Household Income Dropped To Its Lowest Point Since 1995

Great Depression, poor family

Photo: Flickr / austinevan

In the aftermath of the Great Recession, household income dropped once again in 2011 while the poverty level stayed flat after three straight years of increases, the Census Bureau said Wednesday.Median household incomes adjusted for inflation fell 1.5 per cent to $50,054.

That’s 8.1 per cent lower than it had been in 2007, the year before the recession, and almost 9 per cent lower than the peak income level reached in 1999.

The last time median household income was lower was 1995 – meaning it’s been a lost decade and a half for Americans looking to get ahead.

The gross domestic product has gone from $7.4 trillion to $15.1 trillion in current-dollar terms over that time, suggesting that families have fallen behind even as the economy has expanded.

The poverty rate last year dipped from 15.1 per cent to 15 per cent, a statistically insignificant change, as the number of people living in poverty stayed at 46.2 million, including 16.1 million children. Census Bureau officials suggested that workers shifting from part-time to full-time work as the employment picture improved may have helped keep the poverty level stable. Expanded unemployment benefits also helped.

Poverty Rate

Photo: US Census Bureau via The Fiscal Times

The Census Bureau’s poverty figures measure income before taxes and don’t account for items like the Earned Income Tax Credit or food stamps. The average poverty threshold is $11,484 for individuals, or $23,021 for a family of four.

The release of the Census data provided fodder for the campaigns of Gov. Mitt Romney and President Obama at a time when both camps have been trading claims about whether Americans are better or worse off than they were four years ago. “Today’s report confirms that the American Dream remains out of reach for too many families,” Romney spokeswoman Andrea Saul said in a statement. “While this may be the best President Obama can do, it’s not the best America can do. Mitt Romney’s pro-growth agenda will revive our economy, spur job creation, lift families out of poverty, and create a better future for our country.”

The Obama administration countered by highlighting the slight decline in the poverty rate – and the number of Americans who have health insurance, which rose from 256.6 million in 2010 to 260.2 million in 2011, or from 83.7 per cent to 84.3 per cent. “It is clear that had President Obama not taken swift and aggressive action to grow our economy and create jobs, today’s report would have shown much higher poverty rates, lower incomes, and a greater share of the population without health insurance,” Acting Commerce Secretary Rebecca Blank said in a statement.

Blank also sought to address the drop in real median income. “First, inflation increased 3.1 per cent in 2011, more than erasing the 1.6 per cent increase in nominal median household income,” she said. “Inflation in 2011 was boosted significantly by spikes in energy prices. Also, median household incomes have been, and will continue to be, pulled down as the baby boom ages into the retirement years.”

It’s true that, besides the relatively rotten economy, demographic trends may be weighing on the household income figures, though Americans over age 65 saw their real median income rise 2 per cent last year. Still, among Americans age 55-64, real median income fell 4 per cent from 2010 to 2011 following a drop of more than 2 per cent from 2009 to 2010. And the number of elderly households, which typically have lower income than households with workers in their prime earning years, is on the rise, up 4.3 per cent to 26.8 million from 2010 to 2011. “Since the median income of elderly households is much lower than the median of nonelderly households, the growing number of elderly households will tend to lower overall median household income over time,” Ed Welniak, who heads the Census Bureau’s income statistics branch, noted in a blog post.

The Census report included another sign of the economic challenges faced by average Americans: the gap between the highest earning households and those lower down the income scale widened from 2010 to 2011. While the top 5 per cent of households gained 5.3 per cent and the top fifth gained 1.6 per cent, the bottom fifth saw no change – and the three-fifths in the middle got hit hardest, with their income falling between 1.6 and 1.9 per cent.

Household Income

Photo: US Census Bureau via The Fiscal Times

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