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Forum Post: 2009: income down, poverty up

Posted 2 years ago on March 17, 2012, 8:52 a.m. EST by flip (5410)
This content is user submitted and not an official statement

Every September brings the release of the Census Bureau’s annual income, poverty, and health insurance figures. Even in the best of times, they can make for sad reading—but 2009 was a real bust for the American masses. Incomes were down, poverty was up, and millions fell off the insurance rolls. It’s not the worst performance surrounding a recession in modern history—that honor belongs to the downturn of the early 1980s. But that carnage was spread out over five years, by the official Census count. We’re only two years into this mess, and while the recession is formally over (for now), there’s little doubt that 2010 and 2011 will be miserable years.

Before proceeding, a few words on where the stats come from. They’re drawn from a special edition of the Bureau’s monthly Current Population Survey (CPS). The regular survey, which covers about 60,000 households, is what the monthly unemployment figures, among other things, are based on. This special survey, done every March, covers 100,000 households. This is a very large sample, and though it’s far from perfect, it provides an excellent view of monetary well-being. It’s different from the yearly American Community Survey (ACS), whose results were released in late September, which covers many similar topics in great detail, and is comparable to the decennial Census (the one done every ten years). The ACS’s history doesn’t go back anywhere near as far as the CPS, making it difficult to analyze long-term trends consistently. The right has it out for these surveys—ostensibly because, unlike the decennial Census, it’s not specifically authorized by the Constitution, but more likely because they’re ignorant dopes who hate the truth.

And now a closer look at 2009.

Incomes: flat to down

The median income of all households—the income level at middle of the distribution, meaning that half the population is richer, and half, poorer— fell by almost 1% last year, but the move was deemed not large enough to be statistically significant. That is, the likely error in the estimate is larger than the change itself. But the overall number was helped considerably by a near-6% rise in incomes for households headed by someone 65 or over. Under-65 households saw their income fall by 1.3%, and this did pass the test of statistical significance. Especially hard hit were the young, foreign born non-citizens, and blacks. So-called Hispanics held their own. For several reasons, the Census numbers understate incomes at the top. One is that the very rich can’t be bothered answering questionnaires from pesky enumerators. And another is that the Census Bureau treats all incomes over a certain amount—it rises over time, but it’s around a million dollars now—as if they were that amount. The stated reason for this is to protect confidentiality, since the records are available for public use. Maybe. But the effect is seriously to understate how well the very rich have done. That limitation can be overcome by looking at tax records (which also understate things, given the propensity of the rich to hide their income). The economists Thomas Piketty and Emmanuel Saez have done that in great detail, putting together a massive and wonderful history of income distribution in the U.S. going back to 1913.

The conclusion from comparing that work to the Census numbers: by missing the seriously rich, the Census understates things by almost 2/3: Piketty and Saez have the top 5% gaining almost 75% from 1989 to 2007, compared with 29% for the Census survey. (Sadly, 2007 is as far as their data goes, but it probably wouldn’t change much if you took it out another couple of years.) The reason for the difference is the intense action at the very high end. The top 1% was up more than 100% over those 18 years. Take them out of the top 5%, and look just at the 95th to 99th percentiles, and they were up a mere 38%—still well above the Census measure, but at least approaching life in the same universe.

Even within the top 1%, the real action was at the high end: the top 0.01%—our 12,000 richest households, with incomes averaging $35 million a year—were up 215%.That almost 30 times the increase that Piketty and Saez report for the bottom 90% of the population. In other words, an enormous portion of the gains of economic growth have gone to just a few thousand hyper-rich.

All that said, the Census numbers are a good measure of broad trends, even if they miss life in the stratosphere. The story they tell, supplemented with the Piketty-Saez numbers, is this. For the last two decades, the very rich have really raked it in, the merely rich have done quite well, the upper middle class has done more or less OK, the middle ranks have merely held their own, and the bottom 40% of the population has been lucky to tread water, if that. And there’s no sign that any of this is about to change.

Poverty: up.

Before discussing official penury, it’s important to say that the U.S. poverty line is an extremely stingy thing. It’s based on research done in the 1950s that showed that the average household spent a third of its income on food. So, the Johnson administration, eager for metrics in its war on poverty, decided that a poverty line would be three times the minimal food budget computed by the Agriculture Department. Never mind that that food budget was considered an emergency measure taken when a family hit a crisis, not something to live on indefinitely. No, they needed something in a hurry and went with that. And the Census Bureau just adjusted that line for inflation ever since, with no notice paid to rising GDP or average incomes, or the changing nature of household budgets (like the relentless rise in medical care and college tuition or a need for child care that didn’t exist in the days of the one-paycheck family).

