Rich/Poor Gap widens

[Stephen Bezruchka]

As everything is blooming, I guess this is no longer news, but it is in
today's NYT.  Stephen

****
NYT April 24, 2002

Income Gap Widens Between Rich and Poor in 5 States and Narrows in 1

By RICHARD W. STEVENSON

WASHINGTON, April 23 -- The growth in income inequality over the last
several decades was particularly pronounced in a handful of states,
including New York and California, while the gap between rich and poor
narrowed in only one, Alaska, a report released today by two liberal
research groups found.

Using Census Bureau data, the two groups, the Center on Budget and Policy
Priorities and the Economic Policy Institute, looked at household incomes
at the peak of each of the last three economic cycles -- in the late
1970's, the late 80's and the late 90's -- and found that gains in the top
20 percent of families during those periods outstripped those in the
bottom 20 percent in 44 states.

In five states -- Arizona, California, New York, Ohio and Wyoming --
income among the bottom 20 percent of households actually fell in
inflation-adjusted terms while it rose rapidly in the top 20 percent.

In New York, for example, average income in the bottom 20 percent of
households fell $794, or 5.9 percent, over the 20 years, to $12,639.
During the same period, average income among the top 20 percent of
households rose $56,812, or 54.1 percent, to $161,858. That meant that by
the late 1990's the average income of the top fifth of households in New
York was nearly 13 times that of the lowest fifth, up from eight times as
much 20 years earlier.

In 39 states, average family income in the bottom 20 percent rose during
the two decades, but at a slower pace than among the top 20 percent.

In four states -- Arkansas, Mississippi, South Carolina and South Dakota
-- incomes at the top and bottom of the scale increased at about the same
rates over the two decades. In Montana, average income did not change much
at either the high or the low end of the scale.

In Alaska, average annual income among the lowest 20 percent of households
rose 22.5 percent over the 20 years, by $3,461, to $18,818. During the
same period, income among the top 20 percent rose 8.7 percent, or $12,318,
to $154,653.

"The year 2000 marked the final year of the longest recovery on record,"
said Jared Bernstein, an economist at the Economic Policy Institute.
"Toward the end of the great 90's boom, we had very low unemployment and
finally saw some long-awaited real gains for families at bottom of income
scale. But it failed to reverse the growth of income inequality."

Elizabeth McNichol, the director of the Center on Budget and Policy
Priorities' State Fiscal Project, said the figures were particularly
important because they come at a time when states are under intense
pressure to close budget gaps because of the weaker economy. She said
states would be making important decisions about money for programs that
have a direct impact on lower income families, including unemployment and
health insurance, child care and transportation.

"State policy makers," Ms. McNichol said, "will make decisions that worsen
the problem of increasing inequality or push back against the trend of
increasing inequality."

Income inequality has long been an ideological flash point. Conservatives
often play down the problem, noting that many people start out in lower
income brackets when they are young, climb into higher brackets as they
move into their prime earning years, and then fall back again when they
retire.

But there is less and less debate between left and right about whether the
phenomenon exists, although there remain vigorous differences of opinion
about how to respond.

"I think they probably have a point that there is a growing distance
between the top and the bottom, and a lot of that is policy driven," said
William Beach, director of the center for data analysis at the Heritage
Foundation, the conservative research group.

Mr. Beach said that while the tax system encourages wealth creation among
people at the top of the income scale, it does little for people at the
low end, especially when it comes to the biggest tax paid by most
low-income people, the payroll tax that pays for Social Security.

Conservatives are strongly backing a push by the Bush administration to
allow workers to invest a part of their Social Security taxes in stocks
and bonds through personal accounts that they would own, a change they say
would particularly benefit low income workers. Most liberals are strongly
opposed.

The authors of the study by the liberal groups said there did not appear
to be one specific characteristic that defined why states like New York
and California saw a substantial increase in the gap between rich and
poor. But they said there were some obvious reasons that applied to at
least some of the five states where the trend was most pronounced.

They included the Wall Street boom of the 1990's in New York and the
technology boom in California. Many of the states lost well-paid
manufacturing jobs over the 20 years and saw a sharp rise in the number of
relatively low-paid service sector jobs. There was an influx of immigrants
into California, New York, Arizona and Ohio, many of whom filled
low-paying jobs.