Economic Indicators | Wages Incomes and Wealth

Already More Than a Lost Decade: Income and Poverty Trends Continue to Paint a Bleak Picture

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The 2012 poverty and income data released yesterday by the U.S. Census Bureau are yet another reminder that the Great Recession continues to weigh heavily on U.S. households.

Some useful background for yesterday’s release of the 2012 data: 2012 was the first year since 2007 in which the employment situation experienced improvement; however, this improvement was modest. The Great Recession, which began in late 2007, officially ended in the summer of 2009, but the economy continued to lose jobs through early 2010. Then, through the middle of 2011, the job growth we did experience was not adequate to increase the share of the working-age population with a job. Between 2011 and 2012, however, there was some improvement. The share of the working-age (age 16 and over) population with a job dropped from 63.0 percent in 2007 to 58.4 percent in 2011 and rebounded slightly to 58.6 percent in 2012. (The share of the “prime” working-age population—that is, the age 25–54 population—with a job dropped from 79.9 percent in 2007 to 75.1 percent in 2011 and partially rebounded to 75.7 percent in 2012.) Given the tight relationship between the health of the labor market and incomes for most households, it is unsurprising that incomes for most households grew only slightly if at all in 2012 after deteriorating between 2007 and 2011. 

However, the modest income growth for non-elderly households (when looking at all households, the median household actually lost income) between 2011 and 2012 barely began to offset the losses incurred during the recession. Indeed, incomes are substantially lower than they were before the recession began for all but the top 5 percent of the income distribution, and the poverty rate remains elevated (it stayed constant at 15.0 percent between 2011 and 2012).

Furthermore, the disappointing trends of the Great Recession and its aftermath come on the heels of the weak economy of 2000–2007. In the full business cycle from 2000 to 2007, poverty actually increased and, for the first business cycle on record, incomes for those at the middle did not rise. Most of the gains to low- and moderate-income families in the strong labor market of the late 1990s have been erased by the weak labor market of the last 12 years. 

We begin by examining the income data released on Sept. 17 by the Census Bureau and then turn to an analysis of the new poverty data.

Income

Drawing upon the Census Bureau’s newly released income data, we find:

  • Between 2000 and 2012, median income for non-elderly households fell from $64,843 to $57,353, a decline of $7,490, or 11.6 percent.
  • This income erosion is not simply the result of the financial crisis and its aftermath: The weak labor market from 2000 to 2007 led the median income of non-elderly households to fall significantly, from $64,843 to $62,617, the first time in the post-war period that incomes failed to grow over a business cycle.
  • Between 2011 and 2012, the median man working full time, full year saw meager earnings growth of 0.4 percent, and the median woman working full time, full year experienced a drop of 0.3 percent. This indicates that persistent high unemployment—and the reduced bargaining power that results from a lack of outside job opportunities—hurt earnings growth even for those with full-time, full-year work.
  • The median woman working full time, full year saw her earnings grow from $29,261 in 1973 to $38,548 in 2002, and then stagnate for a decade; her earnings stood at $37,791 in 2012. Since 1973, the median man working full time, full year has seen no sustained growth, with his earnings dropping from $51,668 in 1973 to $50,323 in 2002—and falling further over the last 10 years to $49,398 in 2012.
  • Workers with high levels of education have not been spared from weak earnings trends over the last decade. Between 2002 and 2012, full-time, full-year workers age 25 and over with a college degree saw their wages drop—by 6.8 percent for women and by 8.7 percent for men.
  • Inequality remained historically high in 2012; however, it did not increase materially from 2011. The top 5 percent is the only group to have recovered its prerecession (2007) income levels; all other groups have even lost further ground in the 2009–2012 recovery.
  • Racial and ethnic disparities have increased substantially since 2000, as racial and ethnic minorities have seen larger income declines. The median white non-Hispanic household is now bringing in 6.3 percent less in income than it did in 2000, while the declines stand at 11.8 percent for the median Hispanic household and 14.8 percent less for the median black household.

