Still Caught in the Can’t-Catch-Up Economy

Has the economic recovery finally filtered down to the US working class, more than seven years after the official end of the Great Recession? The US Census Bureau says yes, based on the results of its Current Population Survey released on September 13.

According to the Census Bureau, all sectors of the population — be their incomes high or low, their ages old or young, their regions East, West, North or South — experienced sizeable income gains between 2014 and 2015. In fact, as MSNBC reported, income grew the fastest for the poorest people: “[T]he income growth was widespread across every…racial/ethnic demographic, with Americans at the bottom seeing the largest percentage increase.”

But the Census Bureau’s findings are highly suspect, mainly due the mountain of economic data they ignore.

Who could trust a meteorologist, for example, who reports cheerfully: “The recent heat wave has given way to cooler, more pleasant temperatures,” yet doesn’t mention a tropical storm presently whipping through the region?

The Current Population Survey has a similar problem, reporting on pre-tax cash income increases without regard to the spiraling expenses necessary to survive in today’s world.

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The survey showed that median US household income rose a whopping 5.2 percent to $56,516 last year — not only the first increase since before the recession began in 2008, but also the fastest income growth in nearly 50 years.

It also found that 3.5 million people climbed out of poverty in 2015, lowering the poverty rate from 14.8 percent to 13.5 percent — the sharpest annual drop in poverty since the late 1960s. In addition, the percentage of Americans with health insurance for at least part of 2015 reached 90.9 percent — the highest ever recorded.

With such upbeat news arriving less than two months before the election, it was almost possible to hear the corks popping over at Democratic Party headquarters. After all, records were broken in 2015! Obamacare is working! People are working!

Corporate media giants broadcast this ostensibly magnificent news with headlines such as “Median incomes are up and poverty rate is down, surprisingly strong census figures show” (Los Angeles Times) and “Poverty goes down, coverage goes up, and America gets a raise” (MSNBC).

The Washington Post editorial board used the report as an opportunity to ridicule both Bernie Sanders and Donald Trump (as if they were two peas in a pod) for their “bombardment of negativity about the US economy” on the campaign trail — claiming the Census Bureau data proved that “the entire time candidates such as Mr. Sanders and Mr. Trump were out on the stump, the US economy was performing contrary to their respective tales of woe.”

But headlines such as “America Gets a Raise” imply that wages have risen significantly when they have not.

To be sure, roughly 2.4 million more people found full-time, year-round jobs in 2015 compared with the year before. But wages rose much less than 5.2 percent last year. Higher median household income reflects more hours worked rather than a substantial hike in pay.

And even by the Census Bureau’s own measurement, in 2015 median household income (which is the level at which 50 percent of the population makes more and the other 50 percent makes less — was still lower than in 2007, and lower still than the all-time high in 1999.

Further examination also reveals that people in rural areas didn’t share in the increase, but rather experienced a 2 percent decrease in median income last year — which fell to just $44,657 for these households, far below the national median.

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The Cenus Bureau generalizations about median income dramatically downplay the deep concentrations of poverty that exist across the country. For example, North Dakota had the nation’s biggest drop in child poverty between 2011 and 2016, but the poverty rate for Native American children, the majority living on reservations, is five times higher than for the rest of the state’s children.

Likewise, buried within a Detroit Free Press article headlined “Michigan posts its largest income gain since the recession” is the admission that the majority Black cities of:

Flint and Detroit continue to have some of the highest poverty rates in the US, at 40.8 percent and 39.8 percent, respectively. The child poverty rate is higher — more than half of the children who lived in Detroit and Flint last year lived in poverty, 57.6 percent and 58.3 percent, respectively.

The Census Bureau figures also ignore the enormous income disparities, often along racial lines, within individual cities. According to the Census Bureau, Washington, DC’s median household income rose to $75,600 in 2015, but that breaks down to $120,000 for white households compared to just $41,000 for Black households. The poverty rate for the city’s Black population is 27 percent — and 75 percent of all DC residents living in poverty are Black.

