ROANOKE TIMES
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, April 18, 1995                   TAG: 9504180145
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: The New York Times
DATELINE: WASHINGTON                                LENGTH: Long


U.S. LEADS IN KEEPING RICH ON TOP

ECONOMIC EQUALITY isn't happening - in fact, more wealth is being concentrated among fewer people, studies indicate.

New studies on the growing concentration of American wealth and income challenge a cherished part of the country's self-image: They show that rather than being an egalitarian society, the United States has become the most economically stratified of industrial nations.

Even class societies like Britain, which inherited large differences in income and wealth over centuries going back to their feudal pasts, now have greater economic equality than the United States, according to the latest economic and statistical research, much of which is to be published soon.

Economic inequality has been on the rise in the United States since the 1970s. Since 1992, when Bill Clinton charged that Republican tax cuts in the 1980s had broadened the gap between the rich and the middle class, it has become more sharply focused as a political issue.

Many of the new studies are based on the data available then, but provide new analyses that coincide with a vigorous debate in Congress over provisions in the Republican ``Contract With America.''

Indeed, the drive by Republicans to reduce federal welfare programs and cut taxes is expected, at least in the short term, to widen disparities between rich and poor.

Federal Reserve figures from 1989, the most recent available, show that the wealthiest 1 percent of U.S. households - with net worth of at least $2.3 million each - owns nearly 40 percent of the nation's wealth. By contrast, the wealthiest 1 percent of the British population owns about 18 percent of the wealth there, down from 59 percent in the early 1920s.

Further down the scale, the top 20 percent of Americans - households worth $180,000 or more - have more than 80 percent of the country's wealth, a higher figure than in other industrial nations.

Income statistics are similarly skewed. At the bottom end of the scale, the lowest-earning 20 percent of Americans earn only 5.7 percent of all the after-tax income paid to individuals in the United States each year. In Finland, a nation with an exceptionally even distribution of income, the lowest-earning 20 percent receive 10.8 percent of such income.

The top 20 percent of American households in terms of income - $55,000 or more - have 55 percent of all after-tax income.

``We are the most unequal industrialized country in terms of income and wealth, and we're growing more unequal faster than the other industrialized countries,'' said Edward N. Wolff, an economics professor at New York University. He will publish two papers in coming months that compare wealth patterns in Western countries.

Liberal social scientists worry about poor people's shrinking share of the nation's resources, and the consequences in terms of economic performance and social tension.

Margaret Weir, a senior fellow in government studies at the Brookings Institution, called the higher concentration of incomes and wealth ``quite divisive,'' especially in a country where the political system requires so much campaign money.

``It tilts the political system toward those who have more resources,'' she said, adding that financial extremes also undermined the ``sense of community and commonality of purpose.''

Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a Washington research group, observed, ``When you have a child poverty rate that is four times the average of Western European countries that are our principal industrial competitors, and when those children are a significant part of our future work force, you have to worry about the competitive effects as well as the social-fabric effects.''

Conservatives have tended to pay less attention to rising inequality, and some express skepticism about the statistics or their significance.

Marvin H. Kosters, an economist at the American Enterprise Institute in Washington, said he thought the gap, as measured, was being used as a false villain. ``I think we have important sociological problems,'' he said, ``but I don't think this gets at it all that well.''

Murray L. Weidenbaum, professor of economics at Washington University in St. Louis and chairman of the Council of Economic Advisers under President Ronald Reagan in 1981-1982, said he thought the measures tended to overstate the gap by overlooking government programs like food stamps or Medicaid.

Nevertheless, he said he was uncomfortable with greater concentration of wealth ``unless there's a rapid turnover'' in which ``this year's losers will be next year's winners.''

He noted that many wealthy people have bad years and that a lot of middle-class people, like graduate students, who briefly look statistically as if they are starving. The United States does have ``very substantial mobility,'' he added.

Weidenbaum said he doubted that the Republican agenda, if it became law, would have any substantial effect on the gap.

There is no agreement as to why inequality is rising faster in the United States than elsewhere.

Explanations include falling wages for unskilled workers as automation spreads, low tax rates on the rich during the 1980s, relatively low minimum wages, the decline of labor unions and the rapid rise in the 1980s of the stock and bond markets, in which rich people are heavily invested.



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