Disappointing News on Income, Poverty, Health Insurance, and the Earnings of College Graduates

Some disappointing news in today's income data from Census. The NY Times sets the table:

Downward Mobility, Editorial, NY Times: If you’re still harboring the notion that the economy is “good,” prepare to be disabused...

On to the news:

Young College Grads in Free Fall, by Michael Mandel, Economics Unbound: Today's income release from Census was filled with all sorts of interesting numbers. Real median household income rose for the first time since 1999. But it turns out that all of the gain came from foreign-born households--immigrants in other words. The income of native households remained "statistically unchanged." That will give both the pro-immigrant and anti-immigrant forces plenty to talk about.

More disturbingly, the numbers show that young college grads face a steadily worsening future of falling wages. The real earnings of workers aged 25-34 with a BA dropped by 3.3% in 2005. All told, the earnings of young college grads are down by almost 8% since 2002.

Isn't this a horrible looking graph?

The Center on Budget and Policy Priorities (CBPP) examines income and poverty statistics:

Poverty Remains Higher, and Median Income for Non-Elderly is Lower, Tthan When Recession Hit Bottom, CBPP: Summary Overall median household income rose modestly in 2005, while the poverty rate remained unchanged.  For the first time on record, poverty was higher in the fourth year of an economic recovery, and median income no better, than when the last recession hit bottom and the recovery began.

In addition, 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 ... 0.5 percent.  Median income for non-elderly households was $2,000 (or 3.7 percent) lower in 2005 than in 2001.

In a related development, 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 ... 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 ... 1.3 percent.

Furthermore, the poverty rate, at 12.6 percent, remained well above its 11.7 percent rate in 2001, while median household income was $243 lower than in 2001 (not a statistically significant difference).  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.

The Poor Become Poorer

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....

Results Disappointing for this Stage of an Economic Recovery “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...” Center executive director Robert Greenstein said. “It is unprecedented in recoveries of the last 40 years,” he noted, “for poverty to be higher, and the typical working-age household’s income lower, four years into a recovery...”

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.”...

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...

Table 2:  Change in Median Income During First Four Years of Economic Recoveries
Four Year Period:	Dollar Change by Fourth Year of Recovery (In 2005 Dollars)	Percentage Change
1970-1974	+$748	+ 2.0%
1975-1979	+$3,279	+ 8.7%
1982-1986	+$3,244	+ 8.3%
1991-1995	+$1,238	+ 2.9%
2001-2005	- $243	-0.5%

Next, figures on health insurance, also from the CBPP:

The Number of Uninsured Americans is at an All-Time High, CBPP: Data released today by the Census Bureau show that the number of uninsured Americans stood at a record 46.6 million in 2005, with 15.9 percent of Americans lacking health coverage. ... Census data show that 46.6 million Americans were uninsured in 2005, an increase of 1.3 million from the number of uninsured in 2004 (45.3 million).  The percentage who are uninsured rose from 15.6 percent in 2004 to 15.9 percent in 2005.  The number of children who are uninsured rose from 7.9 million in 2004 to 8.3 million in 2005.

“The increase of 360,000 in the number of uninsured children is particularly troublesome,” Greenstein said. “Since 1998, the percentage of uninsured children has been dropping steadily, from a high of 15.4 percent to 10.8 percent in 2004.  The new Census data show that the uninsured rate among children moved in the wrong direction in 2005, rising to 11.2 percent.”...

Key Findings from the New Census Data

• The percentage of Americans without insurance rose to 15.9 percent in 2005, higher than the 15.6 percent level in 2004 and much higher than the 14.9 percent level in 2001.
• The percentage of Americans who are uninsured rose largely because the percentage of people with employer-sponsored coverage continued to decline, as it has in the past several years.
• The percentage of children under 18 who are uninsured rose from 10.8 percent in 2004 to 11.2 percent in 2005, ... an increase of 360,000.
• Lack of insurance is much more common among people with low incomes.  Some 24.4 percent of people with incomes below $25,000 were uninsured in 2005, almost triple the rate of 8.5 percent among people with incomes over $75,000.
• African-Americans (19.6 percent uninsured) and Hispanics (32.7 percent) were much more likely to be uninsured than white, non-Hispanic people (11.3 percent).
• The percentage of native-born citizens who were uninsured rose in 2005, while the percentage of non-citizen immigrants who lacked coverage was unchanged.  Nonetheless, non-citizen immigrants were far more likely to be uninsured (43.6 percent uninsured) than native-born citizens (13.4 percent).  The principal reason so many immigrants lack insurance is that they are less likely to be offered health insurance by their employers.