There is yet another way that the Census Bureau’s poverty statistics skew lower while its median income figures skew higher.

In the introduction to its Current Population Survey, the bureau makes the following caveat about its “sample” population: “People in institutions, such as prisons, long-term care hospitals and nursing homes, are not eligible to be interviewed in the CPS…[P]eople who are homeless and not living in shelters are not included in the sample.” The list of those excluded from the survey thus includes millions of the most impoverished people in the US

Despite the flaws in the Census Bureau’s findings, they still show roughly one in four African Americans and Native Americans and more than one in five Latinos living under the official poverty line. One in five children are living in poverty by official standards, and 10 percent of US households are trying to survive on less than $13,300 a year.

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But the most glaring problem with the Census Bureau’s methodology is its appallingly low poverty threshold. If the poverty line were scaled upward to a more accurate level, the official poverty rate of the US population would certainly skyrocket statistically.

The Social Security Administration developed the current poverty measure back in 1963, adopting a formula based on the minimum amount of money necessary to buy a subsistence level of food, using data from the 1955 Household Food Consumption Survey. On the assumption that food expenditures made up one-third of what a family of four needed to survive at the time, that amount was then multiplied by three to define the poverty line.

This definition, using obsolete 50-year-old consumption patterns and even more antiquated 60-year-old prices (adjusted annually based on the consumer price index), is still in use today.

If that formula (food expenses times three) was ever adequate for survival — and it most certainly wasn’t in the era of Eisenhower — it is completely preposterous today. In 2015, the poverty threshold was set at just at $24,250 for a family of four and $11,770 for an individual.

Even the Census Bureau recognizes some of the shortcomings of its formula. Since 2010, it has issued a “Supplemental Poverty Measure,” adding income from sources such as Social Security, tax credits and food stamps, while subtracting some expenses, such as work costs, medical care and child-support payments.

In 2015, this statistic showed the rate of poverty at a (slightly) more realistic 14.3 percent, compared to the Consumer Population Survey’s 13.5 percent.

But the Supplemental Poverty Measure is an exercise in futility, however well meaning its proponents’ intentions. It does nothing to actually improve the lives of impoverished people because the government relies only on the Current Population Survey to determine eligibility for government poverty programs such as food stamps.

And while those cloistered in the bubble of the federal bureaucracy seem to find its poverty threshold adequate for survival, anyone with at least one foot in the real world is aware that no family of four can make ends meet on $24,250 a year.

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Just as every household needs a budget measuring its income in relation to expenses, we should examine the actual cost of just a few major household necessities to give a cursory sense of whether that 5.2 percent rise in median household income last year actually made a dent in falling working-class living standards:

— Rent: According to apartmentlist.com, using Census data from 1960 to 2014, median rent has risen by 64 percent after adjusting for inflation, while real household income only increased by 18 percent. Between 2000 and 2010, rents rose by 18 percent while household income fell by 7 percent.

As Apartmentlist.com concluded, “As a result, the share of cost-burdened renters [households spending more than one-third of their income on rent] nationwide more than doubled, from 24 percent in 1960 to 49 percent in 2014.”

If anything, the pace is accelerating: In the last year alone, median rents rose by 2.3 percent to $1,120 per month for a 1-bedroom apartment and $1,300 for a 2-bedroom.

— Child care: The cost of child care has nearly doubled since the 1980s — yet it is not considered a necessary household expenditure, even though 75 percent of mothers with children six to 17 years old are in the labor force, as are 61 percent of mothers with children under 3 years old.

In 2015, the average child care cost rose to over $143 a week. As a result, fewer working parents can afford to pay for it and end up keeping children with relatives or trading off child care shifts while the other parent, if they have one, is at their job.

Whereas 42 percent of parents paid for child care in 1997, only 32 percent did so by 2011. The poorest families spend the largest proportion — one-third of their incomes — on child care.

