USA Income and Human Development

USA Income and Human Development

According to the Census Bureau, the pretax median household income in 2006 was $48,201. The two-year average ranged from $66,752 in New Jersey to $34,343 in Mississippi. Using purchasing power parity exchange rates, the overall median is similar to the most affluent cluster of developed nations. After having declined sharply throughout the mid 20th century, poverty rates have plateaued since the early 1970s, with roughly 12.3% or 13.3% of Americans below the federally designated poverty line in any given year, with 58.5% spending at least one year below the poverty line at some point in their lives between the ages of 25 and 75. Owing to lackluster expansion since the late 1970s, the U.S. welfare state is now among the most austere in the developed world, reducing relative poverty by roughly 30% and absolute poverty by roughly 40%; considerably less than the mean for rich nations. While the American welfare state preforms well in reducing poverty among the elderly, from an estimated 50% to 10%,it lacks extensive programs geared towards the well-being of the young. A 2007 UNICEF study of children's well-being in twenty-one industrialized nations, covering a broad range of factors, ranked the U.S. next to last.

Despite strong increases in productivity, low unemployment and low inflation, income gains since 1980 have been slower than in pervious decades, less widely shared and accompanied by increased levels of economic insecurity. Between 1947 and 1979, real median income rose by over 80% for all classes, more so for the poor than the rich. While median household income has increased for all classes since 1980, largely owing to more dual earner households, the closing of the gender gap and longer work hours, growth has been slower and strongly titled towards the very top (see graph). As a result, the share of income of the top 1% has doubbled since 1979, leaving the U.S. with the highest level of income inequality among developed nations. While some economists do not see inequality as a considerable problem, most see it as a problem requiring government action. Inequality has been accompanied by a shift in economic risk, from being shared widely among households, firms and government agencies and distributed among large population pools, to increasingly being shouldered by individual households, with income volatility having increased by over 50% since the early 1970s. Wealth, like income, is highly concentrated: The richest 10% of the adult population possesses 69.8% of the country's household wealth, the second-highest share of any democratic developed nation. The top 1% possesses 33.4% of net wealth.

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