...

ThinkProgress also discusses these figures briefly here and here.

Comments

[Lord]

Doesn't get much better than this. Now why doesn't everyone realize how good the economy is? LOL

[camille roy]

"the numbers show that young college grads face a steadily worsening future of falling wages. The real earnings of workers aged 25-34 with a BA dropped by 3.3% in 2005. All told, the earnings of young college grads are down by almost 8% since 2002."

This reflects what those of us who are the equivalent of troops on the ground know about the impact of white collar outsourcing.

Of course recent college grads are taking it on the chin. That's not an accident, it's by design. Corporations keep their senior people here and offshore the entry level stuff. This has had an effect.

This is probably a leading indicator of the withering of labs, factories and investment due to offshore outsourcing. I suspect it will get much worse.

[Movie Guy]

1 out of every 8 individuals in the USA is in poverty.

1 out of every 4 African-American individuals in the USA is in poverty.

1 out of every 6 children in the USA is in poverty.

[NinjaPlease]

Can we put the "education will save your future, don't fear the globally sourcing wage reaper" argument for good?

[save the rustbelt]

Repeat after me:

Trade will make us more prosperous.

Trade will make us more prosperous.

Trade will make us more prosperous.

Trade will......................

[Soma]

Since when is a college grad with a BA as old as 25-34? Aren't most kids about 20-22 when they get their BA and enter the job market? I'm 29 and barely remember college compared to my work experience. In fact, simple math shows I've worked longer now than I spent in school. Career-wise I'm no longer linked to my education but rather my job experience. At this point, my degree is relegated to virtual subtext on my resume. To call me a young college grad would be extremely misleading. So what this really seems to show is that the incomes of experienced, established but youthful workforce is taking a dive. What's happening to grads then? I don't know. They should go back, do it right and then tell us.

[save the rustbelt]

Soma:

Some day you will realize that you are still a young college grad.

Oh, to be 29 again.

Grandpa

[me]

what CR and ninja said.

[Richard]

STR is right. There is a lot of job-jumping and potentially post-secondary training that happens through one's mid-thirties. Keeping a ten-year lag after a degree is probably about right.

[spencer]

The report switches back and forth between earnings and income data. I assume income is the same as in the personal income data that includes fringe benefits.

So does this mean that earnings is just wages?

Does anyone know the exact difference between these two terms?

[NinjaPlease]

Earnings = any income.

Wages = what you're paid for a job.

Earnings example: You sell a house and collect the profits.

Earnings example 2: You're born rich and live off of dividend checks from the millions of dollars you own in stock. Those dividends are taxed at the maximum rate of 15%. Life is good for you.

Wages example: You work 60 hour weeks but are only paid for 40 hours per week with a bimonthly paycheck.

Wages example 2: you work 2 jobs that pay you a check (a petty staycheck) once every 2 weeks, to support your family because you're still waiting for globalization to bring about those new high paying jobs.

[save the rustbelt]

Ninja:

well done

Does this mean Bush-o-nomics isn't working?

[Soma]

Grandpa,

I figured someone would make an ageist comment. "One day I'll realize..."? Maybe one day you'll realize that you shouldn't patronize people. Besides, you missed my point. The point was clearly that measuring the incomes of recent grads to me means "what are first time job hunters with degrees getting paid?" This is very different from measuring the incomes of 24-35 year olds who have established some job experience. Yes, relatively speaking we are likely more recent grads than someone who goes by the handle "grandpa". But I think the label in this article is misleading and that the study of 20-23 year olds would be a different matter from 24-35 year olds. I say this not because I've got a chip on my shoulder about not wanting to be called a college grad. I say it because I think there is a substantive difference worth noting. After 2-3 years in the marketplace, your worth in the job market and the trends your pay may take is very different from the first 3 years.

