|Question||Why is the recent increase in median household income a misleading statistic when attempting to measure the change in economic inequality?
Household Incomes Rise but…
As household income crept higher last year, more people in each household had to work because median earnings for those working full-time year round actually fell. As the poverty rate edged lower, the percent of Americans living below the poverty line slipped to 12.3 percent in 2006.
The poverty threshold is based on personal data and not on the local cost of living, so the poverty threshold is the same in rural towns and large cities. Also it does not reflect the value of household subsidies such as food stamps, tax credits, Medicaid, which are intended to alleviate the effects of poverty. Over the years, the gap between high-income and low-income households has grown, but income inequality remained unchanged between 2005 and 2006.