— Health care: The Supplemental Poverty Measure for 2015 showed that with medical expenses — including insurance premiums, co-pays, co-insurance, prescription drug costs and other uncovered medical expenses — factored in, 11.2 million (or 3.5 percent) more people are living in poverty than the Census Bureau’s Current Population Survey acknowledges.

And we can expect next year’s statistics to be even worse, as employers continue to push more insurance costs onto their employees. More and more employers are turning to plans with higher co-pays and so-called “high-deductible” plans, offering premiums workers can barely afford and deductibles of $1,000 or $2,000 a year — meaning workers have to pay these amounts before insurance kicks in even a penny toward their medical care.

This year, deductibles alone are rising nearly six times faster than wages, according to the 2016 Employer Health Benefits Survey of the Kaiser Family Foundation.

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A NEW Georgetown University study on job creation shows that workers with a high school diploma or less have lost the most income during the recovery, as more jobs go to those with at least some post-secondary education — perhaps reflecting a glut of “over-educated” applicants for low wage jobs.

“Of the 7.2 million jobs lost in the recession,” the Georgetown study states, “5.6 million were jobs for workers with a high school diploma or less…On net, there are now more than 5.5 million fewer jobs for individuals with a high school education or less than there were in December 2007.”

This downward trend began well before the Great Recession. A report by the Hamilton Project of the Brookings Institution found that between 1990 and 2003, real median wages had already fallen by 20 percent for male workers without a high schooldiploma age 30 to 45, and by 12 percent for women in the same category.

As the New York Times, citing the report, concluded: “Less-educated Americans, especially men, are shifting away from manufacturing and other jobs that once offered higher pay, and a higher share are now working in lower-paying food service, cleaning and groundskeeping jobs.”

But this decline in wages is tied to more than the decline in manufacturing jobs. As the Times article added, “[P]ay levels are declining in almost all of the fields that employ less-educated workers, so even those who have held onto jobs as manufacturers, operators and laborers are making less than they would have a generation ago.” Inflation-adjusted annual pay for manufacturing jobs fell from $33,600 in 1990 to $28,000 in 2013.

While much media attention today is devoted to labeling the so-called “millennial” generation the best-educated in history, fully two-thirds of those between the ages of 25 and 32 have no bachelor’s degree — a figure that is virtually identical to the baby-boomer generation.

But the earnings shortfall for young people without a bachelor’s degree compared to those with a four-year degree has fallen from 77 percent in 1979 to just 62 percent today. And with student debt averaging $35,000 per college grad, a bachelor’s degree is simply out of reach for most low-income young adults.

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The long-term decline in wages is not an accident, nor an unfortunate consequence of factors beyond the control of US policymakers. On the contrary, it has been a long time in the making.

Since the late 1970s, both Democratic and Republican policymakers joined with the rest of the corporate class in a strategy intended to drive down working-class living standards in order to raise corporate profits. This comprehensive set of policies — which involved legal green lights for union busting, wage and benefit cuts, dismantling social welfare subsidies, and privatizing formerly public services in order to shift costs onto consumers — has more recently become known as “neoliberalism.”

The greatest damage from neoliberalism was done early on, from the late 1970s through the early 1990s. The average real hourly wages of production and nonsupervisory workers fell by 15 percent between 1973 and the mid-1990s, lowering the ceiling for working-class wages ever since. Wages briefly rose during the economic boom of the late 1990s — only to be derailed by the early 2000s when wages began to stagnate again. The Great Recession once again accelerated the decline.

The claims of the 2015 Current Population Survey should be viewed in this historical context. Since 1979, the vast majority of US workers have seen their wages bouncing back and forth between decline and stagnation, while the wealthiest few have enjoyed massive gains in income. Even the Census Bureau’s statistics showed that the enormous degree of income inequality in 2015 was “not statistically significant” from the year (or years) before.

So a more appropriate headline for the articles about the Census Bureau report would be, “Neoliberalism continues to slash working-class living standards, with no end in sight (until workers fight back).”