Slowly digging out of a deep hole

From 2011 to 2012, median household income for non-elderly households (those with a head of household younger than age 65) increased from $56,802 to $57,353. However, that modest growth barely began to offset the deep losses incurred during the Great Recession and over the early 2000s business cycle. Between 2007 and 2011, median household income for non-elderly households dropped from $62,617 to $56,802, a decline of $5,815, or 9.3 percent. Furthermore, the disappointing trends of the Great Recession and its aftermath come on the heels of the weak labor market from 2000 to 2007, when the median income of non-elderly households fell significantly, from $64,843 to $62,617. Altogether, from 2000 to 2012, median income for non-elderly households fell from $64,843 to $57,353, a decline of $7,490, or 11.6 percent.

From 2011 to 2012, median income for all households, adjusted for inflation, fell from $51,100 to $51,017, a decline of $83, or 0.2 percent. Non-elderly households—those with a head of household younger than 65 years old—experienced somewhat larger declines because they are more exposed to the labor market and therefore most likely to be negatively affected when the labor market is weak.

Figure A shows real median income over the last three decades for all households and, starting in 1994 when the data became easily available, for non-elderly households. A key point here is the comparison between business cycles. From 1979 to 1989, real median income for all households grew $3,162 (from $48,520 to $51,681); from 1989 to 2000, it grew $4,305 (from $51,681 to $55,987). But for the first time on record, over the 2000–2007 business cycle, incomes did not rise, but fell slightly, from $55,987 to $55,627. And with the weak labor market over this period, the real median income of non-elderly households fell significantly, from $64,843 to $62,617. This means that working families are weathering the current economic downturn on the heels of one of the worst economic expansions on record.

In sum, Figure A shows that the disappointing income trajectory since 2000 for all households and for non-elderly households continues through 2012.

Figure A
Interactive

Median household income, all and non-elderly, 1979–2012 (2012 dollars)

Year All households Non-elderly households
1979 $48,520
1980 $46,985
1981 $46,205
1982 $46,082
1983 $45,760
1984 $47,181
1985 $48,063
1986 $49,764
1987 $50,389
1988 $50,776
1989 $51,681
1990 $50,994
1991 $49,529
1992 $49,122
1993 $48,884
1994 $49,429 $57,064
1995 $50,978 $58,566
1996 $51,720 $59,660
1997 $52,784 $60,429
1998 $54,702 $62,878
1999 $56,080 $64,498
2000 $55,987 $64,843
2001 $54,766 $63,844
2002 $54,127 $63,190
2003 $54,079 $62,635
2004 $53,891 $61,901
2005 $54,486 $61,497
2006 $54,892 $62,322
2007 $55,627 $62,617
2008 $53,644 $60,563
2009 $53,285 $59,755
2010 $51,892 $58,211
2011 $51,100 $56,802
2012 $51,017 $57,353

Note: Non-elderly households are households in which the householder is younger than 65 years old. Shaded areas denote recessions.

Source: Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Table H-5)

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Between 2009 and 2012, only households in the top 5 percent of the income distribution saw income gains, as shown in Figure B. The top 5 percent saw an increase of 0.6 percent, while the middle fifth (the heart of the middle class) saw an income decline of 3.5 percent.

Figure B
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Change in household income across the income distribution, 2007-2012

Lowest fifth Second fifth Third fifth Fourth fifth Top fifth 80-95th percentile Top 5 percent
2009-2012 -7.1% -5.2% -3.5% -2.5% -0.5% -1.4% 0.6%
2007-2012 -10.2% -8.9% -7.5% -6.3% -2.2% -4.0% 0.0%

Source: Current Population Survey, Annual Social and Economic Supplement Historical Income Tables (Table H-3)

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Income inequality remained as high in 2012 as in 2011, but the income gap did not grow further. Yet, inequality was at its highest in 2011, and the disappointing income performance between 2011 and 2012 brought no relief for the middle and lower part of the income distribution. Between 2007 and 2011, the middle and bottom sections of the income distribution were hit harder, and households in nearly all parts of the income distribution lost ground.

