Child Poverty Remains High as U.S. Income Stagnates

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A homeless man sleeps on a park bench in the Brooklyn borough of New York City, on September 10, 2013. Close

A homeless man sleeps on a park bench in the Brooklyn borough of New York City, on September 10, 2013.

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Photographer: Spencer Platt/Getty Images

A homeless man sleeps on a park bench in the Brooklyn borough of New York City, on September 10, 2013.

The number of Americans living in poverty remained close to a two-decade high as the nation struggled to fully recover from the economic recession, Census Bureau data show. One bright spot: Fewer people are uninsured.

The proportion of those living in poverty was 15 percent in 2012, while median household income was $51,017, both little changed from the previous year. Almost 22 percent of Americans under age 18 were in poverty in 2012, the agency said yesterday.

The data show the economic expansion hasn’t broadened to all Americans. Rising stock prices and home values have boosted the finances of the more affluent, while those on the lowest tiers contend with high unemployment and stagnant wages.

“Unless we find ways to strengthen job opportunities and enhance the social safety net, we’ll continue to get disappointing news about the poverty rate from the Census Bureau each September,” Sheldon Danziger, president of the Russell Sage Foundation, a New York-based nonprofit organization that studies poverty, said in a statement.

The agency reported modest good news in the area of health care: The number of Americans who lack insurance declined to 48 million last year from 48.6 million in 2011, as many under the age of 26 took advantage of a provision in President Barack Obama’s 2010 health-care law that allowed them to be covered under their parents’ plans.

Fewer Uninsured

While some parts of Obama’s Affordable Care Act have taken effect, the most critical provision -- the creation of government-run insurance exchanges -- begins to roll out Oct. 1.

The percentage of people without health insurance dropped to 15.4 percent from 15.7 percent in 2011. It was the second straight year of improvement in coverage.

The health law, which will also expand state-run Medicaid programs for the poor starting Jan. 1, is projected to extend coverage to at least 25 million uninsured by 2016, according to estimates from the Congressional Budget Office.

The Census data showed that while Americans’ situation didn’t improve much over the year, things at least stopped getting worse in 2012 for the world’s largest economy.

“For the first time in five years, neither median household income decreased nor the percent of the population in poverty increased,” David Johnson, chief of the social, economic and housing division at the Census Bureau, said on a conference call with reporters.

The Census Bureau releases the nation’s official estimates of household income and poverty annually from the Current Population Survey.

Child Poverty

There were 46.5 million people living in poverty, including 16.1 million children, the agency said. The poverty rate remains 2.5 percentage points higher than in 2007, the last year before the worst of the recession. It was at or above 15 percent from 2010-2012, the highest level since 1993, when it was at 15.1 percent.

The poverty threshold for a family of four in 2012 was $23,283, according to the report.

“The poverty rate is still very high by historical standards,” said Isabel Sawhill, a senior fellow at the Brookings Institution in Washington who studies poverty issues. “The good news is that it is likely to decline as the economy recovers over the next decade. The bad news is that it’s unlikely to get back to its 2007 level -- 12.5 percent -- until the middle of the next decade, according to our projections.”

The poverty rate varied widely among racial and ethnic groups, the census data show. For non-Hispanic whites, it was 9.7 percent, while for blacks it was 27.2 percent, for Hispanics 25.6 percent and for Asians 11.7 percent.

Income Inequality

The Western part of the U.S. was the only region that showed a statistically significant change in its poverty rate, declining to 15.1 percent from 15.8 percent in 2011.

The Census Bureau also reported that a measure of the gap between rich and poor households didn’t change in a statistically significant way from 2011. A measurement known as the Gini index was .477. A figure of zero means all income is evenly distributed while a 1 represents complete concentration. Since 1993, the earliest year available for comparable measures of income inequality, the index is up 5.2 percent.

The only group that has gained since the June 2009 end of the recession is those with the top 5 percent of incomes, said Lawrence Mishel, president of the Economic Policy Institute, a Washington-based research group. Those gains have continued into this year, he said, citing the surge in the stock market. The Standard & Poor’s 500 Index has risen almost 20 percent since Dec. 31, as of yesterday.

Market Wealth

“The growth of the stock market shows that the recovery is even more unbalanced than what the Census Bureau numbers show,” Mishel said on a call with reporters after the report was released. “But the Census Bureau numbers definitely do show a pretty unbalanced pattern of income growth.”

An updated research paper published earlier this month by University of California, Berkeley economist Emmanuel Saez found that the top 10 percent of earners -- those with household income above $114,000 -- collected more than half the nation’s total income in 2012, the largest proportion since the government started gathering such data in 1917.

The study, using preliminary 2012 data, also found that those with the top 1 percent of incomes saw their earnings grow 31.4 percent from 2009 to 2012, while the bottom 99 percent saw growth of just 0.4 percent.

Obama noted those trends in a Sept. 16 speech marking the 5-year anniversary of the financial crisis triggered by the collapse of Lehman Brothers Holdings Inc.

One Percent

“Even though our businesses are creating new jobs and have broken record profits, the top 1 percent of Americans took home 20 percent of the nation’s income last year, while the average worker isn’t seeing a raise at all,” Obama said. “Most of the gains have gone to the top one-tenth of 1 percent. So in many ways, the trends that have taken hold over the past few decades of a winner-take-all economy, where a few do better and better and better, while everybody else just treads water or loses ground, those trends have been made worse by the recession.”

Unemployment, which hovered at or above 8 percent for much of 2012, dropped to 7.3 percent in August. The slow and uneven recovery has left millions dependent on government assistance.

The U.S. Department of Agriculture reported earlier this month that food stamps were used by 47.8 million people in June, close to a record high.

Food Stamps

The program, because of both its rapid growth and fraud allegations, has become a target for Republicans in their fight with Obama and other Democrats over reducing federal budget deficits. Expenditures for what is formally known as the Supplemental Nutrition Assistance Program grew to $78 billion last year, more than double the amount when the recession started in December 2007.

Obama’s ability to alter such economic trend lines will be central to his legacy. How much the unemployment rate drops in the next year also will weigh heavily on November 2014 races that will determine control of Congress.

To contact the reporter on this story: John McCormick in Chicago at jmccormick16@bloomberg.net

To contact the editors responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net; Mark McQuillan at mmcquillan@bloomberg.net

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