Recession Takes Toll on Living Standards

From Wall Street Journal | 09/11/09

Earnings Declined Across Incomes and Races in 2008, According to New Report; More Reach for Government Safety Net

By CONOR DOUGHERTY

The
recession has slashed families' earnings, increased poverty and left
more people without health insurance, according to the Census Bureau's
annual snapshot of living standards. The report Thursday offered sharp
evidence of how much the falling economy has touched Americans across
incomes and races.

Median household income, adjusted for inflation, fell 3.6% last year
to $50,303, the steepest year-over-year drop in forty years. The
poverty rate, at 13.2%, was the highest since 1997. About 700,000 more
people didn't have health insurance in 2008 than the year before,
though the share of the population without coverage was about the same.

Counting Troubles

See data on poverty and the uninsured over 20 years

View Interactive

"There's
a lot of pain for the average family," said Bruce Meyer, an economist
at the University of Chicago. "It's pretty striking how fast and how
far the incomes of the typical family have fallen. The decline is
bigger than anything we've seen in the past, and things are almost
certainly going to get worse."

Indeed, the report captured only how Americans fared in the first
year of the recession, which began in December 2007. Figures for 2009
are expected to show a darker portrait, as the economy has continued to
deteriorate.

The 2008 median income, adjusted for inflation, was the lowest level
since 1997, meaning many middle-class Americans have been seen their
living standards dialed back a decade, undoing advances made during
boom years.

The report also showed that hard times have prompted a growing
number of people to reach for a government safety net. While the number
of people with health insurance declined, the number of people covered
by government insurance increased by 4.4 million people, in part
because of surging Medicaid rolls.

The fall in median income, which is the income of the household at
the midpoint of the economic ladder, was widely felt. Every race saw
income declines in 2008. The largest decline, 5.6%, was among
Hispanics, a reflection of disappearing construction and service jobs.
The median income for Asians fell 4.4%, while black incomes fell 2.8%
and non-Hispanic whites fell 2.6%.

The loss of income was similarly broad across age and gender. The
lone age group to see an income rise was people 65 and over, who saw a
1.2% increase in median income. Men who worked full time saw their
incomes decline 1% to $46,367 while full-time female workers' incomes
fell 1.9% to $35,745.

More

• 
  
  Full Report: Income, poverty, health insurance
  


• 
  
  Charts: Census Bureau Releases New Data for 2008
  


• 
  
  White House: Stimulus Saved, Created Million Jobs
  
  


• 
  
  Econ: Lost Decade for Income
  


• 
  
  Econ: Clues to Income Inequality in Data
  


• 
  
  Income Gap Shrinks, at Cost to Rich
  | Data
  


• 
  
  Econ: Calif. Property Taxes Boost Inequality
  

One
surprising result was that income inequality, which had been expected
by economists to fall as the recession knocked the highest earners
closer to the pack, was essentially unchanged in 2008 by various Census
Bureau measures. The best-off 5% of households got 21.5% of income in
2008, up from 21.2% in 2007. Half of all income went to the top fifth
of American households.

As the economy has shed jobs, many working poor, who in better times
used plentiful jobs and overtime to raise their living standards, are
falling back into poverty. The increase in poverty last year -- 2.6
million people -- was concentrated among working-age families, with the
poverty rate among people between ages 18 and 64 growing to 11.7% from
10.9% a year earlier. Among the hardest hit were children: The child
poverty rate was 19% last year, up from 18%. Poverty is defined, for
example, as earnings under $22,000 for a family of four.

Colette Banks, 52 years old, this month exhausted her unemployment
benefits after losing her $10-an-hour job as a hospital housekeeper in
2007. She has applied to several jobs but had no luck; recently Ms.
Banks applied for four positions at the Prudential Center arena in
Newark, N.J. -- security, housekeeping, ushering and kitchen help --
but hasn't heard back.

With a full work week and occasional overtime, Ms. Banks made about
$21,000 a year when she had her job -- just above the poverty line. She
recently applied for food stamps, rental assistance and Medicaid to
support herself and her 15-year-old granddaughter. TV shows have become
the lone form of entertainment in their household, and dinner is often
rice and beans. "You have to pay a little bit here, pay a bit there,
just to stay above water," she says.

People who might not have previously asked for help are now turning
to such programs as food stamps. New York City has seen a 40% surge in
food-stamp recipients who aren't receiving other kinds of aid, an
indication many low-income workers are reaching out for aid, said
Robert Doar, commissioner of the city's Human Resources Administration.
About 906,000 New Yorkers are receiving food stamps but aren't
receiving cash welfare or disability benefits. (Overall, the city's
food-stamp roll has increased 22% to about 1.6 million people.)

According to the Census, about 54 million people were living under
125% of the poverty line, about three million more than in 2007. The
number of "deep poor" -- people whose earnings put them at less than
half the poverty line -- increased by 1.5 million to 17 million people.

The Census Bureau's poverty measure -- developed in the 1960s --
measures only pretax income and thus doesn't include such noncash
benefits as food stamps and subsidized rent -- programs designed to
fight poverty. The Census Bureau says, for instance, that if the value
of the federal earned-income tax credit, offered to working poor
families, were included, the number of children in poverty in 2007
would have been cut by 2.4 million; estimates for 2008 aren't yet
available.

Write to Conor Dougherty at conor.dougherty@wsj.com