The Real Story Behind Two Important Income & Poverty Headlines

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Within one day of each other, two important articles were released by the mainstream media on incomes, income inequality, poverty and access to healthcare.  Let’s dig into both of them, shall we?

Two days ago, the New York Times ran a story titled U.S. Poverty Hit a Record Low Before the Pandemic Recession.  It details how, according to Census data, at the end of 2019 poverty rates had declined to 10.5%, down 1.3% from the previous year, which constituted an all-time low since this data was being tracked and estimated in 1959.  According to the data, household incomes were also markedly higher:

Household incomes increased to their highest level on record dating to 1967, at $68,700 in inflation-adjusted terms. That change came as individual workers saw their earnings climb and as the total number of people working increased.

Methodology changes made after 2013 make comparing data across time tricky. But even adjusting for those differences, the 2019 income figures appeared to be the highest on record, based on Census Bureau estimates.

However, there are still some important caveats to this data, according to the article:

The data may also have been somewhat skewed by the pandemic. Interviews for this year’s income and poverty report were disrupted by the virus, the Census Bureau said. Some economists warned that the disruptions could have made the data look too rosy: The people who responded to surveys were more likely to have high education and income levels. Analysts at the Census Bureau estimated that poverty would have been slightly higher, at 11.1 percent, without the resulting data quirks.

“It doesn’t change the overall picture — we had a tight labor market that was pulling people in and reducing poverty,” said Heidi Shierholz, director of policy at the Economic Policy Institute. But it underscores that “there was still a lot of room for improvement.”

Census data also revealed that despite the record long economic expansion that roughly 26mm Americans were still without healthcare coverage at the end of 2019, or roughly 8% of the population, which is a slight decrease from the 27.5mm tallied the previous year.

To keep this data in some perspective, let’s take a look at an article that was also released earlier this week.  In a Time Magazine article, Nick Hanauer and David Rolf detail the results of an important Rand Corporation study by Carter Price and Kathryn Edwards on trends in income distribution from 1975 – 2018.  What the study found is eyeopening, to say the least.  Here’s a key excerpt from the article:

Had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. That is an amount equal to nearly 12 percent of GDP—enough to more than double median income—enough to pay every single working American in the bottom nine deciles an additional $1,144 a month. Every month. Every single year.

Price and Edwards calculate that the cumulative tab for our four-decade-long experiment in radical inequality had grown to over $47 trillion from 1975 through 2018. At a recent pace of about $2.5 trillion a year, that number we estimate crossed the $50 trillion mark by early 2020.

Let that sink in for a moment.  An additional $1,144 a month for every working American, gains that went instead to the top 1%.  The implications of this are enormous and wide ranging, and includes overall economic growth, taxes, basic well-being of Americans, political power/priorities/stability, and even national security in the U.S.  As costs of everything from child care and healthcare to education and housing have skyrocketed during that time, think about how much better of Americans (and the country as a whole) would be if this had occurred.

There’s more eye popping data from the article and study:

What if American prosperity had continued to be broadly shared—how much more would a typical worker be earning today? Once the data are compiled, answering these questions is fairly straightforward. Price and Edwards look at real taxable income from 1975 to 2018. They then compare actual income distributions in 2018 to a counterfactual that assumes incomes had continued to keep pace with growth in per capita Gross Domestic Product (GDP)—a 118% increase over the 1975 income numbers. Whether measuring inflation using the more conservative Personal Consumption Expenditures Price Index (PCE) or the more commonly cited Consumer Price Index for all Urban Consumers (CPI-U-RS), the results are striking.

Data Source: RAND; Graphics: Mary Traverse for Civic Ventures
At every income level up to the 90th percentile, wage earners are now being paid a fraction of what they would have had inequality held constant. For example, at the median individual income of $36,000, workers are being shortchanged by $21,000 a year—$28,000 when using the CPI—an amount equivalent to an additional $10.10 to $13.50 an hour. But according to Price and Edwards, this actually understates the impact of rising inequality on low- and middle-income workers, because much of the gains at the bottom of the distribution were largely “driven by an increase in hours not an increase in wages.”
If you haven’t, go read that entire eye popping article today.  To sum things up, for all the positive mentions of the Census data on recent income gains and alleviation of poverty, just keep this study at the forefront of your mind.  American workers all the way up to the 90th percentile have been getting vastly underpaid for 4.5 half decades now.  The fact remains that roughly half the country’s workers make below living wage and do not have $400 saved for an emergency.
Why did this happen?  What have been the effects on them, the poor, and country as a whole?  We have our own theories and will be presenting them in the film, along with the very personal stories of real people who’ve been effected.  Stay tuned.

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David Himmelstein

CUNY

Dr. David Himmelstein is a distinguished professor of public health and health policy in the CUNY School of Public Health at Hunter College, adjunct clinical professor at Albert Einstein College of Medicine, and lecturer in medicine at Harvard Medical School. He has served as chief of the division of social and community medicine at Cambridge Hospital.

