U.S. Incomes Fell, Poverty Rose in 2002
By Jonathan Weisman
Washington Post Staff Writer
Saturday, September 27, 2003; Page A01
U.S. household incomes declined for the third year in a row, and nearly 1.7 million people in the country fell into poverty as the economy recovered sluggishly from the 2001 recession, the U.S. Census Bureau reported yesterday.
The poverty rate rose, for the second straight year, to 12.1 percent in 2002, from 11.7 percent the year before. Even so, the poverty rate last year remained below the average for the previous two decades.
The poverty increases were concentrated among African Americans, suburban residents and Midwesterners. By the end of last year, 34.6 million Americans lived in poverty. Among those, 12.1 million are children, up from 11.7 million in 2001.
Median household cash income, the level at which half of Americans earn more money and half earn less, fell 1.1 percent, to $42,409 in 2002, from $42,900 the year before. Annual median household cash income, which excludes non-cash payments such as food stamps or housing subsidies, peaked in 1999 at $43,915, and has dropped since then by 3.4 percent.
"The reach of the jobless recovery really jumps out at you in these numbers," said Jared Bernstein, a senior economist at the Economic Policy Institute. "We're looking at another protracted weak recovery where the disconnect between economic growth and household income lasts for years."
Daniel Weinberg, chief of the bureau's Housing and Household Economic Statistics Division, said the decline in income and rise in poverty mirror statistics from virtually all previous recessions. He suggested the numbers might have been worse had it not been for President Bush's $1.35 trillion tax cut passed in 2001 and a rise in the value of food stamps and housing subsidies.
The figures come as Bush's approval ratings are at the lowest levels of his term and Democratic presidential candidates have focused their criticism on his stewardship of the economy. Even the timing of the data's release raised questions. Census Bureau officials acknowledged yesterday that the annual income and poverty reports have never before been released on a Friday, the day when bad news is often released in Washington in hopes its impact will dissipate over the weekend. Democrats alleged that the change was politically motivated, an assertion that Census Bureau spokesman Larry Neal denied.
Poverty levels rose in many of the states that will be closely contested in next year's presidential election: Arkansas, Florida, Illinois and Michigan. Median household income fell in Michigan, Illinois, Ohio, Missouri and Florida.
The other states with statistically significant increases in their poverty rates were Hawaii, Maine, Mississippi, South Carolina and Utah.
Averaged over two years, which is how the bureau releases the information by state, poverty rates in 2001 and 2002 jumped 0.9 percent in the District of Columbia over the 2000-2001 average. Virginia had a 0.8 percent increase, and Maryland had no change. Using the same two-year averages, household cash income fell 4.7 percent in the District and 0.5 percent in Maryland. Median income rose 0.4 percent in Virginia.
Bush administration officials noted that the economic recovery has picked up significantly in recent months, a trend they say will soon create jobs and eventually reduce poverty. The Commerce Department yesterday raised its estimate of second-quarter economic growth to a 3.3 percent annual rate.
"The economy is moving," White House spokesman Scott McClellan said yesterday, "but the president is not satisfied as long as people who are looking for work cannot find a job."
Other Republicans noted the slide in household income began in 2000, before Bush took office, and that the situation could be worse.
The broadest measure of household income, which includes tax refunds, food stamps, or other non-cash income, held steady last year, noted Rep. Jim Saxton (R-N.J.), vice chairman of Congress's Joint Economic Committee.
"Despite the effects of the economic slowdown and recession, terrorist attacks, and wars, the comprehensive measure of household income has not plunged," he said.
But Democrats were quick to use the data in their continuous assault on Bush's economic record.
"While our economy continues to slide backward, the president says he sees only progress," said Senate Minority Leader Thomas A. Daschle (D-S.D.). "Someone needs to tell him he's looking in the rearview mirror."
The government's poverty line varies by age and family size, and changes over time with the cost of living. In 2002, an individual under 65 earning up to $9,359 per year was living in poverty. For a family of four, the poverty line was drawn at $18,244 annually.
At the height of the recent economic boom, the poverty rate dipped to 11.3 percent in 2000, its lowest since 1974. The 12.1 percent rate in 2002 was still lower than the 12.7 percent rate in 1998.
Excluding 1999 through 2001, last year's poverty level was lower than every year since 1979. The poverty rate has been lower than the 2002 level in only 10 years since the government began tracking the figure in 1959.
The recent recession ended in November 2001, but the economy grew only weakly until this past spring. Most economists forecast stronger growth in the last half of this year. Sung Won Sohn, chief economist at Wells Fargo Bank, said yesterday the economy is now "firing on all cylinders" as he forecast growth at between a 5 and 6 percent annual rate for the last six months of the year.
But stronger growth has yet to be reflected in employment, which has continued to decline in recent months. And employment is the key factor in poverty rates, economists say.
"The lousy job market is all over these statistics," said Bernstein of the Economic Policy Institute.
The poverty changes in 2002 were noticeably concentrated. Poverty rates were virtually unchanged for self-identified whites, Latinos and Asians, but the portion of African Americans in poverty rose to 24.1 percent from 22.7 percent.
Regionally, poverty rates in the Northeast, South and West did not change last year, but they inched up in the Midwest, to 10.3 percent, from 9.4 percent.
Likewise, the poverty level did not change for inner-city and rural households, but the poverty rate among suburban residents rose to 8.9 percent from 8.2 percent. In all, 1.2 million more suburbanites were living in poverty then in 2001, a total of 13.3 million.
Some economists say much of that increase likely stems from poverty-reduction programs that move poor families to suburbs in hopes that a new environment closer to job-growth centers will lift them to prosperity.
Marc H. Morial, the former mayor of New Orleans, now president of the National Urban League, pointed to the long slide of manufacturing as the main culprit in rising poverty.
The sector has lost 2.7 million jobs since its employment peaked at the end of 2000, he said, "and many African Americans in the Midwest, in the industrial heartland, were employed in manufacturing, in autos, steel, glass, and rubber."
The Census reports also showed that the income gap between rich and poor declined. Median household cash income for the bottom 20 percent of Americans dropped 3 percent in 2002 from 2001, while it slid 5.1 percent for households in the top 5 percent.
Meanwhile, the earnings gap between men and women was its narrowest ever. Women earned 77 cents to a man's dollar in 2002, up a penny from the year before and a nickel from 1999.