[nodakdude]

I suspect that a bigger fraction of 25-34 year old BAs were in grad school in 03-05 than in 00-02. Grad school apps tend to rise when the economy is weaker, and it was certainly weaker in the early 00s than in the late 90s.

I'd have to see more detail before attributing any portion of the earnings decline to any particular factor.

[Emmanuel]

What, do you mean tax breaks for the wealthy don't solve every socioeconomic problem known to man? Mebbe I should watch less Fox News. I'm gonna miss those "Fox News Babes" though. Where's the !@#$&*^ remote? I'm going to CNBC for some REAL news ;-)

[Boomer]

Soma
I don't think Grandpa was patronizing you, I just think he was pining for the good ol' days of his youth.
I would give anything (almost)to be 29 again.

[save the rustbelt]

Soma:

Over the past twenty years I have taught and mentored some 3000+ young people, and most of them think I'm an ok guy. Sorry, but you are young, so enjoy it.

I was not being patronizing at all.

Now I will get serious; get a sense of humor and a sense of perspective. Someday you will look back and the world will look much different and and most likely you will be wiser. If, of course, you are open to the wisdom of your elders.

And some days I do really wish I was 29 again.

[anne]

"After 2-3 years in the marketplace, your worth in the job market and the trends your pay may take is very different from the first 3 years."

Curiously, I remember, sort of, coming on a study that showed that where you start in the market largely determines where you will end in terms of pay. I need to ask about, but I have the sense that initial pay levels largely are predictive even determine much later pay levels....

[dryfly]

anne you are right in a sense... if I recall correctly it is confounded data... ie Ivy Leaguers & like get better initial salaries ON AVERAGE than say kid from midstate mega-u and those same Ivies end up making more later in life as well ON AVERAGE... start high end higher.

So is it the salary that's predicitive or the institution? I'd argue the 'institution' but because the data is confounded you can't easily tease them apart.

Having said that - I do realize there are many exceptions. However the 'generalization' does seem to apply to the aggregate FWIK.

[dryfly]

One thing Mark's entry reminds me of is the debate we had a few months ago regarding the value of more education...

Remember how all the business leaders & pols were screaming in the press...

"More education, more education, the workforce needs more eduction... THAT will solve the problem of globalization, wage stagnation and hives."

Well now what?

[Mark Thoma]

Here's the study I think anne is referring to:Roach College, U.S.A.What Ph.D. students really have to fear. By Joel Waldfogel: Graduate students tend to be paranoid about aspects of their careers that are largely under their control: Will I ever finish my studies? Will I sufficiently impress my adviser? But if new research for academic economists holds up, students should also be freaked out by a factor they can do nothing about: the strength of the job market at the precise time they enter it...

[dryfly]

Here's the study I think anne is referring to

Mark - it is also 'general wisdom' among BS level grads that where you start has a big factor on where you will end. When I graduated in Chem E they strongly suggested we take the job with the highest starting salary - then change later if you don't like the job. But starting higher definitely helps later offers (rarely do people back-slide).

Merit on-the-job has an effect but there is a pedigree effect also. If you doubt it just ask the grads from midstate mega-u. Of course this is all 'conventional wisdom' which is sometimes conventional if not wisdom... ie got no proof.

[save the rustbelt]

dryfly et al:

I seem to remember that those who entered the job market during a downturn (most of the 70s, 81-84, 91-92, etc.) had a really tough time catching up, versus those college grads who entered at a hot spot in the labor market.

Somewhere in 30 boxes of files there is probably a study to that effect. Time to clean house.

I think the Ivies is more of a networking and reputational effect, their grads are destined to run the world, aren't they?

[Blissex]

«Repeat after me:
Trade will make us more prosperous.»

Well, that is true: some of us now, and some others in the future. As usual, depends on how protected your job is, and for a plurality or a majority of people things work well.

Also, 'save_the_rustbelt', I just read a harrowing and interesting article about three provinces in Manchuria which are the chinese rustbelt:

http://www7.nationalgeographic.com/ngm/0609/feature1/

The area has 107 million inhabitants...

One of the more amusing features is that it is so poor that Indian companies are offshoring call centres from India to Manchuria....