However, the incomes of the top 5 percent in 2012 fully returned to their prerecession (2007) level. The rest of the income distribution is still far below where it was before the recession started, as the second panel of Figure B shows. For example, middle-fifth household income remains 7.5 percent below where it was in 2007. The figure shows very clearly how the damage caused by the recession was felt much more strongly among low- and moderate-income households. It is also important to note that the rise in inequality since 2007 compounds roughly three-and-a-half decades of rising inequality. For more on these decades of rising inequality, see EPI’s State of Working America, 12th Edition.

Because Census data are somewhat limited, it is worth examining tax data for 2012 data that provide a closer look at the gains of the top 1 percent. In particular, Census data do not include the capital gains reaped from a booming stock market. If these were included, the gains at the top would be far greater than shown in the Census data. See this recent analysis for more on this topic.

Figure C shows that persistent high unemployment has dampened earnings growth even for those who have full-time, year-round employment. In 2012, the median man working full time, full year experienced a slight increase in real earnings of 0.4 percent, from $49,209 to $49,398. The median woman working full time, full year saw a slight drop, from $37,893 to $37,791. Looking over a longer horizon, the trends are stark. The median woman working full time, full year saw her earnings grow from $29,261 in 1973 to $38,548 in 2002, and then stagnate for a decade, to $37,791 in 2012. Since 1973, the median man working full time, full year has seen no sustained earnings growth, with his earnings dropping from $51,668 in 1973 to $50,323 in 2002 and falling further over the last 10 years to $49,398 in 2012In contrast, the productivity of the economy (for the entire economy, private and public sectors, net of depreciation) grew 86.2 percent from 1973 to 2012.

Figure C
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Real earnings of workers, by gender, 1973–2012 (2012 dollars)

Year Men: Full-time, full-year Women: Full-time, full-year
1973 $51,668 $29,261
1974 $49,833 $29,279
1975 $49,492 $29,110
1976 $49,384 $29,726
1977 $50,454 $29,729
1978 $50,806 $30,199
1979 $50,150 $29,921
1980 $49,378 $29,706
1981 $49,078 $29,071
1982 $48,152 $29,731
1983 $47,942 $30,488
1984 $48,871 $31,110
1985 $49,237 $31,795
1986 $50,482 $32,445
1987 $50,166 $32,697
1988 $49,715 $32,836
1989 $48,865 $33,557
1990 $47,136 $33,757
1991 $48,370 $33,791
1992 $48,419 $34,273
1993 $47,579 $34,028
1994 $47,269 $34,019
1995 $47,118 $33,656
1996 $46,841 $34,551
1997 $48,032 $35,621
1998 $49,722 $36,382
1999 $50,147 $36,264
2000 $49,669 $36,616
2001 $49,640 $37,890
2002 $50,323 $38,548
2003 $50,771 $38,357
2004 $49,591 $37,975
2005 $48,676 $37,470
2006 $48,127 $37,028
2007 $49,958 $38,872
2008 $49,446 $38,119
2009 $50,448 $38,835
2010 $50,497 $38,846
2011 $49,209 $37,893
2012 $49,398 $37,791

Note: Earnings are wage and salary income. Shaded areas denote recessions.

Source: Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Table P-41)

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Figure D examines annual mean earnings of workers age 25 and older with a bachelor’s degree (but no further degree) for men and women. Clearly, even workers with high levels of education have not been spared from weak earnings trends over the last decade. For men, this is a contrast from the previous decade; annual earnings of male college graduates grew steadily throughout the 1990s (especially the late 1990s), peaking at $92,989 in 2000—a 27.0 percent increase from 1991. Women saw equally steady growth over the 1990s, growing 20.6 percent from $49,319 in 1991 to $59,464 in 2000. In contrast, over the last decade since 2002, men’s and women’s earnings have decreased by 8.7 and 6.8 percent, respectively.