So, conceptually, a poverty income today is exactly the same as it was almost 50 years ago, even though average incomes risen. For example, the poverty line for a family of three was 43% of median family income in 1959, the year the poverty stats begin; it was 29% in 2009—and that doesn’t even adjust for the fact that families are smaller now than they were 50 years ago. But since the average family’s income has grown far more slowly than GDP over the last fifty years, the gap between the poverty line and GDP is even sharper. In 1959, the poverty line for a family of three was 81% of per capita GDP; fifty years later, it was 37%. A more honest poverty line—like the one used by many academic researchers, half the median household’s income—would produce numbers nearly twice what officialdom reports.

Yet despite these undemanding standards, nearly 44 million, or 14.3% of Americans, were officially poor in 2009, up from 13.2% in 2008, the highest level since the early 1990s. It’s almost certainly up this year, since it tracks the unemployment rate pretty closely, and this 2010’s jobless rate is higher than 2009’s. The rate among white households was just over 9%; for black and Hispanic households, over 25%, or nearly three times the white rate. It was almost that high for households of any race with children under 6—yes, nearly one in four young kids in the USA is officially poor.

As with income, the elderly have done better than the rest of the population. In 2009, 20.1% of all people under 18 were officially poor, rising for the third consecutive year to a level at the high end of this demographic’s historical range. The poverty rate for those aged 18–64 rose for the second consecutive year to 12.9%, its highest level since the early mid-1960s. But the poverty rate for those over 65 fell sharply, to its lowest level in the fifty-year history of the series.

That must not be read, however, as a furtive call to generational warfare. It’s a very good thing that elderly poverty continues to decline even in a crappy economy—though the Austerity Party, which has it out for Social Security, wants you to believe otherwise. Austerians, as they say, love to cloak their meanness under a false sense of generational equity, but they shouldn’t be allowed to get away with it. Decent social policy could extend this trend to the rest of the population, but this isn’t on offer right now.

30 Comments

30 Comments


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[-] 1 points by GreedKills (1119) 2 years ago

Their plan to make the USA a third world Fascist controlled country is in full swing now. Who will stop the "new fascists"?????

[-] 2 points by flip (5410) 2 years ago

certainly not the democrats - maybe a 3rd party?

[-] 1 points by GreedKills (1119) 2 years ago

Could it done from the inside???? We have been brainwashed as the Germans were in the 30 and and 40s. My parents lived through those times and their stories reminds me so much of the US we live in today. Both sides of this two headed snake we call dems and repubs are fascists.

[-] 2 points by flip (5410) 2 years ago

we seem to be headed in that direction - chomsky mentioned the other day how what the republicans have become is a shadow of what the german industrialists did in the 20's - blame immigrants, unions and women and have no real policy

[-] 1 points by GreedKills (1119) 2 years ago

We started heading there in the 70s I would say. I truly believe a coup occurred during the 2000 election, re-enforced once again after 9/11 with the anthrax attacks. It is a very scary time to be a US citizen. I wish I could offer some answers but to tell you the truth all I have is fear for my children's future.

[-] 1 points by flip (5410) 2 years ago

the center cannot hold - we are looking at land in western ny as a long term fall back position

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[-] 0 points by worldwide (6) 2 years ago

Net incomes were down due to inflation, how 'bout that 5 dollar gas?? :)

[-] 1 points by flip (5410) 2 years ago

real incomes (do any others matter?) have been dropping for more than 30 years - your point?

[-] 0 points by worldwide (6) 2 years ago

Of course in absolute dollar terms they have gone up, only an idiot would say people are paid fewer actual dollars than 30 years ago.

Your "real incomes" makes my point, we're talking loss of purchasing power, inflation, taxes, regulations, out of control government borrowing all affect "real incomes".

[-] 1 points by flip (5410) 2 years ago

sorry but i disagree and there is much evidence to show that reagan and volker knew what they were doing - paul said "then standard of living of the average american must go down" - he did not finish his sentence - it should read - "otherwise how will profits go up!" this has nothing to do with gov't borrowing and everything to do with profits and wages. wages down profits up - no? - did you notice the 20 yr bull market since the reagan revolution - just ask kudlow - profits are the mothers milk of the stock market!

