Blog: Shared Prosperity Remains Elusive According to Poverty Data Released by the Census Bureau
Sep 18, 2014
While the Census Bureau data shows that the official poverty rate fell from 15% in 2012 to 14.5% in 2013, that fact is little consolation to low and middle-income families whose wages and salaries have been largely stagnant, and in many cases, even declining since 2000. Median income for non-elderly households fell from $65,785 to $58,448, a decline of $7,337 or 11.2% from 2000 to 2013. The data is from the Census Bureau, but the idea of following wage trends to determine the path of income inequality is straight from the research and writing of the Economic Policy Institute (EPI). When one examines the data over a longer timeframe, the trends are deeply disappointing and the culprit is wage stagnation.
In the words of EPI, “Since 1973, the median man working full-time, full-year has seen no sustained growth, dropping from $52,421 in 1973 to $51, 055 in 2002 and falling even further over the 2002-07 recovery and the recession to $50, 033 in 2013.” Women’s wages have also stagnated, but for a shorter period of time, from $39,108 in 2002 to $39, 157 in 2013. As Jared Bernstein argues in his September 16 blog “On the Economy” these types of facts “contribute to the growing disconnect between growth and the economic well-being of most households.” The reality of a lack of shared prosperity is a fundamental challenge to Congress, many of whose members conveniently ignore the idea of the common good.
Before we congratulate ourselves on attaining a 14.5% poverty rate, let’s remember that that figure is the same amount of poverty we suffered in 1993, in 1982 and in 1966, according to Census Bureau charts. That 14.5% poverty rate is well above the 11.3% rate in 2000. Today’s median income is still 8% lower than in 2007 and is barely keeping up with inflation. There were 45.3 million people living in poverty in 2013, roughly the same as the year before and not a statistically significant change from 2012. The major reason for the decline in the official poverty rate is a perceptible increase in the number of full-time jobs, which allowed a gradual shift from what had become a trend toward part-time employment.
Using the Gini Index – the most common measure of household income inequality used by economists, with zero representing total income equality and one equivalent to total inequality – income inequality was .476 in 2013; the change from 2012 was not statistically significant. And changes in income inequality between 2012 and 2013 were not statistically significant as measured by the shares on aggregate household income by quintiles. It is worth noting, however, that income gains for the top 5% over the period from 2009 to 2013 was .5% or $1542, the only income group to experience any gains.
Robert Greenstein, President of the Center on Budget and Policy Priorities (CBPP) reminds us that federal austerity policies, such as the sequestration budget cuts as well as tax policies that took effect in 2013 reduced economic growth substantially. The Congressional Budget Office (CBO) projected at the time that these policies alone cost the economy more than one million jobs. We could have enhanced economic growth and strengthened productivity if we had invested more in infrastructure and training people for jobs.
The poverty data released by the Census Bureau on September 16, 2014 doesn’t include the impact of many governmental programs on the poverty rate, such as non-cash benefits (e.g. Earned Income Tax Credit [EITC]) and expenses incurred (e.g. out-of-pocket medical expenses, child care). This rate is known as the Supplemental Poverty Measure (SPM) and is considered to be a more accurate measure, even though it does not replace the official poverty measure. Poverty estimates using the SPM were published by the Census Bureau in November 2011, 2012 and 2013. Supplemental poverty estimates for 2013 will be published in October 2014.
Researchers at Columbia University looked back with their own SPM-like measure in 2013 and concluded that government anti-poverty programs were a significant deterrent to poverty, especially among children, the group that is absolutely the worst-off in the poverty statistics again this year. If the poverty data looks high today, it would be even higher without these vital government programs.
In 2012, the Supplemental Poverty Rate was 16%, rather than the 15.1% that the official poverty rate indicated. Without Social Security, the Supplemental Poverty Rate would have been 24.5%. The National School Lunch Program lowered the SPM by about .5%; housing subsidies lowered it by approximately another 1%. It’s important to keep in mind that the official poverty rate does count Social Security, Supplemental Security Income, unemployment insurance, child support and Temporary Assistance for Needy Families (TANF), but does not capture other cash benefits (e.g. food stamps) and non-cash benefits, like the EITC and does not include many significant expenses of poor families. By failing to capture all benefits that are often vital to poor families as well as many of their key expenses, the official poverty statistics are inadequate.
The value of the safety net in the reduction of poverty cannot be overstated. The Census Bureau has provided the data that allows us to conclude that the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) has lifted 3.7 million people above the poverty line in 2013, including 1.5 million children. And unemployment insurance also kept 1.2 million people out of poverty in 2013. Without these and other safety net programs the poverty rate would have been even higher.
In Pope Francis’s address to the UN Food and Agricultural Organization (FAO) on June 20, 2013, he made clear why groups like the FAO (and, by extension, all of us) must continue to work with low-income families: “A way has to be found to enable everyone to benefit from the fruits of the earth, and not simply to close the gap between the affluent and those who must be satisfied with the crumbs falling from the table, but above all to satisfy the demands of justice, fairness and respect for every human being.”
(There is much to say about how different age, gender, racial and ethnic groups fared in the poverty statistics. We will focus on these various groups next week.)