Poverty Stays Static, But Income Inequality Widens

As economists keep telling us, the Great Recession is officially over. The U.S. gross domestic product grew by a sad 1.8 percent last year. Here's why you probably don't know it: Just about every ounce of economic gain went to the top.

The Census Bureau released 2011 numbers from the annual population survey: The median household income was $50,100, which is 1.5 percent lower than in 2010. Overall, it has fallen 8.1 percent since 2007, the last year before the Great Recession. Robert Greenstein, president of the Center on Budget and Policy Priorities, and Jared Bernstein, an economist and senior fellow there, noted in a conference call with reporters that, before 2007, middle-level incomes were stagnant—so they were holding steady before falling. If we go back to 1997—remember those heady Clinton years?—median household income was $51,704 in 2011-adjusted dollars.

Poverty didn't increase—it held steady at 15 percent—which wasn't expected because it had increased for every one of the last three years, and economists expected that trend to continue. That means the middle-income levels shifted downward. Bernstein attributed it to the fact that jobs being added to the economy are, in disproportionate numbers, low-wage jobs. More men and women of working age were working full-time last year, 1.7 million and 500,000 more, respectively. If you isolate the incomes of working-age households, the median income fell 2.4 percent. Still the supplemental poverty measure isn't out until November or December, so we don't know the whole poverty story. The supplemental measure includes some forms of income, like food stamps and tax credits for low-income families, and excludes some expenditures, like the large out-of-pocket expenses for health care many seniors face, so it tells you more about the effects policies have on the poor. To a large extent, increases in food stamps and the earned income tax credit, for working families with children, cushioned the Great Recession and prevented poverty numbers from being higher. The Making Work Pay Tax Credit, which was passed as part of the stimulus, expired last year, so the supplemental measure will capture the effects of that.

The only income bracket to see its income rise at all was the top 20 percent, by 1.6 percent. The top 5 percent of American households saw their incomes rise by 5.3 percent. 

A bright spot was that, for the first time in a decade, the number of people with private health insurance stayed steady from the year before. Analysts contributed that to the number of 19- to 25-year-olds who are insured because of the health-care reform's law allowing them to remain on their parents' plans. Half a million people that age were added to private insurance plans, which made up for the decline on insurance rolls of people aged 26 to 65, which continued from previous years.

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