Summarizing the New US Census Bureau Report on Income and Poverty: The Rich Continue to Get Richer

The US Census Bureau released new figures on the economic health and well being of Americans on August 29th in its annual report. Below I summarize some of the important aspects of this report. To view this report: www.census.gov/prod/2006pubs/p60-231.pdf

1. Real median household income rose 1.1% in 2005 to $46,326. Real median income is an inflation adjusted measure which indicates the income amount that divides US families at their midpoint, with one half of families earning less than $46,326, and one half of families earning greater than that amount.

2. Although real median household income rose last year, the rise was not sufficient to overcome the impact of the recession that ushered in the 21st century in the US. Real median family incomes in the US in 2005 remained 0.5% lower than real median family incomes in 2001.

3. Real median income values, however, provide a misleading indicator of how widely US citizens share in recent economic gains. For example, while real median family income increased, so too did economic inequality. Economic inequality is evident in several additional indicators.

4. Median family incomes vary significantly by race. The 3 year moving average for families of different racial and ethnic backgrounds were reported as follows: Whites, Non-Hispanic ($50,784); African Americans ($30,858); Hispanics ($35,967); Asians ($61,094).

5. In 2005, the poorest 20% of families earned only 3.4 % of all household income. The top 20% of families earned 50.4% of all household incomes. Clearly, this indicates a wide disparity in the distribution of income.

6. For the top 20% of households, average incomes rose by 2 percent, and the mean annual income for this group of families is now $ 159, 583.

7. Mean income for the bottom 20% rose at a lower rate of 0.6%. The mean family income for those in the lowest 20% of household incomes rose by only $68 to $10,587.

8. The report indicated that the GINI coefficient of income inequality rose to 0.469 in 2005. The higher the GINI coefficient, the more unequal the distribution of income. The 2005 GINI is the largest inequality figure recorded by the US Census Bureau in the 40 years it has issued annual reports.

9. The small rise in income for the lowest 20% of income earning families helped reduce the proportion of the population that lives in poverty by 0.1% (to 12.6%). The 2005 poverty rate, however, was 1.3 points higher than the 2001 poverty rate (11.3%), which indicated that the poorest Americans have had much more difficulty recovering from the early 21st century recession. Today, 36.85 million Americans still live in poverty.

10. Despite the rise in median family income, the median income for both men and women declined. Men’s median income fell by 1.8% to $ 41,386, while women’s median incomes fell 1.3% to $ 31,858. On average, women still earn significantly less than men (77 cents for every dollar earned by men). It should be noted that the rise in the male/female wage level that has occurred since the mid-1980s is largely the result of men’s wages falling relative to women’s wages, and not the result of a real gain in women’s wages relative to men’s wages. Also, the discrepancy between the decline in individual wages (women/men) versus the rise in family income is the result of income generated from investments for families.

11. According to US Census Bureau documents (http://www.census.gov/hhes/poverty/threshld/thresh04.html), poverty thresholds are as follows: for persons under age 65 ($9,827/yr); for persons over age 65 ($ 9,060/yr); for a family of 4 ($19,484) (for other family sizes, use link). It should be noted that the poverty level value set by the US Census Bureau for individuals under age 65 is slightly less ($885) than a person who earns minimum wage ($ 5.15/hour) would make working 40 hours a week for 52 weeks.

12. There are important racial differences in poverty that need to be considered. During 2005, the poverty rate for Whites declined slightly (0.1%), to 10.5%. The African American poverty rate remained constant, though they continue to be adversely affected, and the proportion of African Americans who live in poverty was 24.7%. Like the White poverty rates, the Hispanic poverty rate fell by 0.1%. However, like the African American poverty rate, the Hispanics poverty rate remains significantly higher than the White poverty rate at 21.8%.

13. Poverty rates for other groups also rose. For female headed households, the poverty rate rose by 0.6 points to 31.1%. Likewise, the poverty rate for those over 65 rose by 0.3 points to 10.1%. Poverty rates for children, however, fell by 0.2 points to 17.6%.

14. The number of Americans without health insurance increased to 46.6 million, or by 1.3 million people during 2005.

15. Important regional variations exist in reported family income patterns. The rise in incomes was above the national average in Northeastern States (2.9%) and in Westerns States (1.5%), and below the national average in Midwestern (-0.4%) and Southern (0.1%) states.