Figure D
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Mean earnings of full-time, year-round workers with a bachelor’s degree only, age 25 and older, by gender, 1991–2012

Year Men Women
1991 $73,221 $49,319
1992 $73,822 $50,457
1993 $78,183 $51,957
1994 $81,515 $52,896
1995 $79,212 $51,424
1996 $77,381 $54,360
1997 $80,780 $54,229
1998 $86,288 $57,106
1999 $87,373 $56,591
2000 $92,989 $59,464
2001 $92,550 $59,371
2002 $90,678 $62,510
2003 $88,813 $61,473
2004 $88,131 $59,946
2005 $89,930 $59,340
2006 $88,676 $61,949
2007 $87,504 $59,829
2008 $88,783 $59,104
2009 $86,018 $58,575
2010 $84,123 $59,435
2011 $83,562 $60,666
2012 $82,792 $58,251

Source: Authors' analysis of Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Table P-26)

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Disparities in income between whites and other groups grew in 2012, with the median African American household seeing its income decline 3.8 percent from 2009. Similarly, the median Hispanic household saw its income drop 4.2 percent. This compares with a 2.2 percent drop for the median white non-Hispanic household (see dollar changes in Figure E). The weak labor market of the 2000–2007 business cycle, along with the Great Recession, have wiped out all improvements in median black income since 1994, all improvements in median Hispanic income since 1997, and all improvement in white non-Hispanic median income since 1996. The median white non-Hispanic household is now bringing in 6.3 percent less income than in 2000, compared with declines of 11.8 percent for the median Hispanic household and 14.8 percent for the median black household.

Figure E
Interactive

Real median household income by race and ethnicity, 1989–2012 (2012 dollars)

Year White Black Hispanic
1989 $55,533 $32,331 $39,193
1990 $54,403 $31,806 $38,029
1991 $53,141 $30,920 $37,306
1992 $53,378 $30,072 $36,233
1993 $53,472 $30,564 $35,810
1994 $53,814 $32,214 $35,882
1995 $55,619 $33,500 $34,199
1996 $56,521 $34,218 $36,293
1997 $57,879 $35,731 $37,982
1998 $59,701 $35,663 $39,853
1999 $60,849 $38,460 $42,368
2000 $60,831 $39,556 $44,224
2001 $60,054 $38,220 $43,531
2002 $59,859 $37,239 $42,250
2003 $59,646 $37,065 $41,194
2004 $59,454 $36,753 $41,659
2005 $59,729 $36,406 $42,302
2006 $59,700 $36,592 $43,025
2007 $60,818 $37,752 $42,833
2008 $59,218 $36,626 $40,431
2009 $58,299 $35,058 $40,720
2010 $57,351 $33,863 $39,629
2011 $56,570 $33,042 $39,431
2012 $57,009 $33,718 $39,005

Note: White refers to non-Hispanic whites, black refers to blacks alone or in combination, and Hispanic refers to Hispanics of any race. Shaded areas denote recessions.

Source: Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Table H-5)

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Poverty

We now turn to an analysis of the Census Bureau’s newly released poverty data. Key findings include:

  • The poverty rate was 15.0 percent in 2012, unchanged from 2011. The total number of people in poverty in the United States was 46.5 million in 2012.
  • The poverty rate for children was 21.8 percent in 2012, representing 16.1 million kids living in poverty. In 2012, more than one-third (34.6 percent) of all people living in poverty were children.
  • The poverty rate for working-age people (age 18–64) hit 13.7 percent in 2012, unchanged from 2011. Poverty among the elderly (age 65 and older) remained statistically unchanged at 9.1 percent.
  • In 2012, the share of the poor below half of the poverty line was 43.9 percent. This means that 6.6 percent of the overall population falls below half the poverty line.
  • Nearly 1 in 10 children (9.7 percent) lived below half of the poverty line in 2012.
  • Non-Hispanic whites maintained far lower poverty rates than any other racial/ethnic group, at 9.7 percent, compared with 27.2 percent for blacks and 25.6 percent for Hispanics.
  • In 2012, over one-third of black children (37.9 percent) and Hispanic children (33.8 percent) lived in poverty. The poverty rate for families with children headed by single mothers was 40.9 percent in 2012. Of the 7.1 million families with children living in poverty in 2012, 4.1 million were headed by a single mother.
  • Policies enacted in the years following the War on Poverty, which marks its 50th anniversary in January 2014, helped to forestall even worse trends in 2012. In 2012, 1.7 million people were kept out of poverty by unemployment insurance, and 15.3 million elderly Americans were kept out of poverty by Social Security. If food stamps (i.e., the Supplemental Nutrition Assistance Program, or SNAP) were added to the Census definition of money income, four million fewer people would be in poverty.

