More Americans are living in poverty than at any time since records began more than 50 years ago as a weak economic recovery has failed to lift incomes.
In 2010, 46.2m people fell below the poverty line, calculated as an annual income of $22,314 for a family of four and $11,139 for an individual, according to the Census Bureau.
The increase lifted the poverty rate to 15.1 per cent of the US population, the highest since 1993 and almost 1 percentage point higher than the year before, according to the US census bureau. It will add to pressure on Barack Obama to stimulate the jobs market, where unemployment stands at 9.1 per cent.
“To have hit 15.1 per cent is truly extraordinary,” said Alice O’Connor, a professor who studies poverty at the University of California, Santa Barbara.
“We are entering territory which looks like the period before we even started fighting a ‘War on Poverty’ in the 1960s. It’s quite stunning. This is a terrible statement about the depths of the Great Recession but, even more, about the recovery, which has clearly left the poorest out completely.”
The aftermath of the recession has seen a “two-speed” recovery for Americans, as the wealthiest maintain their spending habits and lifestyles while a record number of their fellow citizens are mired in poverty.
The median household income of Americans dropped 2.3 per cent in 2010 from the previous year, hit by increasing long-term unemployment which has depressed wages and left many without income. Median wages peaked in 1999 and are still 7 per cent below that level, suggesting that incomes have never fully recovered from the downturn the followed the dotcom bust.
The number of Americans without health insurance also rose by nearly 1m people to 49.9m. “Income down, poverty up, health insurance coverage down or flat. The news on economic well-being in the US is not good,” said Ron Haskins, a senior fellow at the Brookings Institution.
Nearly a quarter of American children are living in poverty. Their number increased for the fourth year in a row to 22 per cent, the highest since 1993. Child poverty was the fourth highest in 2010 since the mid-1960s, when the federal “War on Poverty’ was launched by President Lyndon Johnson.
Analysts do not expect a turnround any time soon. “Given the widely accepted projections that both unemployment and, in particular, long-term unemployment will continue at high rates for the next several years, we can expect this pattern of continuing low income and high poverty rates for many years,” Mr Haskins added.
Meanwhile, on the same day as the poverty figures were announced, Ipsos Mendelsohn, the media research group, released figures that show things are apparently looking up for the top tier of US earners.
The group’s annual survey of affluent Americans found that the number of households making more than $100,000 a year was 44.2m in 2011, compared with 44.1m the previous year. Their spending held steady at $1,400bn after previously falling.
“Their life has stabilised,” said Bob Shullman, Ipsos Mendelsohn president. “Everyone feels it when their income falls but, when you have less discretionary income, you feel it more. It doesn’t hurt [the rich] as much.”
The survey, which polled 14,405 wealthy adults, found “almost all affluents are planning a wide range of activities in the next year, with travelling, remodelling, and investing topping this list”.
However, the latest census figures underscore the difficulties facing the US federal and state governments as they seek to reduce deficits and help growing numbers of the poor. Republicans in Washington have targeted programmes that subsidise healthcare for the poor and elderly, Medicaid and Medicare, as well as Social Security benefits for the elderly.
If planned cutbacks take effect and unemployment remains high, analysts predict that life for the poor and middle class will become even harder.
According to Brookings, the poverty rate will continue to rise and hit 16 per cent in 2014. If that happens, nearly 10m Americans will have sunk into poverty since the recession began in 2007. The latest figures showing the divergence between the recovery of the rich and poor come as Mr Obama pushes the $447bn jobs plan unveiled last week. The White House has said it wants to fund most of the package through curbing tax breaks for the richest.
At the same time, the growing income gap is worrying policymakers who are concerned about the effects on aggregate demand if wages continue to stagnate.
In 2009, the median full-time male worker aged 25-64 was earning $48,000 – roughly the same as in 1969 in real terms. Meanwhile, in the same 40-year period, the income of the top 2 per cent of working age men has jumped 75 per cent.
By Matt Kennard and Shannon Bond
13 September 2011
@ Financial Times