The Daily Item, Sunbury, PA

September 13, 2012

Rich-poor gap widens to most in four decades as income falls


By Catherine Dodge and Frank Bass

Bloomberg News


NEW YORK — The income gap between rich and poor Americans grew to the widest in more than 40 years in 2011 as the poverty rate remained at almost a two-decade high.

The U.S. Census Bureau released figures Wednesday that showed median household income fell, underscoring a sputtering economic recovery and struggling middle-class that are at the center of the presidential campaign.

The proportion of people living in poverty was 15 percent in 2011, little changed from 15.1 percent in 2010, while median household income dropped 1.5 percent. The 46.2 million people living in poverty remained at the highest level in the 53 years since the Census Bureau has been collecting that statistic.

“The gains from economic growth in 2011 were quite unevenly shared as household income fell in the middle and rose at the top,” Robert Greenstein, president of the Center on Budget and Policy Priorities in Washington, said on a conference call with reporters.

Average incomes fell for the bottom 80 percent of earners and rose for the top 20 percent, highlighting the need for “those at the top to share,” as the nation looks to reduce its budget deficit, Greenstein said.

The top 1 percent of households experienced about a 6 percent increase in income, said David Johnson, chief of the social, economic and housing division at the Census Bureau.

Americans’ economic struggles are the focus of November’s presidential election. Republican nominee Mitt Romney argues that people are worse off because of President Obama’s economic policies. Obama counters that Romney would push plans benefitting the wealthiest at the expense of the middle-class and those striving to get out of poverty.

“The recession is going to have long-term effects on the poverty rate, which our projections suggest is going to hang high for many years to come,” said Isabel Sawhill, a senior fellow at the Brookings Institution in Washington who studies poverty issues.

Brookings had projected the 2011 poverty rate would rise to 15.5 percent, and the static number may be a result of unemployment benefits keeping thousands out of poverty, Sawhill said.

The data also show the number of Americans who lack health insurance declined to 15.7 percent from 16.3 percent, as many under age 26 took advantage of a provision in Obama’s 2010 health-care overhaul that allowed them to be covered under their parents’ plans.

About 540,000 more young people were insured in 2011, the Census Bureau said. Nationwide, about 48.6 million people were uninsured last year, compared with 49.9 million a year earlier.

While the ranks of Americans in poverty were little changed in 2011, median household income last year was $50,054, down from an inflation-adjusted $50,831 in 2010. In 2011, median household income, adjusted for inflation, was 8.1 percent less than in 2007, the year before the recession began.

The weighted-average poverty threshold for a family of four in 2011 was about $23,000, according to the census.

“Even though the recovery has been slow, the economy has been expanding,” said Melissa Boteach, who coordinates an effort to cut U.S. poverty in half in 10 years at the Center for American Progress, a Washington-based research group with ties to the Obama administration. “The gains from the economic growth have not reached working families struggling at the bottom.” In a blog post, White House spokeswoman Amy Brundage said the report shows that while progress has been made since the recession, “too many families are still struggling.” U.S. unemployment, which hovered at or above 9 percent for most of 2011, has exceeded 8 percent since February 2009, the longest stretch in monthly records going back to 1948. The increase in hardship comes as state and federal governments are cutting spending to close budget deficits.

The income figures declined as the U.S. economy expanded 1.8 percent in 2011, down from 2.4 percent in 2010. Growth has averaged a 1.9 percent annual rate through the first six months of this year.

The Census Bureau also reported that a measure of the gap between rich and poor households rose. A figure of zero means all income is evenly distributed while a 1 represents complete concentration. The measurement, known as the Gini index, rose to .463 from .456. The figure has risen steadily from its 1968 low of .351.

The persistent poverty rates pose a threat to the nation’s long-term economic competitiveness as more and more children are growing up in poor households, Boteach said. Down the road, that leads to higher health-care costs, lower educational levels and reduced worker productivity.

“We’re really shooting ourselves in the foot if we don’t tackle early childhood poverty,” Boteach said.

The government reported earlier this month that food-stamp use reached a record 46.7 million people in June. Participation was up 0.4 percent from May and 3.3 percent higher than a year earlier. It has remained greater than 46 million all year.

Contributing to the rising poverty rates are government job cuts at the local, state and federal levels, with about 386,000 such positions eliminated in 2011, Boteach said.

State and local governments have run out of funds from the 2009 stimulus package that helped balance their budgets and are now having to cut jobs, said Sheldon Danziger, director of the University of Michigan’s Gerald R. Ford School of Public Policy’s National Poverty Center.

“Modest” gains in private-sector job growth in 2011 were largely offset by cuts in government jobs and a drop in unemployment benefits, Greenstein said.