[-] 0 points by worldwide (6) 2 years ago

You simply have no clue about economics do you? How do companies realize profits?

[-] 1 points by flip (5410) 2 years ago

reread what i said - very obvious to anyone who is not blinded by hayek etc - while you are at it respond to what volker said and the reason he said it! oh, never mind - you are probably a waste of time like too many here.

[-] -1 points by worldwide (6) 2 years ago

You really have no idea do you? You are an almost perfect bot for your masters, you never question the party line, you never think about what you are saying. You can't point to "much evidence" beyond some other lefty saying it as well. You hold up a 30 year old out of context (unsourced) statement as some sort of absolute proof of something or other.

If you could only get a moment of clarity and realize what a fool your masters think you are.

[-] 1 points by flip (5410) 2 years ago

i figured as much - paul volker and reagan lefties - maybe by todays standards. and all of this nonsense because i mention that gov't borrowing is not the reason for declining wages - too bad for you . wages, down profits up - give me your spin on that one - and who exactly are my masters - the bankers and the industrialists that reagan sucked up to or the commies lurking under your rug. do you have a coherent thought on these matters or you just want to throw shit at people who understand that obama (while not a friend of the average american) is not responsible for $5 gas - now try really hard - say something that makes sense - or at least that you and your little 13 yr old friends (they must be sitting there with you, giggling about your witty replies) will find amusing. it is easy to amuse 13yr olds - i know - i deal with them most days.

[-] -1 points by worldwide (6) 2 years ago

Wages down, profits up. That seems to have some meaning in your bizzarro world so lets look at that.

Answer this before we proceed. Do you agree in absolute dollar terms, wages are in fact much higher in 2012 than in 1983?

[-] 1 points by flip (5410) 2 years ago

we have had inflation for many years - i agree - in 1935 a pizza cost $.35 - my cousin made $6700 in 1966 - the equivalent of $45k today. now your turn - answer my question - do you think that volker and reagan drove down the standard of living of the average american (and drove up the top 1% or more accurately .1%) and what does $5 gas have to do with anything?

[-] -1 points by worldwide (6) 2 years ago

You aren't connecting the dots. We've agreed that absolute incomes have increased dramatically from 1983 so why is it that these higher wages buy less? This being the "real income" you mention. Inflation has destroyed the purchasing power of American workers.

A 1983 dollar is worth about .35 cents today. Your worker needs 3.5 2012 dollars to have the same purchasing power he did in 1983 and that is the actual root of "wages down". Inflation increases more than wages do, wages always take longer to respond to increases in inflation. Think about this.

"Profits are up", again, in terms of absolute dollars business takes in more of them but these are the same .35 cent dollars your worker has to deal with, they need to bring in 3.5 dollars more than 1983 just to stay even.

As you can see, 5 dollar gas has everything to do with eroding wages, how much was gas in 1983? How many less gallons of milk, diapers and food can the contracting wages of your worker buy because gas is 5 dollars a gallon? Do you see now why wages are down?

It pleases you to blame these problems on some long dead Republicans who supposedly made shadowy comments that somehow absolutely control our economy today. But look at the relative cost of government in the same 30 years, taxes matter, regulations that add billions to the cost of doing business matter, trillions in pension obligations for government and private unions matter.

I know none of this means anything to you, you will wake up tomorrow blaming everything on Volker and Reagan and all will be right in your world. I take the time to do this because there are thousands of people who come here to see what's going on and this will be here for the people who aren't blinded by hatred and politics. Those for whom truth and reality are more important.

[-] 1 points by shooz (17791) 2 years ago

Pretty good ignore most of what I said and continue your myopia.

Tell me please, what value does WallStreet add directly, to any tangible product?

What do they add to our health care, through their ownership of health care(sic) insurance?

[-] 1 points by flip (5410) 2 years ago

you must be a ron paul guy - end the fed right? we have had inflation that is for sure - we are also a much richer country than in 1935 so figure that one out - i answered your questions - can you answer mine? oh great wise one for whom the truth is so important - so answer the above questions - by the way volker is alive and well and working for the dems - just in case you weren't up to speed

[-] -1 points by worldwide (6) 2 years ago

LOL, I'm not anyone's guy, I actually think. :) If you aren't competent to see that your questions were more than answered then I pity you. You can't even figure out the relationship between inflation and the receding value of wages.

