Wednesday, August 30, 2006

Economics, Once Again

The U.S. Census Bureau has come out with some new findings on the incomes of Americans:

The nation's median household income rose last year for the first time since 1999, the Census Bureau reported Tuesday.

Median household income climbed 1.1% to $46,326 in 2005. That means half of U.S. households earned more and half earned less. Per capita income rose 1.5% to $25,036, the Census Bureau said.

The income jump hid some somber news. Earnings actually fell for people working full-time. Household income rose because more people worked in the households, albeit at lower paying jobs. Median earnings of men declined 1.8% last year. For women, the decline was 1.3%.

A few comments on all this: The median incomes for households rose because more people were working, not because wages and salaries would have risen. Instead, they decreased, but the effect of this decrease was swamped by the effect of more workers. Note also that both men's and women's earnings declined, but men's earnings declined more. This will show up as a reduction in the gender gap in earnings, but the reason for the decrease is not an especially joyful one. Men still suffer more from outsourcing and the losses of better paying blue-collar occupations.

If you read the USAToday link to this story you will find a table of income and poverty figures by state. Note that the poorest states are the most wingnutty in their politics. This is one of those great paradoxes.

What about poverty in general, then? What has happened to the percentage of Americans regarded as poor? Here's a partial answer:

In the world's biggest economy, one in eight Americans and almost one in four blacks lived in poverty last year, the U.S. Census Bureau said on Tuesday, both ratios virtually unchanged from 2004.

The survey also showed 15.9 percent of the population, or 46.6 million, had no health insurance, up from 15.6 percent in 2004 and an increase for a fifth consecutive year, even as the economy grew at a 3.2 percent clip.

It was the first year since President George W. Bush took office in 2001 that the poverty rate did not increase. As in past years, the figures showed poverty especially concentrated among blacks and Hispanics.

In all, some 37 million Americans, or 12.6 percent, lived below the poverty line, defined as having an annual income around $10,000 for an individual or $20,000 for a family of four. The total showed a decrease of 90,000 from the 2004 figure, which Census Bureau officials said was "statistically insignificant."

The answer is partial, because these statistics don't include the value of certain government benefits (such as Food Stamps and Medicaid or Medicare payments) while calculating poverty rates, and also partial in the sense that economists always argue about how to measure poverty best. For example, if we used an absolute measure of poverty (something to do with getting the minimum nutrition one needs to survive, perhaps), almost all Americans would be counted among the fairly affluent. But the measure we normally employ is a relative measure of property, telling us how some people do in comparison to the rest of the society.

Looking at the incomes of working Americans is important but not the whole economic story here. What has happened to the different ways of making a living? Consider, for example, the division of our national income cake between people who are wage earners and those whose income comes from investments. Though many people get income from both work and investments, the very rich tend to derive most of their incomes from the latter and the very poor, if not on welfare, from the former. So this graph (via a diary on Kos) is interesting:

Click on the graph to see a larger version. What it is telling us is that the American cake is sliced into fairy unequal wedges these days, and that the slices iced with the word "profit" are bigger and more luscious.

And what does this mean in terms of the 2006 elections? Hard to tell, given the tendency for the U.S. to have the best democracy money can buy.