Tuesday, September 20, 2011

New Census Data Show Just How Screwed the US Middle Class Really Is

The Census Bureau released a whole bunch of data on income in the US for 2010 last week. The picture is seriously bleak, especially for the middle and lower classes. Let me show you just how bleak, with a series of charts.

First, the median household income has dropped in the past decade, for all races:

Table source.

This is seriously bad - it means that, in spite of their hard work, most Americans aren't any better off now than they were ten years ago - which has lots of people talking about a "lost decade." In fact, the median income is now at the same level that it was in 1996 - so we're almost at a lost 15 years, for most Americans.

By some calculations, the median income of working-age households has declined by a whopping 10% in the past 10 years!

The story is especially bad for men - the median man's annual income, adjusted for inflation, is now lower than it was in 1978!

And the long-term outlook doesn't look much better - corporations are shifting their strategies to adjust for the long-term decline of the middle class in the US - doesn't exactly inspire confidence, does it?

Second, the poverty rate is now at its highest level since 1993:

Table source.

So, while poverty fell throughout the 1990s, all of the gains made during that decade have now been erased. And keep in mind that many scholars and economists think that the official poverty rate understates the extent of poverty in America - up to 30% of Americans might actually have trouble making ends meet.

Furthermore, deep poverty (i.e. living below 50% of the poverty line) is at its highest point ever recorded:

Table source.

Fourth, government anti-poverty programs have kept millions of people out of poverty, as intended, but these programs are currently on the chopping block because of the misguided austerity fever that has taken over Washington:

Table source.

What are the US's biggest (and perhaps most effective) anti-poverty programs, and how many people did they keep out of poverty in 2010?
  1. Earned Income Tax Credit (3 million people)
  2. Unemployment Insurance (2.3 million people)
  3. Social Security (13.8 million people)

Fifth, the number of Americans without health insurance climbed by 900,000 to 49.9 million, another record, with data back to 1999:

Table source.

Finally, the Atlantic highlights 4 other disturbing numbers from the Census report:
  • 7.1%: This is small-looking figure with big implications. It is the percent decline in median household income since 1999. Yes, decline. Income is supposed to grow decade-over-decade. That's how wealth builds. But in the last ten years, median income has barely tread water. In fact, real median household income in 2007 was already lower than the income peak of the late-1990s. For the bottom decile, income declined by 12.1 percent over the last ten years.
  • 20-to-1: This is the ratio of median wealth of white households to black households in 2009. The ratio of white to Hispanic households is 18-to-1.
  • 6.6 million: This number is the decline in full-time male workers between 2007 and 2010. The corresponding number for women was less than half, 2.8 million, which is one reason why some analysts called the first two years of the recession a "mancession."
  • 13.6 millionThis is the total decline in people under 65 who have employer-sponsored health insurance, which is the most common source for a family's health coverage. It represents a 10% decline in coverage between 2000-2010.

<sarcasm> But with all of this terrible employment and income news, the REAL danger to the US is government borrowing and spending - even though every market signal says that the markets are not concerned about government spending at all, and if anything, want the US government to borrow and spend more. Way to have your priorities straight, Washington - congrats. </sarcasm>

The causes of this lost decade for the middle class are complex, having to do with a potential realignment of the value of capital v. labor, pressure from international competition and the rise of the developing world, tax policies that shifted the tax burden away from the wealthy and corporations onto the lower and middle classes, and a bunch of other reasons that are beyond the scope of this post.

But, I'll point to one interesting graph from the Center for American Progress, which demonstrates that the middle class's share of aggregate US income has been shrinking since the early 1970s, in tandem with the union membership rate:

I'll be the first to point out that correlation does not equal causality, but it's hard to name groups other than unions that fight for middle class economic interests.

So, in short, all of these graphs show that if you're in the lower or middle class in America, you've been getting seriously screwed as of late - but no worries, I'm sure you can just work hard and become rich.

Oh, wait, no you can't, since income mobility in the US is quite low, by international standards - far lower than in France, Germany, Sweden, Canada, Finland, Norway, or Denmark, for example.

Hmmm .... well then, I guess you can always sell drugs to solve your money woes (note: I actually think this would be a poor solution, but I started watching Breaking Bad for the first time this weekend, so I've got selling drugs on the brain)!


  1. wow, that union membership/Median Income graph is telling...

  2. S. Ramsden,

    Yeah, it's pretty amazing. I mean, I'll be the first to point out (1) that the union membership/median income graph was designed to make the two lines overlap as much as possible and (2) that correlation does not equal causation - but there's definitely some kind of relationship between the decline of the two!

    -The Angry Bureaucrat

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