A sobering census
August 29, 2007
The economic party
is winding down and most working Americans never even got near the punch
The Census Bureau reported Tuesday that median household income rose 0.7
percent last year - it's second annual increase in a row- to $48,201.
The share of households living in poverty fell to 12.3 percent from 12.6
percent in 2005.
This seems like welcome news, but a deeper look at the belated improvement
in these numbers - more than five years after the end of the last recession
- underscores how the gains from economic growth have failed to benefit
most of the population.
The median household income last year was still about $1,000 less than
in 2000, before the onset of the last recession. In 2006, 36.5 million
Americans were living in poverty - 5 million more than six years before,
when the poverty rate fell to 11.3 percent.
What is perhaps most disturbing is that it appears this is as good as
it's going to get. Sputtering under the weight of the credit crisis and
the associated drop in the housing market, the economic expansion that
started in 2001 looks like it might enter history with the dubious distinction
of being the only sustained expansion on record in which the incomes of
typical American households never reached the peak of the previous cycle.
It seems that ordinary working families are going to have to wait - at
the very minimum - until the next cycle to make up the losses they suffered
in this one. There's no guarantee they will.
The gains against poverty last year were remarkably narrow. The poverty
rate declined among the elderly, but it remained unchanged for people
under 65. Analyzed by race, only Hispanics saw poverty decline on average
while other groups experienced no gains. The fortunes of middle-class,
working Americans also appear less upbeat on closer consideration of the
data. Indeed, earnings of men and women working full time actually fell
more than 1 percent last year.
This suggests that when household incomes rose, it was because more members
of the household went to work, not because anybody got a bigger paycheck.
The median income of working-age households, those headed by somebody
younger than 65, remained more than 2 percent lower than in 2001, the
year of the recession.
Overall, the new data on incomes and poverty mesh consistently with
the pattern of the last five years, in which the spoils of the nation's
economic growth have flowed almost exclusively to the wealthy and the
extremely wealthy, leaving little for everybody else.
Standard measures of inequality did not increase last year, according
to the new census data. But over a longer period, the trend becomes crystal
clear: The only group for which earnings in 2006 exceeded those of 2000
were the households in the top 5 percent of the earnings distribution.
For everybody else, they were lower.
This stilted distribution of rewards underscores how economic growth alone
has been insufficient to provide better living standards for most American
families. What are needed are policies to help spread benefits broadly
- be it more progressive taxation, or policies to strengthen public education
and increase access to affordable health care. Unfortunately, these policies
are unlikely to come from the current White House. This administration
prefers tax cuts for the lucky ones in the top 5 percent.