Poverty and the Real Median Income

by cactus

Poverty and the Real Median Income

I want to take a break from my usual taxes and economic growth beat, and I figured why not look at poverty and income. Normally I’d pull the data from the Census site, but for some reason it was down when I went looking (that’s right, folks, around here we get our data is fresh from the tree) so I settled for the offerings from the Statistical Abstract of the United States. (Yes, I know, it is compiled by the Census, but for some reason that site was up.) All that means is that I don’t have the latest year of data, so y’all have my apologies now.

The following graph shows the percentage of people below 125% of the poverty line on the left y-axis and the real median income in 2007 for males and for females on the right y-axis.

The correlation between female real median income and the percentage of people living in poverty (OK, 125% of poverty) is about -64%, but the correlation between the male real median income and the percentage of people living (grumble) within 125% of poverty is about -92%. Given that the real female median income is about $21K a year, one figures a substantial number of women are making so little that there isn’t much that is going to boost them into the ranks of the well-to-do despite what the folks at Cato or Heritage peddle.

So let’s drop the female median income, and focus in on male real median income and poverty. They seem to be inversely, as the graph below shows:

I took the liberty of color coding a few periods. There are three periods where income grew and poverty fell:

1. very rapid improvement through 1973
2. so-so improvement from 1982 to 1989
3. pretty good growth from 1993 to 2000

The data doesn’t stretch back far enough to say precisely when the first period began, but it seems to be running out of gas after the political transition in 1969, and completely dies with the disastrous year of 1973. The third period definitely seems to begin and end with Clinton. In both instances, there was a strong commitment to doing something about poverty (from JFK, LBJ, and Clinton).

So what’s up with the second period? 82 is when Volker finally killed inflation, and good things started (finally) to happen in the economy again. But 1989 or thereabouts did not mark the end of Reaganomics (Bush Sr. tried to continue it) or the Volker administration. So what changed? Is it possible the real median income and poverty reduction benefits observed from 82 to 87 just kind of along for the ride that resulted from the death of inflation, and that by itself could only produce so much benefit? Or did Bush Sr. really change something major around 1989? cdThoughts?

Next week – more on taxes and economic growth, guaranteed to be contentious!!!