Household incomes rise but ...

Census Bureau reports slight rise in 2006 incomes but as a group, households aren't doing as well as before the 2001 recession.

By Jeanne Sahadi, senior writer

NEW YORK ( -- Household income crept higher and the poverty rate edged lower last year, the government said Tuesday, while the number of Americans without health insurance rose by 2.2 million to 47 million people.

Median household income rose 0.7 percent to $48,200, adjusted for inflation, the Census Bureau reported. But more people had to be at work in each household to get there.

That's because median earnings for individuals working full-time year-round actually fell for the third consecutive year. For men, earnings slipped 1.1 percent to a median of $42,300, while for women, earnings sank 1.2 percent to a median of $32,500.

The percent of Americans living below the poverty line, meanwhile, slipped to 12.3 percent in 2006, or about 36.5 million people, from 12.6 percent, or 37 million, the year before. The drop in the number of people living in poverty is not a statistically significant change, but the rate of decline is, marking the first drop since 2000.

The rise in household income and decline in poverty are positive developments, and they were expected given low unemployment last year. But U.S. households have yet to return to the higher income and lower poverty levels they reached during the last recession.

"In 2006, the poverty rate remained higher, and median income for non-elderly households remained $1,300 lower, than in 2001, when the last recession hit bottom," said Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities in a statement. "It is virtually unprecedented for poverty to be higher and the income of working-age households lower in the fifth year of a recovery than in the last year of the previous recession."

The poverty threshold varies based on age and household size. A single person under 65 is considered poor if his income is below $10,488 while a family of four with two kids under 18 is considered poor if their income falls below $20,444.

Poverty thresholds are not adjusted for geographical differences in cost of living so the same threshold applies in Brownsville, Texas, as it does in New York City. Nor do they reflect the value of household subsidies intended to alleviate the effects of poverty (e.g., food stamps, tax credits, Medicaid).

All told, in terms of income and poverty, "the health of the economy shined through, just not as brightly as I would have expected," said Mark Zandi, chief economist and co-founder of Moody's "That the job market was tight as a drum in 2006 and we only got 0.7 percent rise in median income was disappointing. It colors my expectations for median income growth going forward."

But Zandi doesn't think fiscal policies are necessarily to blame for the slow financial progress among middle-income and low-income Americans five-plus years into an economic recovery.

While "fiscal policy hasn't helped," Zandi noted that globalization and technological change are the major causes since they enhance income and wealth of those with skills and education, but not others.

The gap between high-income and low-income households has grown over the years, but income inequality remained statistically unchanged between 2005 and 2006, according to the bureau. The top 20 percent of households (those with incomes over $97,000) took home 50.5 percent of all income, while the bottom 20 percent (those making less than $20,000) took home 3.4 percent.

More uninsured

When it comes to health insurance, the ranks of the haves and have-nots widened for the second straight year. The number of Americans not covered by health insurance rose to 47 million in 2006 - or 15.8 percent of the population - from 44.8 million, or 15.3 percent, the year before, according to the bureau.

The states with the most number of uninsured on average are Texas, New Mexico, Florida, Arizona, Oklahoma, Louisiana and California.

Among those who do have health insurance, the total number of people with policies rose by 800,000 to 249.8 million. But the percentage of people covered through their employers fell to 59.7 percent from 60.2 percent, as did the percentage of those covered by government health programs - down to 27 percent from 27.3 percent.

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