Income Gap More Like An Abyss Difference Between Rich, Poor Has Been Growing Since 1968, But Took Even More Dramatic Leap In ‘93

The rich are getting richer and the poor are getting poorer - faster, the Census Bureau reported Wednesday.

A new Census Bureau study of U.S. income distribution confirmed earlier studies showing the gap between rich and poor has been growing since 1968.

But the new report says the gap widened dramatically in 1993 and stayed there in 1994, the last year covered by the study.

Between 1968 and 1992 the Census Bureau measured a 16.1 percent increase in income inequality in the United States. But the latest analysis, reflecting data from 1993 and 1994, shows a 22.4 percent expansion in the gap since 1968.

The 1993-1994 spurt appears to reflect the fact that the wealthier were able to recover faster from the economic recession of the early 1990s, according to Gary Burtless, an economist at the Brookings Institution, an independent think tank.

“The rebound in incomes that occurred during the recovery from the 1990-1991 recession has been exceptionally concentrated in high-income households,” said Burtless, whose research on income disparity was cited in the Census Bureau report.

Analysts say changes in the labor market - especially corporate downsizing and the drop in demand for lower skilled workers in a technological age - are major contributors to the growing income inequality.

“Technology is the major factor. We’ve put a premium on hiring people who are highly skilled,” said Isabel Sawhill, a senior fellow at the Urban Institute, a Washington, D.C., think tank. “The rewards for those at the top are greater than ever, but getting what you need to make it to make it to the top has become harder than ever.”

More single-parent families and an increasingly competitive global labor market also have contributed to a bigger split between the rich and poor, analysts say.

The long-term growth in income disparity stems from changes in the American household since the 1940s and the problems that unskilled workers face today in the global economy, according to economists.

For example, higher divorce rates have caused a decrease in the number of married couples living with their children, typically the wealthiest households in the United States. As a result, the Census Bureau has noted an increase in single-person households that tend to have lower incomes.

“If you have more people living alone, not in married couple households … you have more low income households than you had before,” said Daniel H. Weinberg, chief of the Census Bureau’s housing and household economics statistics division who authored the report.

Furthermore, the income at these lower levels has decreased as a result of the growth of the global economy.

Cheap foreign labor has lessened the demand for unskilled workers in the United States, resulting in slower growing paychecks at the bottom of the income distribution.

“The declining economic fortune of low-skilled workers is explained to a significant degree because they are now in competition with workers in other countries,” said Henry J. Aaron, director of economic studies at the Brookings Institution.

Income levels increasingly reflect education levels because technology makes advanced education and computer skills a necessity, Aaron said.

Experts and politicians offer varying explanations for the disconcerting income gap and no one has come up convincing cures.

Labor Secretary Robert Reich wants to spend more federal dollars on education, apprenticeships and worker training. President Clinton has proposed tax credits to pay small businesses to educate workers and a $10,000 tax deduction for families’ investments in education and training.

There is bipartisan support in Congress for raising the minimum wage from its current level of $4.35 an hour. And one group of liberals has gone so far as to suggest legislating a maximum wage, which would cap the amounts corporate executives could earn.

But many in Congress and elsewhere are opposed to increasing the minimum wage and say government can’t provide the answers.

Ken Deavers, chief economist with the Employment Policy Foundation, a research organization financed by business, said the current wage structure should not be changed because it encourages people to work hard by rewarding them.

“We clearly don’t want to encourage cutting incentives for companies to be competitive in a global economy,” he noted.

Deavers said government retraining and education efforts cost a lot and do very little.

He said the income gap is so wide because a lot of people in the lower income bracket are not working. Deavers suggested government efforts should focus on encouraging more people to work, such as providing child care for low-income mothers who want to work.

At the high end of the income range, highly paid, highly educated men tend to marry highly paid, highly educated women, concentrating wealth in one household.

“You have a household with two lawyers, for example, married together,” Burtless said. “That pushes this family way up in the income distribution.”

Weinberg cautioned that the 1993-1994 spurt may be exaggerated because of a new methodology the Census Bureau used in making its computations.

Weinberg said changing the data collection method to employ computers made the survey more reliable. He said the Census Bureau could have been underestimating levels of inequality in the past.