The Census Bureau just released its report on poverty and health insurance coverage during 2009. As one would expect given the depth of the Great Recession, the results were not pretty. Below are the key findings about poverty from the report.
- The official U.S. poverty rate in 2009 was 14.3 percent -- up from 13.2 percent in 2008. This was the second statistically significant annual increase in the poverty rate since 2004.
- In 2009, 43.6 million people were in poverty, up from 39.8 million in 2008 -- the third consecutive annual increase in the number of people in poverty.
- Between 2008 and 2009, the poverty rate increased for non-Hispanic Whites (from 8.6 percent to 9.4 percent), for Blacks (from 24.7 percent to 25.8 percent), and for Hispanics (from 23.2 percent to 25.3 percent). For Asians, the 2009 poverty rate (12.5 percent) was not statistically different from the 2008 poverty rate.
- The poverty rate in 2009 (14.3 percent) was the highest poverty rate since 1994 but was 8.1 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available.
- The number of people in poverty in 2009 (43.6 million) is the largest number in the 51 years for which poverty estimates have been published.
- Between 2008 and 2009, the poverty rate increased for children under the age of 18 (from 19.0 percent to 20.7 percent) and people aged 18 to 64 (from 11.7 percent to 12.9 percent), but decreased for people aged 65 and older (from 9.7 percent to 8.9 percent).
The overall poverty rate was 14.3%, up from 13.2% in 2008 and from 12.5% in 2007 before the Great Recession got underway. Geographically, since 2007 the poverty rate rose in 43 states and fell in eight (including Washington DC). The eight states with the declines in poverty rates generally had lower than average poverty rates to begin with, but not all of them.
The biggest decline was in Louisiana, where the rate fell to 14.3%, a drop of 1.8% from 2007 levels. No other state had a drop of more than 0.5%, but given the overall national trends and the effects of the worst recession since WWII, any decline is impressive. The other states recording a decline in their poverty rate were Connecticut, (-0.5% to 8.4%), Vermont (-0.5% to 9.4%), Oklahoma (-0.5% to 12.9%), Massachusetts (-0.4% to 10.8%), South Carolina (-0.4% to 13.7%), Wisconsin (-0.2% to 10.8%) and Washington DC (-0.1% to 17.9%).
Arizona had the largest increase in the poverty rate, up 6.9% to 21.0%. New Mexico followed with a 5.3% rise to 19.3%. Other states with big increases included Arkansas (+5.1% to 18.9%), Hawaii (+5.0% to 12.5%), Georgia (+4.8% to 18.4%) and South Dakota (+4.7% to 14.1%). The increase in South Dakota is particularly surprising since it has one of the lowest unemployment rates in the country.
The highest poverty rates were generally found in the South and Southwest, while the lowest were in the Northeast. Mississippi has the highest rate at 23.1% followed by Arizona (21.2%), New Mexico (19.3%) Arkansas (18.9%) and Georgia (18.4%). The lowest rate was in New Hampshire (7.8%) followed by Connecticut (8.4%), Wyoming (9.2%) , New Jersey (9.3%) and Vermont (9.4%).
In other words, one in seven people in this country are in poverty, which is defined for 2009 as an income of less than $21,954 for a family of four. Just for a point of reference, in most states the cap on unemployment benefits is $400 per week, or 60% of your salary while employed, whichever is less. The $400 per week level works out to be $20,800 per year. At the current minimum wage of $7.25, one would have to work more than 58 hours per week, 52 weeks a year to raise a family of four above the poverty line.
In calculating the poverty rate, the government includes all sources of cash, except for capital gains, but it does not count non-cash help such as food stamps and Section 8 housing subsidies. Capital gains are probably not a major issue for those near the poverty line (with the possible exception of some retired seniors). For children, more than one in five are living in poverty. For Blacks and Hispanics, the rate (for all, not just for kids) is more than one in four.
The only real good news in the report is that the poverty rate for senior citizens is relatively low at 8.9% and falling. The graph below shows the number of people in poverty. The number of poor elderly in the early 1960's is not available -- not zero as the graph seems to indicate.
The second graph shows the percentage of families in poverty over time. Note that the poverty rate for families is significantly below the overall poverty rate, but that is entirely due to male-headed (OK that's the way they put it, not an indication that the male is the more important one in a married household) households. The poverty rate for female-headed households is substantially above the overall rate.
The country made substantial progress in eliminating poverty in the 1960's. In short, the war on poverty was at least a partial success. However, since 1969 there has been little net gain in reducing the poverty rate. When the data was first collected in 1959, 18.5% of all families were in poverty. Over the next decade the rate plunged to 9.7% in 1969. Slower progress was made in the 1970's and a decade later the rate was down to 9.2%.
The 1980's saw a reversal of the trend with the rate rising to 10.3% by 1989. It hit a high of 12.3% in 1993. By 1999 it was back down to 9.3% on its way to an all-time low of 8.7% in 2000. Most of the gains that the Clinton era brought in reducing poverty have now been erased, and the rate is back up to 11.1%.
