Obama's Ballyhooed Economic Recovery: Everyone's doing better — if he's already rich

September 18, 2013

In Blog

Household Incomes Remain Flat Despite Improving Economy

Luke Sharrett for The New York Times

People picked up food in Dyersburg, Tenn., last month during a monthly distribution. The poverty rate was unchanged in 2012.


WASHINGTON — Despite the addition of more than two million jobs last year, soaring corporate profits and continuing economic growth, income for the typical American household did not rise in 2012 and poverty failed to fall, new data from the Census Bureau show.

Andrew Burton/Getty Images Dinner hour at Cathedral Kitchen, which serves the homeless community in Camden, N.J. The nation’s poverty rate held steady around 15 percent, the Census Bureau reported.

“The poverty and income numbers are a metaphor for the entire economy,” said Ron Haskins of the Brookings Institution. “Everything’s on hold, but at a bad level.”

Over a longer perspective, the figures reveal that the income of the median American household today, adjusted for inflation, is no higher than it was for the equivalent household in the late 1980s.

For all but the most highly educated and affluent Americans, incomes have stagnated, or worse, for more than a decade. The census report found that median household income, adjusted for inflation, was $51,017 in 2012, down about 9 percent from an inflation-adjusted peak of $56,080 in 1999, mostly as a result of the longest and most damaging recession since the Depression. Most people have had no gains since the economy hit bottom in 2009.

The government’s authoritative annual report on incomes, poverty and health insurance, released Tuesday, underscores that the economic recovery has largely failed to reach the poor and the middle class, even as the unemployment rate continues to sink and growth has returned.

Government programs remain a lifeline for millions. Unemployment insurance, whose eligibility the federal government expanded in response to the downturn, kept 1.7 million people out of poverty last year. Food stamps, if counted as income, would have kept out four million.

Since the recession ended in 2009, income gains have accrued almost entirely to the top earners, the Census Bureau found. The top 5 percent of earners — households making more than about $191,000 a year — have recovered their losses and earned about as much in 2012 as they did before the recession. But those in the bottom 80 percent of the income distribution are generally making considerably less than they had been, hit by high rates of unemployment and nonexistent wage growth.

Moreover, economists believe that the report understates the degree of income inequality in the United States, by not including, among other things, earnings from capital gains made on rising stock prices.

In one glimmer of improvement, the number of men working full time year-round with earnings increased by one million from 2011 to 2012, to a total of 59 million. Still, the labor market continues to look weak, in particular for less-educated and lower-income men. The labor force participation rate of men has fallen steadily for the past 60 years. In no small part, that is because the median earnings of men working full time have not increased in real terms since the early 1970s.

For women, the earnings stall started about a decade ago, when the gender pay gap stopped closing. “The wage gap hasn’t budged a penny,” said Fatima Goss Graves of the National Women’s Law Center. “After 11 years of no progress on equal pay, policy makers need to get moving to improve the country’s pay discrimination laws, raise the minimum wage and remove the barriers women face in higher-wage jobs.”

The West was the only region that experienced a statistically significant increase in median income, the Census Bureau said, while all other regions were flat. That most likely reflects the relatively strong growth in Washington, Oregon, California and Utah last year. North Dakota, experiencing an oil and gas boom, is the fastest-growing state, though its population is so small that it barely affects the national statistics.

No racial or ethnic group experienced significant changes in income, but that left the gap between Asians, at the top, and blacks, at the bottom, as wide as before. The median income for Asian households was $68,600. For non-Hispanic whites, it was about $57,000, while the typical Hispanic household had an income of $39,000, and blacks were at $33,300.

The poverty rate held steady at about 15 percent in 2012, about 2.5 percentage points higher than before the recession began. Neither the number nor the proportion of people living in poverty changed from 2011 to 2012, the Census Bureau found.

“The continued high rate of poverty is no surprise, given ongoing high unemployment, stagnant wages and government spending cuts,” Sheldon Danziger, the president of the Russell Sage Foundation, a nonprofit organization that studies poverty, said in a statement. “Unless we find ways to strengthen job opportunities and enhance the social safety net, we’ll continue to get disappointing news about the poverty rate from the Census Bureau each September.”

The proportion of Americans living in poverty has either increased or held steady for 11 of the last 12 years.

The share of Americans without health insurance dropped to 15.4 percent in 2012, from 15.7 percent in 2011. Much of the change over the past two years has come from early provisions of the Affordable Care Act that are expanding coverage, especially a policy letting young adults up to age 26 remain on their parents’ health care plans.

The health insurance figures in the report will help form a baseline for a much sharper transformation coming next year, when at least 20 states will expand their Medicaid programs to cover millions of low-income Americans, with the federal government picking up most of the tab.

While things have stopped getting worse, officials acknowledged that the economic recovery had failed to translate into improvements for most families. “We are not where we want to be yet,” Treasury Secretary Jacob J. Lew said at the Economic Club of Washington before the report came out. “Too many Americans cannot find work, growth is not fast enough, and the very definition of what it means to be middle class is being undercut by trends in our economy that must be addressed.”

The census report looks only at money income, not income measured after taxes are taken out or tax credits are added in. It also does not measure the effects of many government transfer programs that help lift families’ spending, like public housing subsidies, food stamps or Medicaid.

Since the recession hit, the government has increased tax levies on the wealthiest Americans and has expanded many programs that aid the poor and the working class.

Still, reversing the tidal economic trends that have squeezed millions of families would take significant policy changes that are unlikely to occur because of the sharp partisan divide in Washington.

“The good news from today’s 2012 income and poverty results is that for the first year since the Great Recession hit, things aren’t getting worse,” Jared Bernstein of the Center on Budget and Policy Priorities, a former Obama economics official and a contributor to The New York Times’s Economix blog, wrote in his analysis of the numbers. “The bad news is that three years into an economic recovery, they’re not getting better either.”