​America's quagmire: Stubborn poverty and slumping income

If the country were a hospital patient, its doctors might want to try another course of treatment.

The recession's impact continues to linger across the country, despite an improvement in a number of economic measures such as job creation, according to new data from the U.S. Census Bureau. Household income and poverty rates remained little changed in 2014 from the prior year, a startling development given the growth of the U.S. economy and an improving job market.

The one optimistic data point in the Census' annual report was the number of Americans who lack health insurance, which has dropped precipitously, thanks to the introduction of the Affordable Care Act. The number of people without health insurance plunged by 8.8 million last year, the bureau said.

Poverty remains a stubborn problem in America, with recent research from the Urban Institute finding that two out of five children spend a year in poverty before they turn 18. That can have long-term negative effects on children, crimping their chances of graduating from high school or enrolling in college. Ahead of the Census' data release, experts had expected to see lower poverty rates and higher median income thanks to a stronger job market, but that failed to bear out.

"If anyone was wondering why the people in this country were feeling so ornery, you should look no further than this report," Lawrence Mishel, president of the Economic Policy Institute, a left-leaning think tank, said on a conference call to discuss the data. "There was incredible income stagnation across the spectrum."

Americans actually earned less last year, a startling development given the tighter job market. Real median household income was $53,700 last year, compared with $54,500 in 2013. It marks the third consecutive year that median income has failed to improve. Median household income peaked in 1999, Mishel noted.

Even the wealthiest households measured by the report -- the top 5 percent of American earners -- saw a slump in their income, which fell to about $206,000 in 2014 from more than $208,000 in 2013, which Mishel pointed to as evidence of the wide-reaching impact of income stagnation.

Without significant improvements in household income, Americans remain mired in a struggle to improve their quality of life, given that wages aren't keeping up with the rising cost of living. One stark reminder of the long-reaching impact of the recession is that median household income remains 6.5 percent lower than in 2007, the year before the recession started, according to Census data.

The impact of poverty isn't any prettier, either. About 46.7 million people are living in poverty, or about one out of every 7 Americans, the Census said. That's little changed from a year earlier, although Census officials noted that the country saw a reduction in poverty rates between 2012 to 2013. Still, the number of Americans living in poverty remains far higher than before the recession.

The face of poverty has been shifting for years. While the Southern states are still home to the bulk of America's poor, the poverty rate there has declined from 49 percent in 1960 to 41 percent in 2010, according to an analysis from Pew Research. In the meantime, the percentage of poor people living in the West has more than doubled to 23 percent.

Compared with the 1970s, children are now more likely to live in poverty than senior citizens, who have seen a steep decline in the percentage living in destitution. About one out of five children in America are now living in poverty, according to the Census. For seniors, the ratio is one out of 10.

The bureau, in releasing research on America's income and poverty levels for 2014, included a new yardstick for measuring poverty, given that the older official definition has increasingly been criticized as out of date. The official poverty rate sets the threshold as cash income equal to three times what a penny-pinching family would spend on food. But that doesn't include the type of costs of living that most families now face, such as child care and health care spending.

Taking those issues into account, the Census provided an analysis of poverty levels using the Supplemental Poverty Measure. Aside from spending on medical care and other costs, the new threshold includes non-cash income from benefits such as food stamps and housing vouchers.

By that measure, the poverty rate in the U.S. was 15.3 percent, or higher than the official poverty rate of 14.9 percent. Seniors, however, were more likely to live in poverty, at 14.4 percent by the supplemental measure and 10 percent by the official measure. At the same time, fewer children by that measure were living in poverty, at 16.7 percent, than when compared with the official yardstick.

That illustrates that the social safety net is helping lift American children out of poverty, with programs such as the Earned Income Tax Credit and food stamps particularly effective, said Jane Waldfogel, professor of social work and public affairs at Columbia University School of Social Work and the author of the forthcoming book "Too Many Children Left Behind." Still, she said, more needs to be done to lower America's poverty rate, she said.

"Compared with almost any other wealthy developed country, our poverty rate is much too high," Waldfogel said. "That's partly due to low incomes, but it's also due to the weaker safety net" when compared with similar countries, such as Canada and Australia.

As for health insurance, the Census found that almost 90 percent of Americans had coverage at some point last year. More than half had employer-based insurance, while almost 15 percent had directly purchased their own coverage, which includes plans bought through Obamacare. Medicaid and Medicare covered about 20 percent and 16 percent of the U.S. population.