Median Household Income Rises 1.1%
Gap Between the Richest
And the Poorest Widens;
Middle Class Feels Squeezed
By ROBERT GUY MATTHEWS
August 30, 2006; Page A2
WASHINGTON -- The median income of American households rose by an inflation-adjusted 1.1% last year after falling five years in a row, the Census Bureau said in its annual report on the well-being of Americans.
But the gap between the richest and poorest Americans widened last year, continuing a trend that dates to the early 1970s with a pause in the late 1990s. The top fifth of American households claimed 50.4% of all income last year, the largest slice since the Census Bureau started tracking the data in 1967.
The new data, from telephone and in-person interviews with 114,384 households, come amid polling data that suggest concern about the economy among many middle-income Americans -- an anxiety that Democrats hope to exploit in November's congressional elections.
"There is nothing to celebrate here," said Ron Haskins, a former Bush administration official now at the Brookings Institution. "A lot of the money goes to the top, and Republicans are forever playing defense on this. The people in the middle are feeling squeezed. If Democrats aren't getting the best of the argument, they should be."
Liberal-leaning analysts yesterday emphasized that despite a robust economy, the rich are getting richer while the poor are treading water. Conservative-leaning analysts emphasized that the median household income is up and the poverty rate is flat.
The Census Bureau said the number of Americans without health insurance rose by 1.4 million last year to 46.6 million, or 15.9% of the population. The poverty rate barely budged, falling to 12.6% from 12.7%, a change the bureau said isn't statistically significant but is an early signal that the poverty rate is starting to level off after four years of increases. About 37 million Americans were living below the official poverty line in 2005. (See related article.)
The income of the median household -- the one at the point at which half of the households have more and half have less income -- was $46,326 in 2005, up from $45,817 the year before. Although the overall economy has grown 11.7% since the recessionary year of 2001, the income of the median household is down 0.5% in that period.
Moreover, earnings for full-time workers employed year-round dropped last year. The median man's earnings declined 1.8% to $41,386 and the median woman's earnings declined 1.3% to $31,855. The measure doesn't include employer-provided health and similar noncash benefits.
Daniel Seybert of Newton Falls in northeastern Ohio counts himself among those not seeing the robust national economy in his household finances. "We have been regressing, with higher gas prices and I am paying a lot more in county and state property taxes," said the 47-year-old Mr. Seybert, who earns about $43,000 a year after 28 years in a tire factory. "When I built my home in 1999, I paid $1,200 in property taxes. Now they are $2,400. That's just money out of pocket."
The interest on the home-equity loan on his two-story, three-bedroom colonial has risen 14 times. He has to work side jobs as a handyman to have "spending money." And because he can't afford a new car, he is driving a 1998 Pontiac Firebird with 135,000 miles. His wife, a bookkeeper for a trucking company, is about to lose her $22,000-a-year job because the company plans to leave the area.
While the median household income rose 1.1%, the average income of households in the bottom 20% rose just 0.6%. Within the top 20%, the gains were concentrated among the richest 5%. The Census Bureau's income calculations include wages, interest, dividends and government cash benefits but exclude capital gains and noncash employee and government benefits. They also exclude the effect of taxes, which tend to narrow the gap between the rich and the poor, although less so as a result of the Bush administration's tax cuts, according to some evidence.
The Census Bureau didn't try to pinpoint the source of the widening income gap. But other data suggest that the richest households have benefited from growing performance-related pay, such as bonuses and stock options, and rising executive compensation generally. In addition, the economy lately has favored workers with more education and training while unskilled workers must increasingly compete with low-wage workers in poorer countries and immigrants.
Bruce D. Meyer, a professor at the University of Chicago's Harris School of Public Policy Studies, said that the numbers are flawed. "Our official statistics are too gloomy," he said. "The middle has been doing better than the numbers suggest." Because the numbers don't reflect other income such as food stamps, housing assistance, Medicaid, mortgage deduction and other kinds of wealth transfers, they make Americans look worse off than they really are, he argued.
But Greg Hinds, a 35-year-old maintenance mechanic for a paper company in Menasha, Wis., said he isn't optimistic about prospering in coming years, because of increased health-care costs and no expected large increases in his salary. He and his wife earn about $70,000 annually and have two children, putting the family in the upper-middle-class range for the area. "I am personally holding my line at home with finances, but it is getting tough," he said.
"Our health-care costs compared to five years ago have doubled," he said. His share of health-insurance premiums rises next week to $52 a week from $19. He said he pays roughly $3,000 a year in deductibles and co-payments and expects that to rise.
The Census Bureau said much of the gains among middle-income households nationally came among foreign-born households. The median income of households headed by natives rose 0.2% to $46,897; among those foreign-born, the median income was up 3.3% to $42,040 with the strongest gains among naturalized citizens.
Median income grew strongest in the Northeast, up 2.9% to $50,882 last year, but dropped 0.4% in the Midwest, to $45,950, where the decline in manufacturing jobs continues to reduce earnings. |
