At last, buoyant economy lifts incomes

For the first time since 1999, Americans have seen an increase in the amount of money in their pockets.

The nation's real median income was up 1.1 percent from 2004 to 2005, reaching more than $46,000, the US Census Bureau reported Tuesday. That's about $500 more than last year.

At the same time, the poverty rate has stabilized, after ticking upward for several years.

The numbers are an indication that the benefits of the economic recovery are finally reaching some in the middle class, economists say, even as they acknowledge that large income disparities among Americans remain.

"As this economic expansion has matured, wage pressures have increased and more is going out to labor," says Anthony Chan, chief economist of JPMorgan Private Client Services in New York. "But we must understand that labor has been squeezed and profit margins have gotten wider. This is not just a result of domestic forces, but mostly due to global forces that in most instances are beyond anyone's control."

Critics note that the middle class is still lagging economically from where it was in 2000, when the median household income was $47,599. That's about $1,300 more than today's median income, or about 3 percent higher. That long-term drop in income came even as productivity growth shot up 17 percent.

"While we certainly applaud the median household getting ahead, it's a day late and a dollar short," says Jared Bernstein, director of the Living Standards Program at the Economic Policy Institute, a nonprofit, nonpartisan think tank in Washington. "You've got to ask yourself, compared to what? A percentage point real gain at this stage of the recovery, which has been stellar in productivity terms, is indicative of a pretty unbalanced recovery."

The Census data also show the poverty rate has stabilized over the past year at about 12 percent.

But an analysis of Census data reveals no virtually no change in the mean income of the bottom 20 percent of income earners over the past 10 years, while those in the top 20 percent saw their incomes increase by 15 percent.

"It says for a long period we have been in an economy where economic growth is not trickling down to the poor," says Sheldon Danziger, a professor of public policy at the University of Michigan in Ann Arbor and co-director of the National Poverty Center. "The good news is poverty didn't go up, but the last time we really got significant drops in poverty was during the economic boom that ended with the recession of 2001."

Another indication of the middle- and working-class economic squeeze is found in the health-insurance data, also released Tuesday by the Census Bureau. The number of people without health insurance in 2005 increased to 46.6 million from 45.3 million the year before. That means that almost 16 percent of Americans don't have health insurance. In 1987, about 13 percent were uninsured.

"It's terrible what's going on. We've added almost 7 million people to the ranks of the uninsured in the last five years," says Dr. Henry Simmons, president of the National Coalition on Health Care in Washington. "We're on a very frightening course, and the problem is worse than the report indicates, because people are paying more out of pocket and getting less coverage."

The Census data found that the percentage of people who got health-insurance coverage through their employers dropped from 2004 to 2005, from 59.8 percent to 59.5 percent. At the same time, the number of people covered by government insurance programs like Medicare and Medicaid rose to 80.2 million, from 79.4 million. But that increase didn't change the share of people covered by the government. That remained steady at 27.3 percent.

The greatest increase among the uninsured was among working adults. Almost 1 million more working people ages 18 to 64 were without health coverage in 2005, bringing the number to 27.3 million. The Census data underscore the challenges the deteriorating healthcare system present to many middle-income Americans, healthcare analysts say. A survey by the Commonwealth Fund earlier this month found: "Three-quarters of working-age adults say the healthcare system needs either fundamental change or complete rebuilding. Just 20 percent said only minor changes are needed."