs/2009/RAND_OP243.pdf

These guys are all sweetness and light, aren’t they?

Aside: We’re here on a Thomson-Reuters site. Assuming that Thomson-Reuters has an interest (monetary?) in affecting the mood of the country, why are they making us feel so depressed just like RAND is doing? It’s bad, of course, but the Mighty Wurlitzer that is pumping out all the doom again seems like it’s being played by a master of gothic church music. You even use the term “depressing” just like Krugman used to do all the time until he got called on it. What interest does the company have in depressing us?

 

Based on the comments on this site so far, the proportion of U.S. citizens wearing tin-foil hats appears to be increasing.

Posted by Philly Boy | Report as abusive
 

Embrace the tin foil, Philly Boy. It’s the most honest thing your country has to offer you right now.

 

“Oh, and the number of people in poverty”

No.

“basically one child in every five is living in poverty in the US.”

No again.

Felix, you really ought to know this. Shame on you for not.

US poverty figures are calculated entirely differently from those of every other country on the planet.

US figures are, market incomes plus cash benefits. Everyone else calculates them as (as well as being 60% of median income, rather than a measure of absolute income) post tax and post benefit system.

It is true to say that, looking at the US figures, x % are in poverty as defined by the way that we define poverty in the US. However, how do we alleviate poverty in the US? We offer food stamps (not cash, thus not counted) Medicaid ( benefit in kind, not counted), housing vouchers (not cash benefit, not counted) the EITC (through the tax system, not counted).

The US poverty rate is the number of people who would be living in poverty if they were not being helped. It is absolutely not a measure of how many people are living in poverty. For we do not count the help that people are receiving (whether that is enough or not is an entirely separate matter) when we calculate the poverty rate.

I’m simply astonished that you don’t know/choose to ignore that.

 

(whether that is enough or not is an entirely separate matter)
Hardly.

Posted by Lord | Report as abusive
 

Tim is right that the methodology is suspect, but is directionally wrong about the implications – the new proposed way of counting poverty (which per the article below sounds like it will address most of his points) actually shows significantly HIGHER levels of poverty.

Article:
http://www.google.com/hostednews/ap/arti cle/ALeqM5icMvnVwEYqBZqYTv57CCUVgopUvwD9 AGH3RO0

Quote:
The overall official poverty rate would increase, from 12.5 percent to 15.3 percent, for a total of 45.7 million people, according to rough calculations by the Census Bureau. Data on all segments, not only the elderly, would be affected:

_ The rate for children under 18 in poverty would decline slightly, to 17.9 percent.

_ Single mothers and their children, who disproportionately receive food stamps, would see declines in the rates of poverty because noncash aid would be taken into account. Low-income people who are working could see increases in poverty rates, a reflection of transportation and child-care costs.

_ Cities with higher costs of living, such as New York, Chicago and San Francisco, would see higher poverty rates, while more rural areas in the Midwest and South might see declines.

_ The rate for extreme poverty, defined as income falling below 50 percent of the poverty line, would decrease due to housing and other noncash benefits.

_ Immigrant poverty rates would go up, due to transportation costs and lower participation in government aid programs.

Posted by ajw | Report as abusive
 

“Tim is right that the methodology is suspect, but is directionally wrong about the implications”

No, not really.

The new method moves from a measure of absolute poverty to a measure of relative poverty: as well as including the benefits that are on offer to those who would be in poverty without said benefits.

Census a few years back calculated the numbers in absolute poverty if benefits were included: the numbers fell dramatically.

That’s rather different from the effect of the move to relative poverty measures (like the less than 60% of median income that every other country uses).

 

So sorry this is such a late comment to such an important, but household income can actually obfuscate important information, namely, household member income. If household sizes have shrunk faster than household income, then household members are still actually getting wealthier. An expected parallel trend in this situation would be that the number of households in the sample is rapidly increasing, too.

Here’s a good summary, from census data, that verifies the hypothesis:

http://cafehayek.com/2008/04/families-an d-pe.html

 

Milo, what on earth led you to believe that the poor are having more children than those of better economic stature? The number of children living in poverty is not an indication of increased breeding by the poor, but rather an indication of how poverty is spreading rapidly and now includes more and more families. Get your head out.

Posted by woofer50 | Report as abusive
 

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