Nick Hanauer

Pitchfork Economics

Nick Hanauer is one of the most successful entrepreneurs, investors, and managers in the Pacific Northwest with over 30 years of experience across a broad range of industries including manufacturing, retail, e-commerce, digital media and advertising, software, aerospace, health care, and finance. He is a co-founder and partner of Second Avenue Partners, a Seattle-based venture capital firm that provides management, strategy, and capital for early stage companies. 

Barry Ritholtz

Ritholtz Wealth MGMT

Barry Ritholtz has spent his career helping people spot their own investment errors and to learn how to better manage their own financial behaviors. He is the creator of The Big Picture, often ranked as the number one financial blog to follow by The Wall Street Journal, New York Times, and others.

Barry is the creator and host of Bloomberg’s “Masters in Business” radio podcast, and a featured columnist at the Washington Post. He is the author of the Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy (Wiley, 2009). In addition to serving as Chairman and Chief Investment Officer of Ritholtz Wealth Management, he is also on the advisory boards of Riskalyze, and Peer Street, two leading financial technology startups bringing transparency and analytics to the investment business.

Barry has named one of the “15 Most Important Economic Journalists” in the United States, and has been called one of The 25 Most Dangerous People in Financial Media. When not working, he can be found with his wife and their two dogs on the north shore of Long Island.

Richard Florida

City Lab

Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate and visiting fellow at Florida International University.

Janet Gornick

CUNY-Stone Center

Janet Gornick attended Harvard University, where she was awarded a B.A. (psychology and social relations, 1980), an M.P.A. (Kennedy School, 1987), and a Ph.D. (political economy and government, 1994). She is currently a professor of political science and sociology at The Graduate Center, CUNY. From September 2006 to August 2016, she served as director of LIS (formerly the Luxembourg Income Study), a cross‐national data archive and research center located in Luxembourg, with a satellite office at The Graduate Center. Since September 2016, she has served as director of the James M. and Cathleen D. Stone Center on Socio‐Economic Inequality. The Stone Center includes the LIS satellite office, known as the US Office of LIS.

Ken Jacobs

UC Berkeley Labor Center

Ken Jacobs is the chair of the Labor Center, where he has been a labor specialist since 2002. His areas of specialization include low-wage work, labor standards policies, and health care coverage. He has recently worked on economic impact studies of proposed minimum wage laws for the cities of Seattle, Los Angeles, and San Jose, and conducted analyses of the public cost of low-wage work. Jacobs is the co-editor, with Michael Reich and Miranda Dietz, of When Mandates Work: Raising Labor Standards at the Local Level (University of California Press), an edited volume on the impacts of labor standards policies in San Francisco.

Steven Pitts

UC Berkeley Labor Center

Steven Pitts came to the Labor Center in August of 2001 from Houston, Texas. Steven received his Ph.D. in economics with an emphasis on urban economics from the University of Houston in 1994. His master’s degree is also from the University of Houston and he holds a bachelor’s degree from Harvard University. For the fifteen years prior to his arrival at the Labor Center, Steven taught economics at Houston Community College and, for five years, he was an adjunct lecturer in the African American Studies Program at the University of Houston. At the Labor Center, Steven focuses on issues of job quality and Black workers. In this arena, he has published reports on employment issues in the Black community, initiated a Black union leadership school, and shaped projects designed to build solidarity between Black and Latino immigrant workers. Currently, a major area of his work involves providing technical assistance to efforts in developing Black worker centers around the country.

April Sims

WSLC AFL-CIO

April Sims was elected Secretary Treasurer of the Washington State Labor Council, AFL-CIO by its affiliated unions in December 2018 and she began her four-year term on Jan. 5, 2019. She is the first woman of color to be elected as a WSLC executive officer.

April has served as the WSLC’s Political and Strategic Campaign Director since November 2017, working to develop shared agendas with labor and community partners, to advance strategic organizing campaigns (raising wages, naturalization, revenue reform, etc.), and to recruit, train and elect political champions for working people. She first joined the WSLC in September 2015 as Field Mobilization Director, working with WSLC-affiliated unions and community partners to support and encourage the participation of individual members with many different political, legislative and community programs.

Prior to joining the WSLC staff, Sims served as the Legislative and Political Action Field Coordinator for the Washington Federation of State Employees, AFSCME Council 28 (WFSE), where she was responsible for member education, communication, and mobilization around legislative issues and political campaigns. She was a WFSE member, shop steward, elected union officer, and union staffer from 2002-15.

Kathryn Edin

Princeton University

Edin is one of the nation’s leading poverty researchers. A qualitative and mixed-method researcher, she has taken on key mysteries about the urban poor that have not been fully answered by quantitative work: How do single mothers possibly survive on welfare? Why don’t more go to work? Why do they end up as single mothers in the first place? Where are the fathers and why do they disengage from their children’s lives? How have the lives of the single mothers changed as a result of welfare reform? The hallmark of her research is her direct, in-depth observations of the lives of low-income women, men, and children.