Weak economy leaves elevated shares of Americans living in hardship

The United States’ poverty rate was unchanged from 2011 to 2012, holding steady at 15.0 percent. The number of people living below the poverty line in 2012 was 46.5 million. As Figure F illustrates, poverty tends to follow a cyclical pattern, rising in recessions and falling in recoveries. The last full business cycle, 2000 to 2007, is an exception. The poverty rate increased between 2000 and 2007, from 11.3 percent to 12.5 percent, then continued to rise through the Great Recession, stagnating around 15.0 percent in 2012. Since 2000, poverty has generally been on an upward trajectory. It is likely, given predictions of the labor market’s future health, that the poverty rate will not return to 2000 (or even 2007) levels for some time.

Figure F
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Poverty rate for total population and children, 1979–2012

Year Total population Children
1979 11.7% 16.4%
1980 13.0% 18.3%
1981 14.0% 20.0%
1982 15.0% 21.9%
1983 15.2% 22.3%
1984 14.4% 21.5%
1985 14.0% 20.7%
1986 13.6% 20.5%
1987 13.4% 20.3%
1988 13.0% 19.5%
1989 12.8% 19.6%
1990 13.5% 20.6%
1991 14.2% 21.8%
1992 14.8% 22.3%
1993 15.1% 22.7%
1994 14.5% 21.8%
1995 13.8% 20.8%
1996 13.7% 20.5%
1997 13.3% 19.9%
1998 12.7% 18.9%
1999 11.9% 17.1%
2000 11.3% 16.2%
2001 11.7% 16.3%
2002 12.1% 16.7%
2003 12.5% 17.6%
2004 12.7% 17.8%
2005 12.6% 17.6%
2006 12.3% 17.4%
2007 12.5% 18.0%
2008 13.2% 19.0%
2009 14.3% 20.7%
2010 15.1% 22.0%
2011 15.0% 21.9%
2012  15.0% 21.8%

Source: Authors’ analysis of Current Population Survey Annual Social and Economic Supplement (CPS-ASEC) Historical Poverty Tables (Table 3) and CPS-ASEC microdata

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Figure F also shows that the poverty rate for children in 2012 was 21.8 percent, far higher than the overall rate. The 2012 “children’s poverty rate” represents 16.1 million kids living in poverty. In 2012, more than a third—34.6 percent—of all people living in poverty were children.

All of the decline in poverty achieved during the business cycle of the 1990s has been reversed. From 1989 to 2000, overall poverty declined by 1.5 percentage points, and child poverty dropped by 3.4 percentage points. From 2000 to 2012, however, poverty increased overall by 3.7 percentage points, and by 5.6 percentage points among children. The large increase in poverty suggests that as anti-poverty policies have come to depend more on paid work as the main pathway out of poverty, the safety net has become less effective in reducing economic hardship when the economy and job market are underperforming.

The non-elderly poverty rate, which looks at those who are 18–64 years old, was 13.7 percent in 2012 (Figure G). This represents a small drop from its historical peak of 13.8 percent in 2010, and the rate has remained unchanged since 2011. Over the same 46 years (1966–2012) covered in the figure, the poverty rate for persons age 65 and older dropped precipitously, due in part to Social Security payments, which have effectively lifted millions of elderly Americans out of poverty. In 2012, the elderly poverty rate was 9.1 percent, statistically unchanged over the year.

