Poverty and Income Trends Paint a Bleak Picture

by Elise Gould Heidi Shierholz
September 16, 2010

Note: For analysis of health insurance coverage, see Decline in employer-sponsored health coverage, by Elise Gould, director of health policy research at EPI. 

This morning’s release by the U.S. Census Bureau of the 2009 poverty and income data was yet another reminder of the severity of the Great Recession that began in December 2007. The data show that the poverty rate increased from 13.2% in 2008 to 14.3% in 2009, the highest rate since 1994. Furthermore, for the first time on record, the nominal (non-inflation adjusted) income of the median, or typical, household actually fell, from $50,303 in 2008 to $49,777 in 2009. Inflation was negative from 2008 to 2009, dropping by 0.4%, so real (inflation-adjusted) income did slightly better, dropping $335, or -0.7%, from $50,112 in 2008 to $49,777 in 2009.

When unemployment skyrockets and job seekers cannot find work, incomes fall and poverty rises. The fact that the deterioration in both poverty and income from 2008 to 2009 were so dramatic is unsurprising given the deterioration in the labor market. Figure A shows that the unemployment rate increased from 5.8% to 9.3% from 2008 to 2009, a 3.5 percentage point increase. This is by far the largest one-year increase on record (these data go back to 1948; the second largest increase was a 2.9 percentage point increase from 5.6% in 1974 to 8.5% in 1975). When we look back on this whole period, we will likely find that the Great Recession that began in December 2007 caused the unemployment rate to rise for four years, from 2007-11. However, the increase from 2008 to 2009, which is what today’s data release covers, captures the big collapse in the American economy.

Key findings from today’s report

Poverty

  • The poverty rate increased from 13.2% to 14.3% between 2008 and 2009, representing an additional 3.7 million people living in poverty for a total of 43.6 million in poverty in 2009. The poverty rate for children was 20.7% in 2009, representing 15.5 million kids living in poverty. In 2009, over one-third (35.5%) of all people living in poverty were children.
  • The poverty rate for working-age people (18-64 years old) hit 12.9% in 2009, the highest rate in nearly 50 years. The elderly (65 and older) population saw a -0.8 percentage point decrease to 8.9% in 2009, the lowest elderly poverty rate on record. Social Security provides seniors with an income that insulates them against severe economic downturns like the Great Recession.
  • Although significant increases in poverty were felt from 2007 to 2008, it was only the tip of the iceberg. 
  • While no single group was spared, white non-Hispanics maintained far lower rates. Hispanics and Asians were particularly hard-hit by increases in poverty in this recession, increasing 3.8 and 2.3 percentage points from 2007-09.
  • The poor are getting poorer.  In 2009, the share of the population below half the poverty line hit a record high of 6.3%.
  • In 2009, over one-third of black children (35.7%) and nearly one-third Hispanic children (33.1%) were living in poverty.  Families (with children) headed by single mothers hit 38.5% in 2009.  Of the 6.6 million families living in poverty, 3.8 million of them were headed by a single mom.
  • The poverty threshold decreased, from $22,025 for a family of four in 2008 to $21,954 in 2009. In the five decades that this measure has existed, 2009 is the first time that the threshold has ever decreased.

Income

  • For the first time on record, the nominal (non-inflation adjusted) income of the median, or typical, household actually fell, from $50,303 in 2008 to $49,777 in 2009. Inflation was negative from 2008 to 2009, dropping by 0.4%, so real (inflation-adjusted) income did slightly better. Real median income declined by $335 from $50,112 in 2008 to $49,777 in 2009, a decline of 0.7%. The real median income of working-age households declined even more, falling by $754 from $56,575 to $55,821.
  • African Americans were hit particularly hard in 2009, with the median African American household income dropping by 4.4%. 
  • The 2009 data show that inequality increased slightly with higher incomes recovering disproportionally in the second year of the recession. In 2009, workers at the 20th percentile saw a decline in income of 0.9%, while workers at the 95th percentile saw an increase of 0.4%. 
  • Real earnings for the median full-time, full-year female worker rose 1.9% in 2009, from $35,609 to $36,278, while the median male working full-time, full year saw an increase of 2.0%, from $46,191 to $47,127.  Particularly astonishing was the 4.7 million drop in the number of earners working full-time full-year. The job loss and hours reductions of 2009 meant there was a 3.7 million drop in the overall number of workers with any earnings at all in 2009, and a 1.1 million increase in the number of workers working part-time and/or part-year. 

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