Among female-headed households, the rates follow a similar pattern but are consistently far higher. In 1959, the rate was 42.6%, and by 1969 it had been cut to 32.7%. Slower progress in the 1970's brought the rate down to 30.4%. The strong economy in the 1980's did not help poor single-mom households, and the rate rose back up to 32.2% in 1989. The rate plunged during the 1990's and in 1999 it was 29.9%. The all-time low was hit in 2000 at 25.4%. Now we are back up to 29.9%.
The Health Insurance numbers are equally alarming. The Health Care reform was not passed until well into 2010, and most of its major provisions have yet to kick in. We will probably see a small improvement in the health insurance coverage numbers in 2010, and more progress in the years to come. Still, these numbers highlight why reforming health care was so important.
- The number of people with health insurance decreased from 255.1 million in 2008 to 253.6 million in 2009. Since 1987, the first year that comparable health insurance data were collected, this is the first year that the number of people with health insurance has decreased.
- Between 2008 and 2009, the number of people covered by private health insurance decreased from 201.0 million to 194.5 million, while the number covered by government health insurance climbed from 87.4 million to 93.2 million. The number covered by employment-based health insurance declined from 176.3 million to 169.7 million. The number with Medicaid coverage increased from 42.6 million to 47.8 million.
- Comparable health insurance data were first collected in 1987. The percentage of people covered by private insurance (63.9 percent) is the lowest since that year, as is the percentage of people covered by employment-based insurance (55.8 percent). In contrast, the percentage of people covered by government health insurance programs (30.6 percent) is the highest since 1987, as is the percentage covered by Medicaid (15.7 percent).
- In 2009, 10.0 percent (7.5 million) of children under 18 were without health insurance. Neither estimate is significantly different from the corresponding 2008 estimate.
- The uninsured rate for children in poverty (15.1 percent) was greater than the rate for all children.
- In 2009, the uninsured rates decreased as household income increased: from 26.6 percent for those in households with annual incomes less than $25,000 to 9.1 percent in households with incomes of $75,000 or more.
For the first time, the overall number of people with health insurance in the country declined. While a 0.6% decline is not huge, keep in mind that the population of the country is growing. The number of people with private health insurance coverage is falling even faster, down by 3.2% for the year. If not for the subsidy to help the uninsured keep their health care coverage through COBRA, the decline would have been much steeper.
With higher unemployment, the number of people who have health insurance through their jobs fell by 3.7%. Even with Medicaid, which has been growing rapidly, up 12.2% in a single year, the poor are much more likely than the middle class to be without health care coverage.
Since WWII health insurance coverage has, for the most part, been tied to employment. The Health Care Reform bill really didn't change that, but it will help those that fall between the cracks of the system. For the most part they will end up getting their health care coverage through the big insurance companies like WellPoint (WLP) and Aetna (AET) that now provide most of the private coverage. People will be required to have health insurance, and will be subsidized if they can't afford it.
Also, the health insurance companies will not be able to deny coverage to people based on pre-existing conditions, nor make up excuses to drop people from coverage as soon as they get sick. Still, government-provided health coverage is becoming a bigger and bigger part of the mix. The decline in employment-based coverage has been relentless, and it is down over 8 points since the statistics on coverage first started in 1987.
In total, 50.7 million people did not have health insurance in 2009, or 16.7% of the population, up from 46.3 million in 2008. That is despite an increase of 5.8 million people getting government coverage through Medicare, Medicaid or the Veterans Administration. Yes, if you don't have health coverage and go to the hospital emergency room, they have to treat you until you are stabilized. However, that will not stop the hospital from billing you for the services and forcing you into bankruptcy. That sword of Damocles is hanging over the head of one in six Americans. Fortunately, for most of them, help is on the way.
This is still a wealthy country, but the distribution of income has been becoming more and more third-world-like. The result is that we have a very high percentage of people in poverty relative to most other advanced countries.
The best single number to measure income inequality is known as the Gini index. It ranges from 0.0, in a communist utopia where all the income is perfectly evenly distributed, to 1.0 if you had a country where a single person or family got all the income (Czarist Russia is about the closest historical example I can think of for a country approaching a Gini index of 1.0).
For the U.S. the Gini index is now 0.468. In that respect, we are far more like Mexico, our neighbor to the south, with a Gini index of 0.482, than we are to Canada, our neighbor to the north with a Gini index of 0.321. The European Union has a Gini index of 0.31, and the most egalitarian country in the world is Sweden with a Gini index of 0.23.
The countries closest to the U.S. were Rwanda (0.468) and Nepal (0.472). Just something to keep in mind as the debate on letting the tax cuts for the highest income people in the country expire, while keeping the tax rates where they are for the bottom 97% of the country.
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.