New Jerseyans Are Still Struggling

The release this week of the US Census Bureau’s Current Population Survey (CPS) shows just how far New Jerseyans have fallen since the recession began. From 2006-2007 to 2010-2011, New Jersey’s median income decreased by a staggering $7,132 to $63,646, the fourth largest decrease in the nation and about double the amount that the national median income dropped. Meanwhile, the official poverty rate – which doesn’t fully measure the true struggles of working families in high-cost New Jersey – has increased by 2.5 percentage points since the recession began.

The New Jersey report doesn’t break out gains and losses by income level. Nationally, the decline in median income masks that those at the very bottom saw no change, those in the top 20 percent enjoyed significant increases, and the middle class absorbed most of the loss. Given that other independent reports about New Jersey document an erosion of the middle-class, we expect that New Jersey’s large drop in median income is likely consistent with the national pattern but with outsized hits on the middle class. We’ll know for sure when the American Community Survey is released in a few weeks.

In any case, a sudden ten percent drop in median income should set off the alarm bells. It’s clear that New Jerseyans are suffering from the agonizingly slow recovery of the state’s economy. The short- and long-term implications for the state’s future are huge.

Struggling New Jerseyans Could Use a Boost

Average working New Jerseyans have not recovered from the recession. Actually, they are much worse off. There are simple steps the state could take to give these folks a boost and prevent many more from falling into deep poverty. The most effective steps are to raise the minimum wage and fully and immediately restore the state Earned Income Tax Credit (EITC). Both steps not only help struggling families but also give a shot to New Jersey’s economy.

Enacting an increase in the state’s minimum wage from $7.25 to $8.50 per hour and tying future increases to inflation would boost incomes for about a half-million working New Jerseyans, while pumping a quarter of a billion dollars directly into the state’s economy in the first year alone. The Assembly passed this bill in May; the CPS data is just the latest reminder that the Senate and the administration need to act on it this year.

Fully and immediately restoring the state EITC to 25 percent – where it stood before the credit was cut in 2010 – would provide much-needed extra cash to approximately 500,000 families. These are the folks who “play by the rules,” but their wages fall short in high-cost New Jersey. Ronald Reagan thought that the EITC was the most effective anti-poverty tool available, since it rewards work and helps with necessities like shelter, food and transportation. Both houses of the legislature passed a bill to fully and immediately restore EITC. The governor agrees to the importance of EITC, even including it in his new “Middle-Class Reform Agenda.” But he will not restore EITC unless it is part of a broader, more expensive tax-cut plan, effectively holding hard-working families hostage in a political negotiation. The state cannot afford the bigger tax cut package; it can afford to restore EITC.

Health Care Reform is Sorely Needed in New Jersey

The uninsurance rate for persons under 65 increased by another 2 points to 17.6 percent from 2008-2009 to 2010-2011, and New Jersey now has the seventh highest rate in the nation. The number of New Jerseyans without health insurance has increased by 462,000 since 2000. The culprit for the latest rise appears to be employer-based insurance, which decreased in New Jersey by 4.7 percentage points – the sixth highest decrease in the nation, and about double the rate of national decline. As more employers decide not to provide health insurance to their workers, it is clear that health care reform is sorely needed in New Jersey. As the chart below shows, the uninsurance rate increased even in times of prosperity and growth.

The problem is that health coverage costs have doubled since 2000, while most incomes have stayed flat or declined. As insurance coverage drops, costs go up even higher for those still insured as risk is spread across a smaller pool, which leads to even more people dropping coverage. This death spiral will not end until there is a comprehensive solution to this problem. The administration should fully support the Affordable Care Act, agree to its Medicaid expansion provision, and get moving on setting up a state health insurance exchange.

Government Programs Work

While the overall health insurance rate is declining largely due to employers dropping coverage, government programs like Medicaid and NJ FamilyCare are doing a remarkable job of filling in the gaps. Persons under 65 enrolled in Medicaid increased by 2.5 percentage points from 2008-2009 to 2010-2011, and the increase in children enrolled in Medicaid and NJ FamilyCare was even greater: 6.3 percentage points. As a result, since the recession started, the uninsurance rate for children actually dropped from 12.5 percent to 9.3 percent in New Jersey – an impressive accomplishment. We expect even higher enrollment of children when the Affordable Care Act is fully implemented in 2014 because of broadened eligibility standards.

A Note About Census Data

The Current Population Survey Annual Social & Economic Supplement, on which this analysis is based, is used for long-term trends in state poverty and health insurance. It has a small national sample size of 100,000, so caution must be used in interpreting the data at a state level. To reduce the margin of error in the sample size for states, the Census Bureau recommends that the data be averaged for two years and that it only be used if it is statistically significant, a recommendation that this analysis follows.

Within a few weeks, the CPS will be followed by the American Community Survey, which is designed for state and local estimates; comparisons between states; and detailed state characteristics. This is possible because it has a much larger sample size of 3 million. NJPP will provide analysis of this data once it becomes available. While the above trends should remain the same in the ACS, the exact estimates may vary.