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August 30, 2006

Progress?

There is a little something for everyone -- that is to say, things to cheer about, things to frown about -- in the Census Bureau's report on Income, Poverty, and Health Insurance Coverage for 2005.  MarketWatch summarizes:

Real U.S. median household income rose 1.1% in 2005, climbing for the first increase since 1999, but inflation-adjusted incomes still have not recovered fully from the 2001 recession, the Census Bureau reported Tuesday.

Real median incomes for 2005 rose 1.1% to $46,326 but were down 0.5% from 2001's $46,569. Median income means half of the 114.4 million U.S. households earned less, half earned more. The figures have been adjusted for inflation.

Income inequality continued to increase, with the top 20% of families accounting for a record 50.4% of all household income, just the third time since the mid-1960s that they've taken more than half. For the top 20%, the median income rose by $3,592, or 2.2%, to $166,000.

Meanwhile, the bottom 20% captured just 3.4% of income, matching their lowest share since the mid-1960s. Median incomes for the bottom 20% increased by $17, or 0.2%, to $11,288...

The poverty rate declined for the first time since 2000, nosing down to 12.6% from 12.7%, but this amounted to a statistically insignificant change, the government said. The poverty rate was 1.3 percentage points higher than 2001's 11.3% but was lower than the 13.8% average in the 1990s.

A couple of things I found interesting in details.  A few facts: About 27 percent of people 25 years of age or older had incomes less than twice the poverty level.  For prime working-age folks -- those between 25 and 65 -- with at least 4 years of college, your chance of having income that low was, in 2005, between 8 and 12 percent (depending on your exact age group).  Among those with high-school degrees only, the chance of being in the low income group ranged from 25 to 39 percent.  And without a high-school degree?  Your chance of having an income less than twice the poverty rate was in excess of 50 percent.
 
When thinking about income inequality -- especially among those away from the extremely high and extremely low levels of income -- there is just no escaping this picture:

   

Education_premium_real_dollars   
 
   
The second thing I found interesting was the reasons that people who were not employed gave for not working:
   
Poverty_2a   
Poverty_2b
   
Conclusion?  If you are poor and not working -- which is the most common circumstance for those under the poverty line -- the reasons are not obviously related to the state of the labor market.
UPDATE: The comment by kharris below made me realize that that last sentence is pretty silly. It is clear that choosing retirement rather than work, work at home rather than work in the market, and choosing educational investment over employment are inherently related to conditions in the labor market.  I was thinking in terms of conditions related to unemployment, and so the phrase probably should have read:
If you are poor and not working -- which is the most common circumstance for those under the poverty line -- the reasons are not obviously associated with a lack of jobs for those who choose to remain in the labor force.
Stated that way, it is clear that judging this to be a good or bad thing is pretty tricky.  Those who are retired or have decided to stay home to attend to family may simply be discouraged by the lack of opportunity.  And we might lament that the return to working is so low that poverty is associated with separation from the labor force.  On the other hand, we might be encouraged that such a large fraction of those under the poverty line appear to be making a deliberate choice to acauire human capital.  This is one of those cases where each of theose reactions is probably justified.
BLOGLAND UPDATE: Mark Thoma has an extensive round-up, the dominant theme being that this is a bad report.  Daniel Gross is not so impressed either.  John Irons declares the increase in the number of Americans without health insurance "bleak." 

August 30, 2006 in Health Care, Inequality, Labor Markets, This, That, and the Other | Permalink

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Listed below are links to blogs that reference Progress?:

» Are Conditions Getting Worse for the Poor in the U.S.? from EclectEcon
There has been quite a bit of discussion in the media and around the blogosphere during the past couple of days about labour income and about conditions for the U.S. poor. Here's more from ... [Read More]

Tracked on Aug 30, 2006 1:57:02 PM

Comments

See Thoma, http://economistsview.typepad.com/economistsview/2006/08/disappointing_n.html#more
for all the bad news. Entry college graduate salaries continue to fall. Rising incomes are only among immigrants and the elderly

Posted by: Lord | August 30, 2006 at 02:33 AM

"If you are poor and not working -- which is the most common circumstance for those under the poverty line -- the reasons are not obviously related to the state of the labor market."

Huh? We have no way of knowing how the people below the poverty line are distributed across categories in the reasons-for-not-working pie charts. One could just as easily assert, based on the pie charts, that reasons for poverty are not obviously unrelated to the state of the labor market.

Posted by: kharris | August 30, 2006 at 03:46 PM

kharris -- The pie chart applies only to people below the pverty line, so I'm not entirely sure what you mean. However, see my comment above, because there is a sense in which my statement was poorly crafted.

Posted by: Dave Altig | August 30, 2006 at 09:26 PM

Globalization will continue to keep a lid on wage inflation here in the US... JMHO.

Posted by: muckdog | September 02, 2006 at 02:21 AM

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