Figure G
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Poverty rate for elderly and non-elderly adults, 1966–2012

Year Non-elderly (age 18–64) Elderly (age 65+)
1966 10.5% 28.5%
1967 10.0% 29.5%
1968 9.0% 25.0%
1969 8.7% 25.3%
1970 9.0% 24.6%
1971 9.3% 21.6%
1972 8.8% 18.6%
1973 8.3% 16.3%
1974 8.3% 14.6%
1975 9.2% 15.3%
1976 9.0% 15.0%
1977 8.8% 14.1%
1978 8.7% 14.0%
1979 8.9% 15.2%
1980 10.1% 15.7%
1981 11.1% 15.3%
1982 12.0% 14.6%
1983 12.4% 13.8%
1984 11.7% 12.4%
1985 11.3% 12.6%
1986 10.8% 12.4%
1987 10.6% 12.5%
1988 10.5% 12.0%
1989 10.2% 11.4%
1990 10.7% 12.2%
1991 11.4% 12.4%
1992 11.9% 12.9%
1993 12.4% 12.2%
1994 11.9% 11.7%
1995 11.4% 10.5%
1996 11.4% 10.8%
1997 10.9% 10.5%
1998 10.5% 10.5%
1999 10.1% 9.7%
2000 9.6% 9.9%
2001 10.1% 10.1%
2002 10.6% 10.4%
2003 10.8% 10.2%
2004 11.3% 9.8%
2005 11.1% 10.1%
2006 10.8% 9.4%
2007 10.9% 9.7%
2008 11.7% 9.7%
2009 12.9% 8.9%
2010 13.8% 8.9%
2011 13.7% 8.7%
2012  13.7%  9.1%

Source: Authors’ analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Table 3)

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Figure H displays the share of the poor falling below half of the poverty line from 1975 to 2012; this metric tracks the depth of poverty by measuring those living on half the subsistence rate. In 2012, 50 percent of the poverty line for a two-adult, two-child family was $11,642. In 2012, 43.9 percent of the poor were living below half of the poverty line. As a share of the overall population, this means that 6.6 percent of Americans were living below half of the poverty line in 2012. Turning to the population under 18 years old, nearly 1 in 10 children (9.7 percent) were below half the poverty line in 2012 (not shown).

Figure H
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Share of the poor in “deep poverty,” 1975–2012

Year Below 50%
1975 29.9%
1976 28.1%
1977 30.2%
1978 31.5%
1979 32.8%
1980 33.5%
1981 35.2%
1982 37.2%
1983 38.5%
1984 37.9%
1985 37.4%
1986 39.2%
1987 38.7%
1988 39.9%
1989 38.0%
1990 38.5%
1991 39.4%
1992 40.9%
1993 40.7%
1994 40.5%
1995 38.1%
1996 39.5%
1997 41.0%
1998 40.4%
1999 39.3%
2000 39.9%
2001 40.8%
2002 40.7%
2003 42.6%
2004 42.4%
2005 43.1%
2006 42.4%
2007 41.8%
2008 42.9%
2009 43.7%
2010 44.3%
2011 44.0%
2012 43.9%

Source: Authors' analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Tables 2 and 22)

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As shown in Figure I, poverty rates and changes in those rates vary dramatically across racial and ethnic groups. Non-Hispanic whites experienced the lowest rate of poverty, at 9.7 percent in 2012, while the rates for blacks and Hispanics were more than two-and-a-half times higher, at 27.2 percent and 25.6 percent, respectively.

Figure I
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Poverty rate, by race and ethnicity, 2011–2012

Year White, non-Hispanic Black Hispanic Asian
2011  9.8%  27.6%  25.3%  12.3%
2012 9.7% 27.2% 25.6% 11.7%

Note: Races and ethnicities are presented in the following mutually exclusive categories: White refers to non-Hispanic whites, black refers to non-Hispanic blacks, and Hispanic refers to Hispanics of any race.

