Economic Research and Data

Economic Trends

Filling you in on the current state of the economy

10.01.07

Regional Activity

Poverty and Income in the Fourth District

Each August, the U.S. Census Bureau reports new data on poverty and income for the nation, the states, and cities from its Current Population Survey. This is the official source of poverty statistics for the United States, and it is used as a basis for the distribution of public spending and in making public policy. Families and individuals are classified as living in poverty if their total family income or unrelated individual income was less than the poverty threshold specified for the applicable family size, the age of the head of household, and the number of related children who are under 18 and living there. For example, in 2006, the poverty threshold for a four-person family unit with two children was $20,444 and for an individual, $10,294.

In 2006, 12.3 percent of the U.S. population lived in poverty. Mississippi has the highest poverty rate, while the New England states of New Hampshire, Vermont, and Connecticut have the lowest. The four states of the Fourth District stack up as follows: Ohio (12.1 percent) and Pennsylvania (11.3 percent) have somewhat lower poverty rates than the national rate, but Kentucky (16.8 percent) and West Virginia (15.3 percent) have much higher poverty rates and are among the top 10 poorest states in the nation.

Looking at poverty rates over the past 16-year period, we note that Ohio and Pennsylvania have achieved lower poverty rates than the nation, and they have experienced similar trends. The highest poverty rates were seen between 1993 and 1994. A downward trend followed until 2001–2002, when poverty rates began to rise again. In fact, today Ohio’s and Pennsylvania’s poverty rates are almost the same as they were back in 1990. Kentucky loosely follows this pattern as well; its poverty rate reached a high in 1993, it declined to its lowest level in 1999, and then rose again thereafter. Except for a brief dip in Kentucky’s poverty rate in 1999, poverty rates in Kentucky and West Virginia remained well above those of Ohio and Pennsylvania throughout the entire period.


           
For 2006, the median household income for the nation was $48,201. The only state in the Fourth District to have a median household income higher than the nation was Pennsylvania, at $48,477. Ohio’s median household came in at $45,900, which ranks it thirtieth among the states. In Kentucky ($39,485) and West Virginia ($38,419), the median household earns substantially less than the national median household income.

The inflation adjusted median household income for the nation increased from $44,782 to $48,201 over the 1990–2006 period. Ohio and Pennsylvania follow the trend in the national median household income up through 2004. After 2004, Ohio’s income growth falters while Pennsylvania’s continues to track the nation’s. Kentucky and West Virginia also experience gains in real household income over the period, though Kentucky’s growth rate after the beginning 1990 is quite modest. Similar to Ohio, Kentucky has recently experienced a substantial decline in real median household income.

New data are also available on poverty and income for metropolitan statistical areas (MSAs) and cities from the 2006 American Community Survey. Looking at the large cities in the Fourth District—Cincinnati, Cleveland, Columbus, and Pittsburgh—we see that these cities all have poverty rates exceeding 20 percent. Cleveland and Cincinnati have particularly high rates, with both cities ranked in the top-five poorest large cities in the nation. These four largest cities of the district all have very similar poverty rates, with Columbus, somewhat surprisingly, having the highest of all at 13.1 percent. With regards to the smaller cities in the district, both Youngstown and Dayton have very high poverty rates—exceeding 28 percent. Similar to their larger counterparts, these cities have poverty rates that are much higher within the cities’ official borders than in the broader metropolitan areas surrounding them. The exception is Lexington, Kentucky, where the poverty rate is quite similar for both the city and MSA. This is due to the fact that City of Lexington makes up a large part of the Lexington-Fayette MSA.

Among large Fourth District cities, Columbus has the highest median household income at $40,074, while Cleveland has the lowest at $26,535. The latest American Community Survey report shows that the City of Cleveland has the lowest median household income for places with 250,000 or more people. At the metropolitan level, the differences are more muted, with Cincinnati ($50,346) and Columbus ($49,920) at the high end and Pittsburgh ($43,260) at the low end. The median household income in the Cleveland MSA is $45,925; Cleveland also has the largest disparity in the Fourth District between the level of income in the city and the MSA ($19,390).

Economic Trends is published by the Research Department of the Federal Reserve Bank of Cleveland.

Views stated in Economic Trends are those of individuals in the Research Department and not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System. Materials may be reprinted provided that the source is credited.

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