Gary Evans

Cornell University

Professor Evans is an environmental and developmental psychologist interested in how the physical environment affects human health and well being among children. His specific areas of expertise include the environment of childhood poverty, children’s environments (housing, schools, playgrounds, toys), cumulative risk and child development, environmental stressors, and the development of children’s environmental attitudes and behaviors.

Olga Miranda

SEIU 87

Olga is President of SEIU Local 87 in San Francisco. The SEIU was founded in 1921 in Chicago as the Building Services Employees Union (BSEU); its first members were janitors, elevator operators, and window washers.
Today SEIU is the fastest-growing union in North America, uniting workers in the United States, Canada and Puerto Rico. Over 25 percent of our members whom identify as immigrants – a constant tribute to the union’s roots. From the start, SEIU has embraced its heritage as a union of immigrants and has stood on the frontline of immigrant justice.

“People open their lives and homes to us, for me it becomes not only a privilege but a responsibility to make sure their stories are told. We have to be brutally honest and empathetic when telling their stories. When it comes to filming families, the right thing to do is be their advocate and make sure people don’t look away. “
Jillian Hurley
Producer

Stephanie Porta

Organize Florida

As a community organizer, Stephanie Porta has spent the last 15 years working to support Florida’s low income communities in their fight for equity and dignity. Her work has led to raising Florida’s minimum wage in 2004, passing police accountability reforms, winning foreclosure prevention programs, affordable utility campaigns, electing progressive officials and much more.

In 2010, Stephanie co-founded Organize Florida to work on the needs of Florida’s low and moderate income communities and now acts as Executive Director. The membership organization has grown quickly and has membership in 17 counties across mid-Florida. In 2014, Stephanie championed efforts to pass Earned Sick Time in Orange County, and in 2016 supported outreach efforts to more than two million voters across Florida. Stephanie has been recognized by the Orlando Sentinel, Orlando Weekly, Orlando Magazine & Orlando Women’s Magazine for leadership on government transparency and issues facing the working poor.

Beth Babcock

Empathways

Elisabeth Babcock (Beth) is the President and CEO of Economic Mobility Pathways (EMPath), an international charitable organization dedicated to creating new pathways to economic independence for low-income families. EMPath uses its unique “action-tank” business model to design, build, and test new approaches for creating economic mobility and then shares them with other organizations and governments.

Mike Buchman

Solid Ground

Mike is the Communications Director for Solid Ground in Seattle, WA. Solid Ground works to end poverty and undo racism and other oppressions that are root causes of poverty. Solid Ground envisions a community beyond poverty and oppression where all people have equitable opportunity to thrive.

Stephanie Kelton

Stony Brook University

Stephanie is a leading authority on Modern Monetary Theory, a new approach to economics that is taking the world by storm. She is considered one of the most important voices influencing the policy debate today.

Her forthcoming book, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy (June 9, 2020), shows how to break free of the flawed thinking that has hamstrung policymakers around the world.

 

Lawrence Katz

Harvard University

Lawrence F. Katz is the Elisabeth Allison Professor of Economics at Harvard University and a Research Associate of the National Bureau of Economic Research.  His research focuses on issues in labor economics and the economics of social problems. He is the author (with Claudia Goldin) of The Race between Education and Technology (Harvard University Press, 2008), a history of U.S. economic inequality and the roles of technological change and the pace of educational advance in affecting the wage structure. 

 

Stacy Mitchell

ILSR

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and analysis, and partners with a broad range of allies to design and implement policies to reverse corporate concentration and strengthen local enterprise.

Mitchell has also written for The AtlanticBloombergWashington Monthly, and Wall Street Journal.  She’s the author of the book Big-Box Swindle. Her perspective and research are frequently cited in news media and she’s appeared on several national radio shows and podcasts, including NPR’s On The Media and Chris Hayes’ Why Is This Happening?

 

"Income inequality is the greatest problem facing America today. It effects our other two major inequality issues, racial inequality and gender inequality. Income inequality must be remedied or America will inevitably collapse into a Banana Republic without drastic legislative and societal action."
Dave Pederson
Producer
"How the war on poverty became the war against the poor."
Dave Pederson
Producer

Jacob Hacker

Yale University

Jacob S. Hacker is Stanley Resor Professor of Political Science and Director of the Institution for Social and Policy Studies at Yale University. A regular media commentator and policy adviser, he is the author or co-author of five books, numerous journal articles, and a wide range of popular writings on American politics and public policy. His most recent book, written with Paul Pierson, is American Amnesia: How the War on Government Led Us to Forget What Made America Prosper—a New York Times Book Review Editor’s Choice and a best business book of 2016 according to the management magazine Strategy+Business.