Poverty, Income, and Health Insurance: What to Expect and Why It Really Matters

By Jared Bernstein, Huffington Post. Posted August 21, 2008.

Every year around this time, the Census Bureau releases one of the most important government reports: the annual status of poverty, household income, and health insurance coverage. The release is scheduled for the morning of August 26th at 10; you can usually watch the press conference over the web if that kind of thing turns you on as much as it does me.

With your approval, I'd like to take you on a pre-release tour of these data, discussing what to expect -- slightly lower poverty and higher median income; less health coverage -- and, more importantly, the context within which to interpret these results.

While 2007 probably seems just so last year, the release is uniquely important ... even historical. That's because 2007 was almost certainly the last year of the 2000s recovery, and the Census release enables us, for the first time, to evaluate how the living standards of middle- and low-income families fared over this recovery. It's not likely to be pretty.

What's that? You already know how they/you did? Good point. But this makes it official, and the release, which generally gets front page status for a day or two, gives us a chance to reflect on an economic expansion that left most people behind. It also happens to be a presidential election year, with the economy front and center in precisely the manner invoked by these data. As I've said in this space before, the candidate who understands this disconnect between growth and living standards, and whose ideas are best crafted to reconnect them ... that's the one who should win.

The first thing you should know about these data is that they refer to calendar year 2007, as the Census Bureau treats insurance coverage and poverty as annual concepts for this report: if your family income was below the official threshold last year, or you went without any kind of health coverage, public or private, for the whole year, they count you as poor or uninsured.

There are known glitches: the poverty concept is way outdated, and is generally agreed to understate the degree of actual material deprivation. In 2006, 12.3% of the population -- 36.5 million people -- were officially poor. But when a couple of statistical scholars put together a more comprehensive, alternative measure, they found a 2006 poverty rate of 17.7%, adding 16 million more persons to the poverty rolls compared to the official measure.

Also, the income measure is pretax, and since taxes have been cut a lot in recent years, a post-tax measure would show more income growth, though this is less important for the middle-class relative to the rich, whose taxes have been cut the most.

So, with all that throat-clearing out of the way, here's what to look for. Wait ... one more caveat. When it comes to forecasting economic reports, econometricians are no better than weather-persons. So, if I get these right, tell everyone. If I'm way off, we never spoke.

• Poverty probably fell a bit, I'd say to 12.1% (from 12.3% in 2006).
• Median household income, adjusted for inflation, probably rose about 1%.
• There are likely more uninsured people, especially due to lost employer coverage.

If the economy's in the tank, why do I think things improved? Because for most of 2007, the economy wasn't in the shape it's in now, and usually -- not always -- in the last year of an expansion, poverty goes down. The key determinants tend to be jobs, wages, and inflation, and all were actually in decent territory until the last quarter of last year. However, things have of course deteriorated since -- we'll get to the 2008 story in a moment.

But here's the first contextual kicker: assuming I'm right about the direction of these results, before anyone uncorks the champagne over the first two of them, consider these facts. Compared to the peak of the last business cycle in the year 2000:

• A larger share of the population will be poor.
• Real median household income will be lower.
• There will be millions more people without health coverage.

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Jared Bernstein is a senior economist and director of the Living Standards Program at the Economic Policy Institute in Washington D.C.