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Earlier today, the Census Bureau released its estimates of poverty, income, inequality and health care coverage for the year 2008. As expected, given the economic and financial collapse at the end of 2008, there was a sharp rise in poverty along with a decline in median incomes.

Real median household income (which takes into account inflation) declined by 3.6% in the US last year, and it declined by similar amounts for almost every age and demographic group in the country. In concrete terms, this means that for the average household, living standards fell by 3.6%.

The group hit the hardest were those in the 45-54 age bracket, whose median income fell by 5.4%. Typically, this is the time of peak earnings for households. But the economic collapse hit these people the worst. The only group that did ok were households headed by someone aged 65 and over. The median income of this group stayed the same—thanks, mainly, to social security.

One interesting tidbit in the report concerned wages for men and for women who worked full time. For many years women working full-time earned only 60% of what men made who worked full-time. But over the past 20-30 years this has increased slowly, reaching nearly 80% in 2007. Moreover, the unemployment rate for men and women has started to diverge recently, with men experiencing significantly higher rates of unemployment than men. Men are already experiencing an unemployment rate over 10 percent, while the unemployment rate for women is around 9 percent. Thus, it came as a big surprise to me that earnings for men working full-time fell last year by only 1% while earnings for women working full-time last year fell by 1.9%.  

The income distribution figures were also pretty bad. Income inequality rose last year. The top quintile is the only quintile that received a larger proportion of total income in the country (+.6%)—mainly due to a large gain of 1.4% by the top 5% of households. The poorest quintile saw no change in their share of income (a pathetic 3.4%). All the other groups lost; the share of lost income went to those at the very top of the distribution.

Probably worst of all were the figures on poverty. The national poverty rate rose from 12.5% to 13.2%. Pretty much all groups in the US saw rising poverty rates. The only exception was those in households headed by someone 65 and older; poverty rate for this group remained unchanged at 9.7%. Again, this was due to social security putting a floor on the incomes of the elderly.

One group that did very badly was children, whose poverty rate rose from 18% to 19%. I talked earlier this week in my diary how poverty was not measured very well and how and why poverty thresholds should probably be increased. To keep us people happy, the Census Bureau also calculates how many people fall below 125% of the poverty line. With this higher poverty line, one-quarter of all US children were poor last year. This is especially disconcerting considering all we know about the consequences of child poverty. Children who grow up in poverty have more emotional and psychological problems, have more health problems, are less likely to stay in school, do worse on standardized tests, and earn less income over their lifetime. Child poverty pretty much increased continuously throughout the Bush years, with many bad consequences to follow for these people and for the entire country. So much for no child left behind!  

The percentage of households covered by health insurance did not decline. This, too, is not surprising given the timing of the economic collapse. Even last November the unemployment rate was only 6.8%, and many people laid off late last year did get manage to get insurance coverage for several months—either through severance payments or through COBRA. So we are not likely to see big increases here until the 2009 data come out next year at this time.

Finally, and sadly, since the recession has hit much harder this year than last, we can only expect a worse report next year at this time. The decline in median household income will be greater; the increase in US poverty will be much larger; and we will certainly see a decline in health care coverage.

If one lesson can be drawn from all these numbers it is the importance of government programs to provide a safety net and support its citizens. This is why the elderly have not suffered during the current recession to the same extent as everyone else. Sadly, we have dismantled too many programs over the past several decades and this is beginning to haunt us now. Besides increasing the suffering of US families, it also slows down the recovery that is needed badly.

My top priority, given our problems and given the long-term consequences of child poverty I alluded to earlier, would be to do something to help low and moderate-income households with children. Virtually every other developed country in the world has a program of child allowances. These are direct payments to households with children. All households are eligible, regardless of their income level. This is one reason why both child poverty rates and overall poverty rates are much lower in every other developed country compared to the US.

Originally posted to steven pressman on Thu Sep 10, 2009 at 11:17 AM PDT.

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