Poverty Rate Soars to Record High in 2010

Poor manAccording to the annual poverty data released by the Census Bureau yesterday, there were 46.2 million Americans living in poverty in 2010, up from 43.6 million in 2009 (an increase of 2.6 million). In other words, more than1 in 6 Americans were poor in 2010. This is the highest number since the Census Bureau began gathering data 52 years ago, superseding last year’s all-time high.

The national poverty rate climbed to 15.1 percent in 2010, an increase over 2009’s rate of 14.3 percent. This is the fourth yearly increase. The South was hit hardest, as its poverty rate climbed by 1.2 percent—twice the rate of any other region in the country.

Experts believe that these figures understate the real level of poverty in the U.S. For example, many more young adults are staying or moving back home because they can’t find jobs, and others have doubled up with friends and relatives. If only their incomes, as opposed to the entire household’s, are counted, then instead of the official poverty rate of 8.4 percent, 45.3 percent would be in poverty.

Additionally, the government’s methodology for determining poverty inadequately measures the real poverty rate in America. The federal poverty line of $22,314a yearfor a family of four and $11,139 for an individual is based on methodology designed in the early 1960s that fails to capture people’s spending and living needs in today’s economy.

The Census Bureau will release a Supplemental Poverty Measure in October 2011. This new measure, which the Bureau announced last March, is intended to provide an alternative, modernized measure of economic well-being. It will use a more accurate measure of a family’s income by including income from government programs (e.g., tax credits, nutritional support, housing and energy assistance), while deducting expenses (e.g., child support obligations, child care costs, work expenses, taxes and medical costs). It will not replace the official poverty measure and will not be used to determine eligibility for government programs. 

Income
Middle-class American families’ income fell in 2010. The median household income fell 2.3%, or $1,154, in 2010, adjusting for inflation. Overall, median income has changed very little compared to rising consumer prices over the last 30 years. Adjusted for inflation, the middle-income family earns only 11% more than they did in 1980, while the top 5% richest Americans saw their incomes surge 42%.

Income inequality has also increased. The top-earning 20 percent of Americans—those making more than $100,000 each year—received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968. Between 1999 (the year that household incomes peaked before the 2001 recession) and 2010, income at the 50th and 10th percentiles declined 7.1 percent and 12.1 percent respectively, while the decline in income at the 90th percentile was only 1.5 percent. Although there was no change in the income ratios in the 90th to 10th percentile, the 90th to 10th percentile income ratio increased from 10.42 to 11.67 percent. Households in the top 20 percent by income saw incomes fall by 0.7 percent, while those in the bottom 20 percent saw incomes fall by over six times as much—4.5 percent—in inflation-adjusted dollars.

Households in the Midwest, South and West experienced declines in real median income between 2009 and 2010. On the other hand, median household income for the Northeast stayed about the same. More detailed state-by-state data will become available when the Census Bureau releases the American Community Survey next week on September 22nd.

Interestingly, the data note that, because more families have “doubled-up households,” the poverty statistics may significantly under count actual household poverty levels.Doubled-up households are defined as households that include at least one "additional" adult: a person 18 or older who is not enrolled in school and is not the householder, spouse, or cohabiting partner of the householder.

In spring 2007, prior to the recession, doubled-up households totaled 19.7 million. By spring 2011, the number of doubled-up households had increased by 2 million to 21.8 million, and the percent rose by 1.3 percentage points from 17 percent to 18.3 percent. Nearly 6 million young adults age 25-34 (14.2 percent) resided in their parents' households, compared with 4.7 million (11.8 percent) before the recession, an increase of 2.4 percent. As noted earlier, while it is difficult to precisely assess the impact of doubling up on overall poverty rates, the poverty rates for young adults age 25-35 would go from 8.4 percent to 45.3 percent if only their income was considered rather than the entire family’s income. 

Minorities
The Census Bureau poverty data show the poverty rate for African-Americans increased faster than for the rest of the population and was just over 27 percent. Blacks and Hispanics were hit particularly hard by the recession. The rate of blacks living in poverty climbed by 1.6 percent, and Hispanics’ rate increased by 1.3 percent. In comparison, the white poverty rate grew by 0.7 percent, and the Asian poverty rate actually fell by 0.4 percent.

One recent analysis concluded that the gap in wealth between white households and households of blacks and Hispanics was the largest in 2009 since the government began publishing data on this topic a quarter century ago. According to the report, about a quarter of all Hispanic (24%) and black (24%) households in 2009 had no assets other than a vehicle, compared with just 6% of white households.

Health Insurance Coverage 
The Census Bureau’s report also showed that the number of people without health care coverage rose to 49.9 million last year from 49.0 million in 2009, though the percentage of uninsured was from the 2009 rate of 16.3 percent. The Northeast and the Midwest appear to have had the lowest uninsured rates in 2010.

The increase in the number of people without health insurance is due mostly to working-age Americans who lost employer-provided insurance in the weak economy. Between 2009 and 2010, the percentage of people covered by employment-based health insurance declined from 56.1 percent to 55.3 percent, while the percentage covered by government health insurance increased from 30.6 percent to 31.0 percent. Reaching a new low, this is the tenth year of decline in the share of people with employer-provided insurance. Interestingly, however, the percentage covered by Medicaid (15.9 percent) was not statistically different from 2009. Moreover, an additional 2% of young adults age 18-24 gained coverage due to the health care reforms that allow them to remain under their parents’ health insurance until the age of 25.

The number of uninsured people isn’t likely to decrease if the unemployment rate remains high. Despite the historic Affordable Care Act health care reform legislation passed last year, many Americans will remain uncovered for a while because many of the Act’s primary expansions in coverage will not take effect until 2014

Children and the Elderly
The share of children under 18 living in poverty also jumped to 22% from 20.7% in the previous year. In 2010, 16.4 million children younger than 18 lived in poverty, compared with 15.5 million in 2009.

Historical Impact of Recessions 
These data cover the first full calendar year after the technical end of the  December 2007-June 2009 recession. The data are bleak but not surprising.

Given that in 2010 the unemployment rate was 9% and the number of Americans who were unemployed for 6 months or more was at an all-time high, the single most important factor in the increase in poverty may be the increase in the number of people who did not work at all last year. Since the start of the recession in 2007, the number of men working full time, year-round with earnings has decreased by 6.6 million, and the number of women has declined by 2.8 million.

Taken together, the data all point to the severe and widespread financial strains of a nation in the throes of an economic crisis. And the Census data report, coming shortly after President Obama’s proposed package of $447 billion in tax cuts and spending to revive job growth and the recovery contained in the American Jobs Act, is almost certain to intensify the debate over the government’s role in helping the poor and unemployed at a time of budget deficits and painful cutbacks in public services.

As the poverty rate approaches levels not seen since Lyndon B. Johnson launched the War on Poverty in 1965, it is crucial that American families tell Congress just how important such government safety nets have been to their economic well-being. The 2010 data show that there has been a sharp increase in those households that are in “deep poverty” (i.e., households living at less than half of the federal poverty level). Deep poverty has risen to an estimated 6.3%—20.5 million people—an increase of more than 25% since 2000. This number is an indicator of “disconnected” households with little meaningful attachment to employment.  As experts note, as government programs to assist those Americans suffering from this economic downturn are cut, it won't take much for “deep poverty” to claim a share of the population the country hasn't seen in over three decades. If that happens, the current poverty numbers, as astounding as they are, will seem meager.

 

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