[-] 1 points by flip (5410) 2 years ago

wow - so you know nothing of the reagan 80's - everyone knows what $5 gas does to working people - you make no sense or maybe you have no sense

[-] 1 points by flip (5410) 2 years ago

sure i can but that is not the question - you will have to go back a ways to figure it out - i don't have time hold your hand while your brain cramps - sorry i will try again one more time - it is a yes or no question - here it is don't blink - now your turn - answer my question - do you think that volker and reagan drove down the standard of living of the average american (and drove up the top 1% or more accurately .1%) and what does $5 gas have to do with anything?

[-] 0 points by worldwide (6) 2 years ago

Only a complete idiot would believe that, so no I don't. Read my response as to what 5 dollar gas does to your poor working man. So sad.

[+] -6 points by DKAtoday (34974) from Coon Rapids, MN 2 years ago

The dollar amounts have risen, this is a fact. So have costs to live, this is a fact. Has the average pay to the average worker kept pace with rising costs? No! This is also a fact. Have the wealthy gotten huge increases in their income ( hoarding ) ? Yes this is a fact.

The problem is proportional. We have a weak economy because we have an underpaid majority who can do no more then try to support a roof over their head and food in their stomach. There is no surplus income for these people. So the economy shrinks and stifles as it is choked of life from the major portion of the population.

This is FACT.


Try not to choke on the truth.

worldwide

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[-] -1 points by worldwide (6) 2 years ago

Fascinating, you truly can't see the effect of .35 cent dollars on wages and corporate income. LOL, you guys would need 10 more IQ points just to begin to be embarrassed at the silliness you spout. :)

[+] -6 points by DKAtoday (34974) from Coon Rapids, MN 2 years ago

You have no contact with reality. Or I might take offense at your nonsense. Fortunately you are like an open book and everyone is literate. We see you. We do not care for you or your support of the corruption in this world. You are as obvious as a wild fire in the wilderness at night as seen from overhead.

You are a living example of what the movements against corruption are fighting.

Thank you for being a representation of what is wrong for others to see.

[-] -1 points by worldwide (6) 2 years ago

Yes, you are a fighter for fantasy. :) May knowledge and understanding never darken your doorway, may you always remain ignorant of any semblance of economic awareness and continue to blame the boogieman for all your imagined troubles. :)

You are a paragon of leftwing obtuseness. :)

[-] 1 points by shooz (17791) 2 years ago

Your argument is completely myopic.

The truth in what you say lies in the fallacy of still factoring gold.

This is how it should be done.

http://pragcap.com/resources/understanding-modern-monetary-system

The main thing you miss,could be called "consumer inflation".

This is caused almost 100% by pure profit motives.

This where WallStreet is the problem.

They add nothing tangible to anything. Their profit is created by inducing "consumer inflation", in many ways.

You miss this factor entirely.

WallStreet profits by skimming value in all markets.

This directly makes your money worth less.

Goods, commodities, labor, IRAs, banking. You name it, they skim it.

In some cases, they outright own it, in an effort to further their control.

Note the WallStreet banks currently occupying the FED.

It behooves us to regulate them to the point that they no longer can operate like the mafia.

[-] -2 points by worldwide (6) 2 years ago

Oh my God, it astounds me how little you guys know and understand of economics. Inflation isn't caused by chasing a profit. Chasing a profit reacts to inflation, not the other way around.

Let me ask you, are you guys really this ignorant (not to be insulting, ignorance can be cured) of economics or do you run around saying this stuff hoping to fool those truly dense? I understand your masters want this false information disseminated but at what level of leftism do you know it's bullshit?

Do you genuinely believe that Wall Street runs around "skimming" goods, commodities, labor, IRAs and banks? What is the process? In what Universities is "skimming" taught? If you have knowledge of this why don't you go to the authorities and turn them in? See how silly your statement is?

I've always looked at the left and understood in the lower levels there is genuine belief in things that are demonstrably untrue; ie high corporate taxes benefit the people.

But at some level there has to be those smart enough to know that what is fed to the base is untrue and that's really my question, do you know what you just posted is untrue or do you believe it?

[+] -6 points by DKAtoday (34974) from Coon Rapids, MN 2 years ago

I will take that as a very nice compliment coming from the likes of you. As I do not want to live in the world that you think is right and good. You continue to live your fantasy and I will continue to fight for a healthy and prosperous reality for ALL.