Source: Authors' analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Table 2)

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The 2000s have all but erased any gains made in the 1990s in reducing poverty. This recession has only exacerbated the damaging trends over the last decade, leaving large shares of some of the most vulnerable populations living below the poverty line. Figure J shows changes over time in poverty rates for particularly vulnerable populationsracial and ethnic minority children, families with children, and single-mother families. While the rate of poverty among black children fell between 2011 and 2012, black children experienced a 6.7 percentage-point increase in poverty over 2000 to 2012, hitting 37.9 percent in 2012. Hispanic children experienced an increase in poverty of 5.4 percentage points over the same period, reaching 33.8 percent.

Figure J
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Poverty rates of vulnerable populations, 2000 and 2012

Under 18, black Under 18, Hispanic All families with children Female-headed households with children
2000 31.2% 28.4% 12.7% 33.0%
2012  37.9%  33.8%  18.4%  40.9%

Note: Races and ethnicities are presented in the following mutually exclusive categories: White refers to non-Hispanic whites, black refers to non-Hispanic blacks, and Hispanic refers to Hispanics of any race.

Source: Authors' analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Tables 3 and 4)

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Families with children experienced an increase in poverty of 5.7 percentage points between 2000 and 2012, hitting 18.4 percent in 2012. For families headed by single mothers, there was a 7.9 percentage-point jump, from 33.0 percent in 2000 to 40.9 percent in 2012. In 2012, 4.1 million of the 7.1 million families living in poverty were headed by single mothers.

The upcoming 50th anniversary of the War on Poverty in January 2014 makes it a particularly instructive time to step back and examine how government policies effectively reduce the incidence of poverty in the United States. The poverty rate and associated trends would have been worse if public policies had not provided a necessary safety net. In 2012, 1.7 million people were kept out of poverty by unemployment insurance. That is, unemployment benefits went to families that otherwise would likely have suffered steeper income declines, and in some cases dropped below the poverty line. Social Security is a strong safety net that keeps millions of elderly Americans out of poverty. In 2012, 15.3 million elderly were kept out of poverty by Social Security. Furthermore, if food stamps (SNAP) were added to the Census definition of money income, four million fewer people would be in poverty.

While many government efforts have succeeded in reducing poverty in this country, there have been periods of even greater strides in poverty reduction. For instance, the period between 1959 and the mid-1970s saw great declines in poverty (Figure K). As the country got richer, on average, poverty fell precipitously. If the relationship between per capita GDP growth and poverty that prevailed from 1959 to 1973 had held, the poverty rate would have fallen to zero in the mid-1980s. The fact remains that rising inequality has kept poverty from falling as the economy has grown over the last three decades.

Figure K
Interactive

Poverty rate, actual and simulated, 1959–2012

Simulated poverty rate Actual poverty rate
1959 22% 22%
1960 22% 22%
1961 22% 22%
1962 21% 21%
1963 20% 20%
1964 19% 19%
1965 17% 17%
1966 15% 15%
1967 15% 14%
1968 14% 13%
1969 13% 12%
1970 13% 13%
1971 13% 13%
1972 11% 12%
1973 9% 11%
1974 10% 11%
1975 10% 12%
1976 9% 12%
1977 7% 12%
1978 6% 11%
1979 5% 12%
1980 5% 13%
1981 5% 14%
1982 6% 15%
1983 4% 15%
1984 2% 14%
1985 0% 14%
1986 14%
1987 13%
1988 13%
1989 13%
1990 14%
1991 14%
1992 15%
1993 15%
1994 15%
1995 14%
1996 14%
1997 13%
1998 13%
1999 12%
2000 11%
2001 12%
2002 12%
2003 13%
2004 13%
2005 13%
2006 12%
2007 13%
2008 13%
2009 14%
2010 15.1%
2011 15%
2012  15%

Note: Poverty rate is simulated by a model based on the relationship between per capita GDP growth and the official poverty rate between 1959 and 1973.

Source: Authors' analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Tables 2 and 4) and Bureau of Economic Analysis National Income Product Accounts public data. Analysis using Sheldon Danziger and Peter Gottschalk's 1995 book, American Unequal (Russell Sage Foundation and Harvard University Press).

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— Research assistance by Alyssa DavisWilliam Kimball, and Hilary Wething