Tuesday, May 22, 2007

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.

8 Comments:

At 5/23/2007 9:13 AM, Anonymous Anonymous said...

I think it is interesting that the graph shown here is not included with the WSJ article, probably because it illustrates that the issue is not as clear cut as the article makes it seem. Yes, the lowest quintile makes extraordinary strides in the period 1997-2000, in the aftermath of the welfare reform. But it also demonstrates that this class was most immediately impacted by the economic downturn in the early 2000's, unlike the other 80%, and that the lowest quintile never recovers from that downturn. If you combine that with the information elsewhere that more children are under the poverty level since the Bush administration took power, you have to question the conclusions of this article.

 
At 5/23/2007 9:37 AM, Blogger Mark J. Perry said...

The exact data in the CBO graph ARE included in the WSJ article, but in table form.

 
At 5/23/2007 11:20 AM, Anonymous L D Fraley said...

Contrary to the article's premise, the "Rising Tide" table shows the middle class is clearly left behind. Additionally, the table does not include investment income which is a disproportionately larger income for the top
20 %.

 
At 5/23/2007 2:05 PM, Blogger william said...

middle class is is doing fine thank you. remember these are percentage changes, so let's not forget the base, e.g., $5 raise from $10 /hr vs. $5 raise on a $30 / hr base.

 
At 5/23/2007 2:08 PM, Anonymous Tom Davis said...

I think it is a mistake to assume that reality (especially that sub-category known as economic-reality) would in some way affect an election (Edwards' or Paul's) -- or after the election, legislation.

Modern democratic government is not about the real world, it's about what the majority wish were true.

Sometimes I wish for the days of monarchy -- at least then no one was under the misimpression that government is a good arbiter on economic and social issues.

 
At 5/23/2007 2:32 PM, Anonymous Linda F said...

And even if what they say about earnings for those two classes were true, what about the increase in housing costs and healthcare that is the cause of so much bankruptcy? Except you can't hardly do that anymore now either.

And what about the high cost of gas necessary to commute all the way out into the suburbs which is the only place people can afford?

In many cities, the median price for a home can be over $600k. The rule of thumb is that you should spend about 2 years salary. The median income is not $300k.

I don't ever plan to do a job that's going to make me rich. But with the only kind of building going on these days, I am never going to be able to afford to buy a home any where near any non-depressed city center that I know of. And I don't want to live in the suburbs and commute for hours.

I think collapse is imminent.

 
At 5/23/2007 8:29 PM, Anonymous Anonymous said...

Just another conservative lie.

Yes, the lowest quintile had the highest jump in "earnings", but, in the same report, the wealthiest quintile far outpaced everyone else when you look at the broader measurement of "income."

take a look for yourself:

http://www.cbo.gov/ftpdocs/81xx/doc8113/05-16-Low-Income.pdf

either you are a sheep or just a Republican stenographer.

 
At 5/24/2007 9:39 AM, Blogger juandos said...

Well in his/her usual inane style the person named, 'Anonymous' whines: "Yes, the lowest quintile had the highest jump in "earnings", but, in the same report, the wealthiest quintile far outpaced everyone else when you look at the broader measurement of "income.""...

Anonymous would do well to read Basic Economics - A Citizen’s guide to the Economy by Thomas Sowell...

Well of course Anonymous would point out the parasitical class of people who've made it their life's work to make BAD decisions... Should be what? Pitied? Compensated for their bad decisions?

People with no skill sets needed in the market place of employment are compensated fairly by market place standards...

The fact is that everyone has done better, especially since the Bush Tax cut...

The federal government Commerce Department has a nifty little outfit called the Bureau of Economic Analysis and there's this interesting little document titled, " Annual Revision of the National Income and Product - Accounts Annual Estimates for 2003–2005 Quarterly Estimates for 2003:I–2006:I " that's worth perusing...

The long and the short of it is, a rising tide raises ALL boats...

 

Post a Comment

Links to this post:

Create a Link

<< Home