The Dismal Economy

1
The Dismal Economy

• Heather Boushey
• Center for Economic and Policy Research
• 8 April 2005

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Introduction

• My job today is talk to you about the state of
  the labor market and opportunities for upward
  mobility.
• Unfortunately, this will not be an optimistic
  talk.
• Trends have gotten worse over the past few years
  and policy responses have only added to the
  problem.
• Inequality tears at the promise of the American
  Dream, because its harder today to make ends
  meet and achieve a stable middle-class lifestyle.

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Inequality Overview

• Growing since early 1970s.
• Slowed, but did not reverse course, during the
  late 1990s.
• Grew during recession/recovery.
• Progress in gender and racial equity has stalled.
• Gender gap increased in 2003.

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Latest data on income (from 2003)

• In 2003, income was stagnant, poverty was up and
  health insurance coverage especially health
  insurance from an employerwas down.
• Further, while low-income households saw falling
  incomes, high-income households saw their income
  rise.

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Slow Job Growth

• Today, the economy only has 415,000 more jobs
  that it did when the recession began in March
  2001.
• Had the share of Americans working remained at
  its 2000 level, 4.5 million more people would
  have had jobs in March 2005.

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Wages down

• Tepid job growth is tough on the wallets of
  Americas families.
• Wages are lower today than they were in 2002, in
  inflation-adjusted terms.
• Low-wage workers hit harder than higher waged
  workers.

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Rich Got Richer

• In 2003, income for households in the top income
  bracket roseby 1.1 percent, up to 86,867.
• Families whose total income places them the
  bottom fifth of household lost groundas their
  incomes fell by 1.9 percent, to 17, 984.
• Gap between the top and the bottom grew, and is
  in fact higher that any other time since the U.S.
  Census began surveying annual income in 1967.

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Pulling away from middle as well

• And its not just that the rich are getting
  richer while the poor are getting poorer.
• Wealthy households are pulling away from the
  middle as well. For the first time, households at
  the 80th percentile have twice the income of
  those in the middle.

9
Growth in real family income, 1947 to 1973
Source CEPR analysis of Bureau of Labor
Statistics data.
10
Growth in real family income, 1973 to 2003
Source CEPR analysis of Bureau of Labor
Statistics data.
11
Minority and non-native households saw incomes
fall, relative to whites

• African-American households had the lowest median
  income at 29,68962 percent of the median for
  non-Hispanic white households (47,777).
• Among Hispanic households, median income was
  32,997 in 2003, down by 2.6 percent from 2002.
• Households headed by a non-citizen saw income
  fall by 5.6 percent to 32,806.

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Gender gap increased in 2003

• In 2003, full-time women workers earned only 76
  cents for every dollar earned by full-time men,
  down from 77 cents in 2002.
• The gap increased because womens median earnings
  fell by 0.6 percent, down to 30,724, while mens
  median earnings remained unchanged at 40,668.

13
More Poor Americans

• There were 1.3 million more people in poverty in
  2003 and the poverty rate, which rose by 0.4
  percentage points in 2003, now stands at 12.5
  percentincreasing for the third year in a row.
• Poverty rose more even for children, increasing
  from 16.7 percent in 2002 to 17.6 percent in
  2003.
• Poverty rose by 1.4 percentage points among
  female-headed households, up to 28.0 percent.
  This is the highest rate since 1998.

14
Changes in intergenerational mobility
Source Blanden and Machin (2002), Table 5.
15
Income inequality in OECD Countries
Source Mishel, et al. The State of Working
America 2004-05.
16
Health insurance coverage down

• Tying health insurance coverage to employment
  means coverage falls when employment is low.
• An estimated 45.0 million people15.2 percent of
  all Americanswere without health insurance for
  the entire year in 2003, an increase of 1.4
  million from 2002.
• In most years, another 20 percent of Americans go
  without health insurance at some point during the
  year, but are not without coverage the entire
  year.

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Health insurance coverage for those with jobs, as
well

• Even those who had jobs saw their uninsurance
  rate rise from 19.5 percent in 2002 up to 20.2
  percent in 2003, a 0.7 percentage point increase.
  
• Health insurance coverage fell mostly because the
  share of Americans who had employer-based
  coverage at some point during the year declined
  between 2002 and 2003, falling from 61.3 percent
  down to 60.4 percent.

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Children and health insurance coverage

• The drop in employer-provided health insurance
  was even sharper among children, falling by 1.8
  percentage points, from 63.0 percent down to 61.2
  percent.
• Medicaid coverage for children rose by 2.4
  percentage points, however, from 24.0 to 26.4,
  offsetting declines in employer-based coverage.
• The share of children without any health
  insurance remained steady at 11.4 percent.

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Current issues for Medicaid

• Budget proposal 45 billion cuts over the next
  ten years.
• The proposed Medicaid cuts translate into an
  average of 1.2 million fewer children accessing
  the Medicaid system each year between 2006 and
  2010.  
• Medicaid costs less per beneficiary than private
  health insurance plans. The problem is that
  health care costs have been outstripping
  inflation for years.

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