Poverty Remains Higher, Median Income for Non-Elderly Lower Than When Recession Hit Bottom

WASHINGTON - August 29 - Median household income rose modestly in 2005, while the poverty rate remained unchanged. For the first time on record, median income was lower in the fourth year of an economic recovery, and poverty was higher, than when the last recession hit bottom and the recovery began, according to the Center on Budget and Policy Priorities.

Median income remained $243 below its level in the recession year of 2001, while the poverty rate, at 12.6 percent, remained well above its 11.7 percent rate in 2001. In addition, both the number and the percentage of Americans who lack health insurance climbed again and remained much higher than in 2001. Four million more people were poor, and 5.4 million more were uninsured, than in 2001. The percentage of children who are uninsured rose in 2005 for the first time since 1998.

"Four years into an economic recovery, the country has yet to make progress in reducing poverty, raising the typical family's income, or stemming the rise in the ranks of the uninsured, compared to where we were in the last recession," Center Executive Director Robert Greenstein said.

The 1.1 percent increase in median income in 2005, which was well below the average gain for a recovery year, was driven by a rise in income among elderly households. Median income for non- elderly households (those headed by someone under 65) fell again in 2005, declining by $275, or 0.5 percent. Median income for non-elderly households was $2,000 (or 3.7 percent) lower in 2005 than in 2001.

In addition, the median earnings of both male and female full- time workers declined in 2005. Median earnings for men working full time throughout the year fell for the second straight year, dropping by $774, or 1.8 percent, after adjusting for inflation. The median earnings of full-time year-round female workers fell for the third straight year, declining by $427, or 1.3 percent.

The poor also became poorer. The amount by which the average person who is poor fell below the poverty line ($3,236) in 2005 was the highest on record, as was the share of the poor who fell below half of the poverty line.

Ranks of the Uninsured Rise Again

The number of uninsured people climbed by 1.3 million in 2005 to 46.6 million -- also setting a new record -- while the percentage without insurance rose from 15.6 percent to 15.9 percent. Both figures were far above the figures for the 2001 recession year, when 41.2 million people -- 14.6 percent of the population - were uninsured.

The number of children who are uninsured rose by 360,000 to 8.3 million, climbing from 10.8 percent of children in 2004 to 11.2 percent in 2005.

Results Disappointing for this Stage of an Economic Recovery

"It is unprecedented in recoveries of the last 40 years," Greenstein noted, "for poverty to be higher, and the typical household's income lower, four years into a recovery than when the previous recession hit bottom."

Greenstein observed that, "These disappointing figures on median income and poverty are the latest evidence that the economic growth of the past few years has had an unusually limited reach. Many middle- and low-income families are not sharing in the gains."

In related findings that underscore the unevenness of the current economic recovery, data recently issued by the Commerce Department show that a smaller share of the gains from the current economic recovery are going to workers' wages and salaries, and a larger share are going to corporate profits, than in any other recovery since World War II.

Little Cause for Optimism in 2006

Developments so far in 2006 do not offer much cause for optimism. Job growth has been slightly slower so far in 2006 than in 2005. In addition, in the first quarter of 2006, wages and salaries reached their lowest level on record as a share of the economy.