A glimmer of hope for America's poorest
As America continues to struggle to regain its footing following the recession, there's a glint of hope for the country's poorest.
The poverty rate for American households declined to 14.5 percent last year, down from 15 percent in the previous year, marking the first decrease since 2006, according to a report from the U.S. Census Bureau released on Tuesday. Fewer children are now living in hardship, with the poverty rate for those under 18 declining to 19.9 percent last year from 21.8 percent in 2012.
That may signal that some of the country's worst-off families are finally seeing some benefits from the economic recovery. Still, low-income and middle-class households still have a long way to go to reclaim the wages and income lost during the recession, according to an analysis from the left-leaning Economic Policy Institute. Household income for working-age Americans is almost $7,400 below where it was in 2000, the group's analysis of Census figures found.
"We have come through a really sharp recession, and the economy has been in an recovery since 2009 in a sense that GPD has grown," although most Americans are still struggling, said EPI president Lawrence Mishel on a conference call to discuss the group's analysis. "Incomes fell a whole lot during this period and are now just making a slight recovery."
The bad news is that 45.3 million Americans continue to live in poverty, which equates to individual income of less than $12,119 per year, or income of less than $23,834 for a family of four. Despite 2013's decline in the poverty rate, it remains above its pre-recession range.
One benefit is that fewer children are living in poverty, thanks to higher wages for the lowest American earners. With low-wage parents making more money, that translated into lift for their dependents, said Valerie Wilson, director of the EPI's program on race, ethnicity, and the economy.
"A lot of those households have multiple children," she noted. When parents see income gains, that has a "multiplying effect," she said.
Some states have boosted their minimum wages, which might be helping to lift some families above the poverty line, while government programs such as unemployment insurance may have also helped, she said.
Still, the report may verify what many Americans feel: That incomes are stuck in neutral, or worse. U.S. median income last year was statistically unchanged, at $51,939, compared with 2012, the Census said.
"In contrast with the 1960s, 1970s, and 1980s -- when the benefits of economic recoveries were more broadly shared and poverty and median income improved more quickly when recoveries started -- the recoveries of the past two decades have been much slower to generate income gains for middle- and low-income Americans," the Center on Budget and Policy Priorities president Robert Greenstein wrote in a research note.
Income inequality has been exacerbated by the lagging fortunes of the poor and middle-class, which have struggled to regain their lost earnings. The EPI's analysis of the Census data found that the bottom fifth of families have only recaptured 84.1 percent of their income peak in 2000. The top five percent of families, however, have reached 93.5 percent of their historic income peak in 2006.
The top 5 percent of U.S. households earn at least $196,000, while the bottom fifth had incomes of $20,900 last year, according to the Census.
The report illustrates that the recovery is just reaching some Americans, the EPI's Mishel noted. The Federal Reserve shouldn't "even think of slowing the economy until we have wage growth of 3.5 percent or more," he said.
"We are very slowly digging ourselves out of a very deep hole," Mishel said. "Families are just getting a taste of what a recovery looks like."