Published: January 23, 2006
by: Jan Richter
We expect recessions to hurt. We don’t expect good times to hurt too.
But here we are in 2006, over four years into the economic recovery that began in late 2001, and average families – working families in the low-wage workforce and middle-income families – have not yet recovered the ground they lost.
At the same time that the uneven recovery has been taking its toll on ordinary and needy families, Congressional leaders and the Bush administration have continued to push for tax breaks and budget cuts that will affect low-income children.
An analysis by the Congressional Budget Office documents that the newly enacted 2001 and 2003 “tax-cut” laws actually gave the poorest one-fifth of the country, almost 23 million households, a tax hike in 2003 [1], while those with low and modest incomes got refunds from $100 to $300. The real winners were the million households making over $700,000 in after-tax income. They got an additional tax cut worth $53,300 in 2003.
Congress is poised to vote on February 1, 2006 on a major budget bill that will cut funding for children’s health care, child care assistance, student loans, and child support enforcement. Later in February Congress will vote on another major tax bill that will provide more tax breaks that primarily benefit only one out of a hundred taxpayers [2].
In the first years of the 21st century, wages have failed to keep pace with inflation or productivity and job growth has failed to keep pace with the growth of the population. This is an economic recovery that has worked very well for those at the top but it has not worked for the majority of families. It has been especially cruel to those with the least.
Profits are up but the wages and incomes of average Americans are stagnant [3] or down. In constant dollars, the average household income dropped 4 percent, from $44,389 in 1999 to $46,129 in 2004.
Rising housing, utility costs and health care costs have also made it even harder for families to get by, let alone get ahead.
Since 2000 the percentage of people with employer-provided health insurance has been falling and family health care costs have risen over 40 percent [4].
The share of families with children among people seeking food assistance in the nation’s [5] (p. 96) cities steadily declined from 1990 to 2002, but began to rise again in 2002, from 48 percent to 54 percent in 2005.
While some cities have been successful in reducing homelessness among families with children [6] (p. 96), many families are feeling the squeeze of rising housing costs. In 2003, 60 percent of the nation’s low-income children lived in families spending more than 30 percent of their income on housing [7].
In the United States there is not a single rural county or metropolitan area where a worker with a full-time minimum-wage job can afford even a one-bedroom unit priced at the fair market rent [8].
Teen births are down and births to unmarried mothers, divorces and the share of single-parent families have leveled off. (Kids Count 2004, pp. 43 and 44). Workforce participation among single parents has increased, but much of the growth has been in poverty-wage jobs.
And workers have increased productivity – 13.5 percent since the start of the recovery in November, 2001 – but the rewards from a more productive workforce have been going into corporate profits, not wages. About 22 percent of corporate income is distributed as corporate profits in most recovery periods. In this economic recovery, corporate profits have taken 35 percent of the total income growth, shortchanging wage growth [9].
For many low and moderate-income families, credit card debt, often incurred to cover living expenses during a layoff or medical expenses during an expensive illness, has become the de facto safety net, as unemployment insurance, health benefits and public programs have eroded [10].
The level of household debt is also the highest ever measured –mortgage and consumer debt is now 115% of after-tax income, twice the level of 30 years ago. Families are paying an all-time high of 13.6% of their after-tax income to pay off their debts and the personal savings rate is negative [11] for the first time since World War II.
Speaking of debt, the 2005 bankruptcy law, which went into effect October 17, makes it harder for families suffering from economic hardships to write off their debt [12], most of which is incurred after job loss, divorce and medical crises.
The average family is struggling to make it from paycheck to paycheck, delaying or not getting needed medical care, and falling deeper in debt to cover necessities. And when families struggle, so do kids.
Jan Richter is the Advocacy Director for Connect for Kids.
http://www.connectforkids.org/node/3858
Links:
[1] http://www.cbo.gov/ftpdocs/70xx/doc7000/12-29-FedTaxRates.pdf
[2] http://www.connectforkids.org/action_central
[3] http://www.epi.org/content.cfm/pm110
[4] http://www.epi.org/content.cfm/pm110
[5] http://www.usmayors.org/uscm/hungersurvey/2005/HH2005FINAL.pdf
[6] http://www.usmayors.org/uscm/hungersurvey/2005/HH2005FINAL.pdf
[7] http://www.nlihc.org/oor2005/
[8] http://www.nlihc.org/oor2005/
[9] http://www.epi.org/content.cfm/pm110
[10] http://www.demos.org/pubs/psn_execsummary.pdf
[11] http://www.epi.org/content.cfm/pm110
[12] http://www.faireconomy.org/press/2005/MoralBankruptcy.html