The New York Times
By: Sabrina Tavernise
September 12, 2012
WASHINGTON -- The income gap between the wealthiest 20 percent of American households and the rest of the country grew sharply in 2011, the Census Bureau reported, as an overwhelming majority of Americans saw no gains from a weak economic recovery in its second full year.
Income for the top fifth of American households rose by 1.6 percent last year, driven by even larger increases for the top 5 percent of households, said David Johnson, the Census Bureau official who presented the findings. All households in the middle of the scale saw declines, while those at the very bottom stagnated.
"You're really struck by the unevenness of the recovery," said Lawrence Katz, an economics professor at Harvard. "The top end took a whack in the recession, but they've gotten back on their feet. Everyone else is still down for the count."
The numbers helped drive an overall decline in income for the typical American family. Median household income after inflation fell to $50,054, a level that was 8 percent lower than in 2007, the year before the recession took hold.
That drop poses a political challenge for President Obama as he presents himself as a champion of the middle class and defends his economic stewardship in a tightly fought presidential race. The Republican presidential candidate, Mitt Romney, is likely to seize on the decline as evidence of the president's failure to fix an ailing economy. Mr. Obama, for his part, has emphasized the potentially damaging effects of Republican policies on the middle class.
Obama administration officials said Wednesday that more recent data on job growth, unemployment and wages indicated that median income, adjusted for inflation, was growing this year. They pointed to the rise in income inequality as proof that their policy priorities are even more urgent. Rebecca M. Blank, the acting United States commerce secretary, said in a statement that the rise "underscores the fact we must enact policies that help rebuild our economy not from the top down, but from the middle out."
It is an argument that conservatives, who contend that income inequality is not inherently harmful, largely reject.
"Over the long run, the disappearing middle class has moved up, not down," said Douglas J. Besharov, a professor of public policy at the University of Maryland. "Too much redistribution will kill the goose that laid the golden egg."
The Census Bureau reported that a standard measure of income inequality, the Gini index, registered the first year-on-year increase since 1993, a surprise for economists who say the measure, which has been rising for some time, usually changes so slowly that a statistically significant rise over the course of one calendar year is rare.
Two other of the report's findings were promoted by the administration as achievements. The share of Americans without health insurance declined, driven by a 2.2 percent drop in the portion of uninsured 19- to 25-year-olds, strong evidence of an impact from a provision in Mr. Obama's Affordable Care Act that allowed children to stay on their parents' insurance policies until age 26. The uninsured rate for the nation fell to 15.7 percent from 16.3 percent. And the percentage of Americans in poverty remained unchanged for the first time in four years, though economists had expected the rate to rise for a fifth straight year.
"If you have to guess what's going on, 2011 was the year that we started making real gains in employment," said Justin Wolfers, an economist at the University of Michigan.
Mr. Johnson, the census official, said the movement of people from part-time work to full-time work was most likely a major reason the poverty rate did not worsen. The number of people in poverty declined in the South and the suburbs, and among people who were not United States citizens.
"Looks like there's a big shift from part time to full time, and the largest percent increase in full-time work was in the lowest quintile," he said, referring to the bottom fifth of the income spectrum.
There were 46.2 million people in poverty in the United States last year, little changed from 2010. That figure represents 15 percent of the population, compared with 15.1 percent in 2010, census officials said, a change that was not statistically significant.
But the data still reflects the bleak state of the American labor market. Inflation-adjusted median household income fell by 1.5 percent in 2011. During the recovery, about 3 in 5 of the new jobs created have been low-skill and low-wage -- taking people off the unemployment rolls and pulling some families out of poverty, but not providing a clear route to the middle class.
That trend helps explain how the poverty rate could stay flat while the median income went down. Middle-income earners, for instance manufacturing workers and middle managers, have fared worse in this economy that both lower-income workers and higher-income workers, a phenomenon economists refer to as the polarization of the labor market, Professor Katz said. As a result, income at the middle point of the spectrum went down, while remaining flat at the bottom, something that happened from the late 1980s to the early 2000s, he said.