U.S. Poverty Rising, Family Incomes Fall

The 2008 poverty rate was 13.2 percent, up from 12.5 in 2007, affecting nearly 8.1 million families during the first official year of the recession that began December 2007.

Sheldon Danziger, director of the National Poverty Center at the University of Michigan and a Russell Sage Foundation fellow, said the poverty level was even higher than many expected.

Census report“Of course poverty goes up in recessions,” he said, but poverty rates have not been rebounding during times of economic recovery in recent years. “We were starting at a higher poverty level at the end of the last economic recovery.”

Median income dropped to $50,303, and fell in all regions except the northeast. The decline in income and the increase in unemployment in 2008 coincided with an increase in the number of people without insurance, but the percentage of uninsured, 15.4 percent, was not statistically different from the previous year.

The number of uninsured in 2008 was 46.3 million, up from 45.7 million in 2007. President Barack Obama said Thursday that the number of people without coverage is higher than the census reflects.

“We know from more up-to-date surveys that since the recession intensified last September, the situation has grown worse,” the president said. “It’s estimated that the ranks of the uninsured have swelled by nearly 6 million people – that’s 17,000 men and women every single day.”

Private health insurance lost 1 million Americans in 2008, according to the census, but those insured through government programs increased by 4.4 million.

Danziger described the shift as part of a long term drop in the number of workers getting coverage through their jobs. But said there is a bright spot to the data.

“For children, uninsurance didn’t go up in part because of the state child health insurance program,” he said.

The census data also reveals that some of the more secure subgroups of the U.S. population saw greater rises in poverty in 2008, such as married-couple households and whites, said Greg Acs, a researcher at the Urban Institute.

“The situation is already pretty dire for those in need,” he said. “But the increase in poverty, the loss in income, is hitting subgroups of the population that have been somewhat insulated before the recession.”

The poverty level is $22,025 for a family of four, a line that has become controversial.

“The needs threshold we are using, which was developed almost 50 years ago, is probably too low and doesn’t reflect what families need,” said Acs, but the poverty calculation also does not take into account resources available to families, like food stamps or tax credits.

More and more people will continue to drop below that line as the recession wears on, warns Danziger.

“There is a whole continuum of economic hardship so there are many people who have experienced large drops in income who might not be considered poor,” he said.

“I think the situation is going to be so much worse in 2009 because a lot more people have been unemployed for longer periods.”

Both Danziger and Acs predicted the poverty rate for 2009 would at least reach 14 percent.

Regionally, both the Midwest and the West experienced increases in their poverty rates in 2008. The Midwest poverty rate increased to 12.4 percent and the West increased to 13.5 percent. The South did not see an increase but continues to have the highest level of poverty, at 14.3 percent.

Dante Chinni, director of the Patchwork Nation Project at the Christian Science Monitor said the South, which has a high number of heavily minority communities, traditionally has lower incomes and higher rates of poverty.

In the Midwest, the drop in income and increase in poverty may be tied to failures of big manufacturing that bleed out to affect smaller support manufacturers as well. The West, Acs said, has seen a dramatic shift, going from a region that had unemployment and poverty below the national average to being above the national average of both.

Chinni said much of that pain came from boomtown areas, that saw construction explode, then bottom out beginning in 2008.

“Those places were growing like weeds, now those places have tons of homes for sale,” Chinni said. “An entire sector of their economy went away.”

Unemployment will be key to any recovery in poverty rates said Acs, but that progress may still be a long way off.

“[Poverty] will only start coming down once unemployment starts coming down and that is one of the last things to start coming down in a recovery,” Acs said.