Gap between U.S. rich and poor has grown wider, report says

Alaska among best states for those with low incomes

Posted: Tuesday, January 18, 2000

WASHINGTON - In most states the income gap between upper income families and the rest of society has grown sharply higher over the last decade, a new report shows.

Alaska, however, was among those states that defied the national trend. The best states for the poor during the 1990s were Missouri, Arkansas, South Carolina, Louisiana, Mississippi, Tennessee, Alaska, Indiana and Colorado, which actually saw incomes for the poor grow as fast or faster than the richest fifth.

A state-by-state analysis of Census Bureau data revealed that in 37 states, the difference in household income between the richest fifth and poorest fifth of families grew substantially over the past decade. The study was conducted by the Economic Policy Institute and the Center for Budget and Policy Priorities

In 43 states, the middle fifth of families also lost ground compared to the top fifth of the population, but not nearly as much as the poorest families, the study showed.

``The benefits of this booming economy are not being evenly distributed,'' said Jared Bernstein, an economist at the Economic Policy Institute. ``The middle class is working more than ever, but their returns from that contribution are much less than the 20 percent increase in productivity in this decade suggests it should be. This isn't a recipe for a satisfied middle class over the long run.''

Nationwide, the poorest fifth of families posted an average $103 or 0.8 percent gain in family income, which excluded noncash subsidies such as food stamps but did include all government grants and the Earned Income Tax Credit. The middle group saw its average household income rise $779 or 1.7 percent, while the top fifth of society saw its average family income rise $17,867 or 14.9 percent.

The study compared the annual average incomes for families from 1988 to 1990 with the period from 1996 to 1998, the latest data available from the Census Bureau's Current Population Survey.

Just as income disparity is growing nationwide, there is growing inequality among the states. Northeastern states and states with large immigrant populations appeared to have the largest increases in inequality between the richest and poorest groups.

Connecticut and Rhode Island were the worst states for the poor, where low-income families lost 25.9 percent and 21.8 percent of income, respectively, while the richest fifth posted hefty 17.7 percent and 28.1 percent gains. Both states also lost population in this decade.

The study's analysts suggested the two increases in the minimum wage, the low unemployment rate and federal tax policies such as the Earned Income Tax Credit had the most impact in those states because of their relatively low wage scales. ``Those states still have the greatest inequality, so it is a good news, bad news story,'' Bernstein said.

The middle class in some states with early primaries got hammered during the 1990s, which could influence voting patterns. New Hampshire, for instance, saw its middle fifth of families lose $5,821 or 10 percent of household income during the period, the worst performance of any state. The middle fifth of families also grew poorer in Wyoming, Hawaii, Arizona, Vermont, New York, Connecticut, Maine, Massachusetts, California, New Jersey and Montana.

The study also compared the late 1970s to the late 1990s. Over those two decades, the poorest fifth of families lost 6.5 percent of household income while the richest fifth posted a 33.3 percent gain. The middle fifth eked out a 5.1 percent gain.

Economists have offered numerous theories for the growth in inequality. The decline of manufacturing in the 1980s was largely responsible in that decade, while rising salaries earned by people with higher education and skill has maintained and even widened the gap in the 1990s, some say.

Others point to sociological factors like the maturation of women's participation in the work force. A generation ago, many two-earner households were made up of a high-income male and a low or moderate-income female. Today, there is a growing number of households with two high-wage workers, whose combined family incomes have increased the gap between rich and poor.

Social observers remain divided on the significance of growing inequality. ``When all boats are rising, one response is not to care,'' said Rebecca Blank, dean of the Ford School of Public Policy at the University of Michigan and a former member of President Clinton's Council of Economic Advisers. ``But in the long run, it affects our ability to hold a common civic conversation, and that is a concern.''

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