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Latest Data Show Incomes Continue Downward as Inequality Rises

Job seekers in line

SOURCE: AP/Jae C. Hong

Job seekers wait in line at a job fair expo in Anaheim, California.

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New data released today by the U.S. Census Bureau on family and household incomes mirrors recent employment trends, underscoring the need for job-creating policies from Congress.

In 2011 the typical U.S. household had an income of $50,054, just below what it was in 2010 in inflation-adjusted dollars. This means that the Great Recession of 2007–2009 and the lingering high unemployment since then erased all the gains of the past 15 years. Household income has fallen 8.1 percent in inflation-adjusted dollars since 2007, the year before the Great Recession began. This is compared to a 2 percent decline over the early 2000s recession.

The trends are even starker for nonwhite families. African American households have incomes today that are lower than they have been since 1994—and for Hispanic households, since 1997. (see Figure 1)

The new data from the Census Bureau reveal why the current employment situation is untenable. U.S. unemployment continues to hover around 8 percent, leaving 12.5 million people out of work and searching for a job. Overall, the share of the U.S. population with a job remains at a low not seen since 1983. Given that most U.S. families derive the majority of their income from earnings, these employment trends are clearly crimping any chances for earnings to rise in 2012.

Indeed, as income for the typical family falls, the incomes of those at the very top are rising. New Census data show that income inequality across households increased between 2007 and 2011. Part of the reason for the widening gap can be attributed to the rebound of the stock market from early 2009 to 2011, with the Dow Jones Industrial Average alone gaining 35 percent over those three years. This has increased the incomes of the well-off but has left Main Street behind. (see Figure 2)

Figure 2 shows the change in average income between 2007 and 2011 that each fifth of the income distribution brought home. The Great Recession has pulled down family income sharply for all groups, except for those at the very top, who continue to make gains.

A key issue, especially for lower-income families, is that long-term unemployment insurance was curtailed in 2011, even though unemployment remains high and the share of those who were long-term unemployed—those out of work and searching for a new job for at least six months—was at historic highs in 2011. Last year six states (Arkansas, Florida, Illinois, Michigan, Missouri, and South Carolina) passed legislation that decreased the maximum number of weeks that an individual could receive unemployment benefits, according to a recent Congressional Research Service study. Whereas in 2010, unemployment benefits lifted 3.4 million people out of poverty, in 2011 that number fell to 2.3 million, even though the average rate of unemployment in 2011 was at 8.9 percent, only 0.7 percent lower than the average in 2010.

Both men and women who worked full time in 2011 saw their median earnings decline by 2.5 percent from 2010 to 2011. The ratio of female-to-male pay was unchanged at 77 cents to the dollar in 2011.

The American Dream is not built on falling incomes. Yet a key factor in the data for 2011 is that policymakers made choices to stop helping the unemployed as much, even though our economy had not improved enough to allow everyone who wanted a job to get one. Moving forward, it would be better if policymakers focused on creating jobs, passing legislation such as the American Jobs Act, which President Obama proposed a year ago. Leaders in Congress need to make sure families can make ends meet rather than unduly punish them for the missteps on Wall Street that caused our jobs crisis in the first place.

Heather Boushey is Senior Economist at the Center for American Progress. Jane Farrell is a Research Assistant on the Economic Policy team at the Center.

 

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