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Income and Poverty in 2010

U.S. incomes decline and poverty rises – but Arkansas fares better than most other states

Yesterday’s report from the Census Bureau showed that real household median income in the U.S. declined by 2.3% in 2010, and the share of the population below the poverty level rose to 15.1%–the highest level since 1993.  Clearly, the severity of the 2008-09 recession and the sluggish pace of the subsequent recovery are continuing to suppress standards of living.  Nevertheless, there are caveats to the coverage of the Census statistics that moderate some of the dismal interpretations of these statistics.  Moreover, the data for Arkansas contain some relatively positive news.

One important detail about the Census Bureau’s measurement of income is that it includes only “money income.”  It does not include government transfers such as housing subsidies, the value of publicly provided medical care, and food stamps.  The value of these transfers has grown rapidly in recent years, particularly since the onset of the recession.  If we consider overall standards of living — especially for the lower-income segment of households — comparisons to previous years’ money-income figures tell only part of the story.

Arkansas has long been among the lowest-income states in the nation.  Yesterday’s report did not change that generalization.  Median household income in Arkansas was $38,571, the second lowest in the nation.  Given the uncertainty associated with sampling and measurement error, Arkansas is one of nine states in which a three-year average of median household income is not significantly different from the lowest level (statistically speaking). 

However, in inflation adjusted terms, the 2010 income figure represents an increase of 3.8% compared to the previous year.  Arkansas was one of only 22 states to see an increase, and in fact, ranked as the 7th highest growth rate among the 50 states plus the District of Columbia.

The Poverty Rate in Arkansas was 15.5% in 2010 — nearly equal to the national average.  In comparison to 2009, the poverty rate in Arkansas was down from 18.9%.   Arkansas was one of only 16 states to see a decline, and the drop of 3.4 percentage points was the largest in the nation.  There is a range of statistical uncertainty in the poverty numbers as well, but using a 2-year moving average measure, the Arkansas’ poverty rate was basically unchanged from 2008-09 to 2009-10.

One important factor to consider when comparing income and poverty in Arkansas to the rest of the country is differences in cost-of-living.  The median income statistics and poverty levels are adjusted for inflation, but not for differences in prices across states and regions.  According to the most recent statistics on relative cost of living indexes, Arkansas has the fifth-lowest cost of living in the nation, with the general price level equal to about 91.4% of the national average.  If the income and poverty statistics were adjusted for differences in prices, the standard of living in Arkansas is higher than indicated by the uniform national statistics (see previous post:  The Poverty Rate and the Cost of Living).