Bad News for 2 Americas Myth: The Poor Got Richer
Some bad news today for John Edwards and his "two Americas" campaign theme.
Today's WSJ reports on a new study just released by the Congressional Budget Office that shows that the poor have been making significant earnings gains, due to a combination of welfare reform, expansion of the earned income tax credit and wage gains from a tight labor market, especially during the 1990s expansion.
The CBO reports that low-wage households with children had earnings after inflation in 2005 that were about 80% higher than in the early 1990s. From the WSJ:
The CBO results don't fit the prevailing media stereotype of the U.S. economy as a richer take all affair -- which may explain why you haven't read about them. Among all families with children, the poorest fifth had the fastest overall earnings growth over the 15 years measured(see the chart above). The poorest even had higher earnings growth than the richest 20%. The earnings of these poor households are about 80% higher today than in the early 1990s.
The report also rebuts the claim that the middle class is losing ground. The median family with children saw an 18% rise in earnings from the early 1990s through 2005. That's $8,500 more purchasing power after inflation. The wealthiest fifth made a 55% gain in earnings, but the key point is that every class saw significant gains in income.
There's a lot of income mobility in America, so comparing poor families today with the poor families of 10 years ago can be misleading because they're not the same families. Every year hundreds of thousands of new immigrants and the young enter the workforce at "poor" income levels. But the CBO study found that, with the exception of chronically poor families who have no breadwinner, low-income job holders are climbing the income ladder.