The latest batch of data released by the Census Bureau provides a new perspective on the impacts of the Great Recession. The overall trend lines look continue to look particularly poor for families up and down the economic ladder. In the aggregate, income is down and poverty is up.
For the average family, income declined 2.3% in real terms over the last year. We can no longer say that wages are stagnant because, in fact, they are going down. And it’s getting worse for those at the bottom. The official poverty rate in 2010 topped 15%, up from 14.3 last year and the fourth consecutive year where the rate increased. Last year, 46.2 million people were classified as poor, an increase of 2.6 million people.
We’ve had other recessions in the last fifty years but the impacts of this one, which was supposed to have officially ended in 2009, is turning out to be especially severe. Compared to ten other recessions since the late 1940s, income declines and poverty increases have never been as pronounced in the subsequent year as this time around. There’s little evidence around right now that the economy is on a sustained path toward recovery. Instead, we are gathering more and more data which points to extended economic hardship for families across the country.
It’s frustrating to digest this information but not see any concerted policy action designed to reverse these trends. Meanwhile, the evidence mounts that our society is no longer providing the type of opportunities we have come to expect as Americans. It feels like entire cohorts are being left to fend for themselves.
The rising child poverty numbers are simply tragic; this rate rose last year to 22%. The social costs of this level of child poverty will not be felt today, they will rise substantially over time. A credible estimate is that we should expect child poverty to cost the economy almost $500 billion a year in lost productivity, increased health expenditures, and other factors.
Another set of people we should be particularly concerned about is young adults. They had the worst decline in income as a demographic group, lowering their income 9.3% over the previous year. To cope with dimming economic prospects, young adults have been forced to double-up with other family members. The official definition of a “doubled-up” household is one that includes at least one “additional” adult, who is older than 18 and not enrolled in school but is not the householder, spouse, or “cohabiting partner.”
Over the course of the recession, the number and share of doubled-up households has increased dramatically, rising over 25% among young adults. Last year, 14.2 percent of people ages 25 to 34 lived with their parents, up two percentage points since the start of the recession. Most are not counted as poor, but if their own income status were considered, over 45% would have incomes below the poverty threshold. On top of that, we can infer that many of the doubled up are also saddled with rising levels of student loan debt. It’s been pretty tough out there for recent college grads.
Now, we certainly can celebrate the ingenuity of families who come together in tough times, but we need to recognize the hole being dug for the demographic cohorts we traditionally count on to invigorate our economy.
Incomes certainly need to go up, along with job opportunities. That is a fundamental precondition for future prosperity. But to forge new pathways toward economic security, millions of families need to rebuild their balance sheets. They must be able to build up a stock of assets that they can access in times of need or as strategic investments. This underscores the necessity of responding to this recession (and these rising poverty numbers) by crafting a complementary set of policies that promote savings and asset building over the long term.