Census Report Paints Troubling Economic Picture On Incomes

Sep 17, 2013

For the first year since the recession, median household incomes did not decline in 2012. But it's hardly a reassuring picture. Incomes were flat despite the economic recovery and big gains in the stock market. That's a troubling aspect about today's labor market. It's four years since the official end of the recession and many households are worse off than when it started.

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For the first year since the recession, median household incomes did not decline in 2012. Incomes didn't drop but they were flat, this despite the economic recovery. The information comes to us from the latest data the Census Bureau released today. And it points to a troubling aspect of the economy: Many families are worse off now than when the recession officially ended four years ago.

NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: Americans are still making a lot less money than they were before the recession hit. In 2007, adjusting for inflation, U.S. median income was close to $56,000 a year. But that's now fallen to $51,000. It leveled off in 2012, but incomes still aren't rising but incomes still aren't rising.

SHELDON DANZIGER: The only good news this year is that we don't have bad news.

ARNOLD: Sheldon Danziger is an economist and president of the Russell Sage Foundation. He says that the poverty rate at 15 percent is back where it was in the early 1990s. And, adjusting for inflation, incomes are back where they were in 1989.

Larry Katz is a labor economist at Harvard.

LARRY KATZ: The typical family right now is basically back where they were almost 25 years ago. We have seen some average income growth but it's still all going to the very top end. Only the sort of top one percent or few percent of the income distribution are seeing any gains yet in this recovery.

ARNOLD: There are a couple of things at work here. First, when you have such a deep recession you just have too many people looking for work. Bill Rogers is an economist and professor at Rutgers University.

BILL ROGERS: We still have for every job posted, there are about three people looking for that job.

ARNOLD: This is why high unemployment affects not just the unemployed but most workers in the economy. Your employer knows that you're not very likely to get a better job offer from another company so there's no reason to give you a raise.

ROGERS: And so, the nexus of power in terms of where wages are set still lies with the employer and not the employee.

ARNOLD: That should change eventually if the economy keeps improving and enough people get jobs.

There's another force at work here though. Technology is replacing a lot of even middle-class jobs with robots and computers. For example, TurboTax means fewer accountants. Sheldon Danziger says this is a big deal.

DANZIGER: People are talking about a future of driverless cars. You know, are UPS trucks going to drive themselves in a computerized lane from New York to Chicago? That would be more labor-saving technology.

ARNOLD: Innovation though could also create higher skilled jobs to replace those lost by the middle-class. And some economists think that the current picture is a bit brighter than what the latest census figures suggest.

KEVIN HASSETT: There are a lot of things that are difficult for economists to measure that have improved about people's lives.

ARNOLD: Kevin Hassett is director of economic policy studies at the American Enterprise Institute. He says if you just look at median income, people are worse off than they were 10 years ago. But those dollars that they make go further as lots of things become cheaper.

HASSETT: The percentage of low-income households who have a computer grew over the last decade, about from 19.8 percent to 47.7 percent. The percentage that have air conditioning went from 65 percent to about 85 percent.

ARNOLD: One thing that all the economists we talked to agreed on, whether conservative or liberal, is that the government could be doing more to help, and the gridlock in Washington is getting in the way.

Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.