Most in U.S. Got Richer, Poor Got Poorer in 1996

Incomes rose slightly for the typical American household last year, but the poorest segment of the population fell further behind, the Census Bureau reported Monday.

The bureau’s annual reports on income and poverty paint a picture of a nation that continues to gain ground after the recession of the early 1990s but has still not recovered all of the losses suffered during that downturn.

Though the median household income increased for the second consecutive year, up to $35,492, it remains slightly lower than it was in 1989 at the peak of the last economic cycle, just before the recession.

In California, one of the last states to recover from the recession, the figures portray a state economy that is slowly but steadily healing. Median income in the state rose slightly in 1996 for the third consecutive year, keeping pace with the rest of the nation. And poverty in the Los Angeles metropolitan area declined half a percentage point, to 18.7%.

Nationally, the poverty rate declined slightly for the third straight year, to 13.7%. That’s still higher than the figure in 1989, even though the ensuing economic boom has been the nation’s most robust in 30 years. And the poverty rate for California, 16.8%, remained significantly higher than the national rate, even though it declined half a percentage point.

Using a poverty threshold of $16,036 for a family of four, the census found that 36.5 million Americans are poor.

Children remained more prone to poverty, and the number of children younger than 18 without health insurance jumped from 9.8 million in 1995 to 10.6 million in 1996, nearly 15% of all children, according to the report.

“It’s been good news for three years. We must acknowledge this is good, decent progress,” said Lawrence Mishel, research director at the Economic Policy Institute, a Washington think tank. “But we are still not out of the hole.”

Overall, the study shows that incomes in California have increased 5% since bottoming out in 1993. But the state’s median income of $38,812 remains almost 7% lower than the pre-recession high of almost $42,000 in 1989.

The gains over the last three years, experts said, show that California’s so-called new economy of high-technology, computer software, entertainment and biotechnology is helping the state snap back.

“California was really hammered. We lost over 700,000 jobs to the recession,” said Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County. “Some people still are not certain we have completely recovered, but California is cranking. We are a million jobs ahead of the previous employment peak in 1990. Once we got rolling, the state took off like a 737.”

Nationally, the 1996 median income of $35,492 represented a 1.2% increase, in inflation-adjusted dollars, from 1995. But it was still lower than the 1989 pre-recession high of $36,575. The median income is the amount earned by the typical family at the center of the income scale: Half the families earn more and half earn less.

Incomes for some groups have fully recovered from the declines of the early 1990s, the census found. Married couples are earning 2.2% more than before the recession, whereas households run by African Americans, single mothers and people 55 to 65 had all caught up with their pre-recession earnings.

At a morning press conference, President Clinton celebrated the Census Bureau’s report, calling it “more evidence that our economic strategy is succeeding.” He pointed specifically to the data showing that a “typical family” income has risen $2,200 since 1993.

“That’s an extra $2,200 that hard-working families can put toward their children’s educations, a down payment on a home or even a much-needed vacation,” Clinton said. “After years and years of stagnant family incomes, today’s report proves that America’s middle class, no longer forgotten, is rising fast.”

Still, the modest 1.2% increase in the median income continued a quarter-century trend of relatively slow gains for the average American family. In the 26 years from 1947 to 1973, the heyday of America’s post-war economic dominance, median income doubled, even after adjusting for inflation. In the 24 years since 1973, it has increased just 1.6%.

Some critics believe that the government overestimates the rate of inflation, which would mean that families are actually gaining ground faster than those figures suggest. But the size of the inflation overestimate--if any--remains controversial, and no one questions that incomes are growing more slowly today than in the 1950s and 1960s.

Many analysts see the minimal decline in the poverty rate--from 13.8% in 1995 to 13.7% in 1996--as the most disappointing number in the snapshot. Last year, the poverty rate registered the largest one-year decline since 1984.

“It’s disappointing that the poverty rate hasn’t fallen, but it isn’t surprising,” Mishel said. “The wage earners at the bottom don’t do well, and we are cutting back on support for low-income people.”

Indeed, the census figures show that families whose earnings ranked them in the bottom fifth of the income distribution saw their incomes drop nearly 2%. By contrast, families in the top 20% experienced gains of more than 2%. According to an analysis by the Center on Budget and Policy Priorities, the top fifth is now the only group whose average income exceeds the pre-recession 1989 level.

Despite the stability in the total poverty rate, the distribution of deprivation continued to evolve, the census found. Over the last few years, the poverty rate among African Americans has dropped much faster than among whites or Hispanics. As in 1995, a slightly higher percentage of Latinos than blacks now lives in poverty.

At 11.2%, the poverty rate among whites remained unchanged since 1995 and virtually unchanged since 1991. Asian-American poverty also remained essentially unchanged, at 14.5%. But the poverty rate among blacks dropped to 28.4% in 1996--down about one percentage point since 1995 and more than four points since 1991. Poverty among Latinos also dropped about one percentage point in 1996, to 29.4%, but remained slightly higher than in 1991.

Gregory Rodriguez, a research fellow at the Pepperdine Institute for Public Policy, said Latino poverty rates are inflated by the steady flow of low-earning new immigrants, obscuring the gains achieved by longer-term residents.

As always, family structure exerts a huge influence on poverty. Among all races, just 5.6% of married couples live in poverty, the bureau found. But nearly 1 in 7 families headed by single men live in poverty, while nearly one-third of female-headed families are poor.

One reason the poverty rate has remained stubbornly high is that more families are headed by single parents. In 1981, single-parent households constituted about 18% of all families; today, they are nearly 1 in 4.

The differences are even more dramatic when looking at families with children. Overall, about 1 in 6 families with children younger than 18 live in poverty. But only 7.5% of married families with young children are poor, compared to nearly 42% of female-headed households.

These differences extend across racial lines. Among African Americans, female-headed households with young children are nearly five times as likely as married couples to live in poverty. Among Latinos, the ratio is almost three to one.

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The Income Trail

Median household income has increased modestly nationwide since the late ‘60s.

Household Income (adjusted for inflation)

California: $38,812 in 1996

The nation: $35,492 in 1996

Note: California figures prior to 1984 are unavailable.

Source: U.S. Census Bureau