THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, June 23, 1996 TAG: 9606210479
SECTION: COMMENTARY PAGE: J1 EDITION: FINAL
SOURCE: FROM STAFF AND WIRE REPORTS
LENGTH: 124 lines
Rapid income increases among the richest of the rich and with a shrinking share of the economic pie for the poor have left the nation its most economically polarized since World War II, according to a U.S. Census Bureau report released last week.
The detailed look at American income trends since 1947 shows that poor and middle class families were getting a growing share of the nation's wealth until the mid-1960s, when the trend reversed.
By 1982, all progress toward equality in incomes had been wiped out. And since then, the gaps between rich and poor have widened.
State and regional figures, although not as up to date as the Census Bureau report, show the same trend in Virginia and Hampton Roads.
This may be good news for Tiffany's, but not for the nation.
``If you have too great a disparity between the haves and the have-nots, when do the have-nots no longer feel they have an adequate stake in that society?'' said Sam Kaplan, an economist at the Weldon Cooper Center for Public Service in Charlottesville.
William J. McDonough, president of the Federal Reserve Bank of New York, has said the situation raises the question of ``whether we will be able to go forward together as a unified society with a confident outlook, or as a society of diverse economic groups suspicious of both the future and each other.''
Some conservative economists disagree. They argue that when you add benefits to the figures, workers are doing better.
Also, Kaplan said, ``Most economists would say some disparity is good because it provides an incentive to move up.
``If we all made the same amount, there would be less incentive to work and get ahead. So some disparity is good. The question is, when do you have too much?''
No one disputes the shift of resources to the wealthiest households, however.
According to the Census Bureau, the richest one-fifth of American households saw their share of the nation's economic pie increase from 40.9 percent in 1970 to 46.9 percent in 1994. For the richest of the rich - the top 5 percent of families - the increase was even more dramatic. They brought home 20.1 percent of the nation's total income in 1994, up from 15.6 percent in 1970.
The share earned by the poorest one-fifth of families dropped from 5.4 percent in 1970 to 4.2 percent in 1994.
The census used five measurements to quantify the income trends, and the figures confirmed the growing disparity in each case.
Since the early 1970s, earnings for the 60 percent of American households with the lowest incomes have remained stagnant or declined slightly. Meanwhile, the 40 percent of the nation's households that are the richest have enjoyed income growth.
The richest of the rich - the top 5 percent - had average incomes of $183,044 in 1994, up from $116,784 in 1967, after adjusting for inflation to 1994 levels, according to Census Bureau figures.
Economists link the widening gulf in American incomes to a combination of factors. Wages for low-skilled workers have been stagnant or on the decline because of rising use of technology and global competition, while wages for the most qualified workers have gone up.
``The economy has been a pretty good place for people who have special kinds of talents that employers prize,'' said Gary Burtless, an economist at the Brookings Institution. ``It's a world in which Michael Jordans are prospering mightily and people who sell tickets at the United Center are seeing their wages slip back from one year to the next.''
Another factor has been the weakening of labor unions, which usually push for higher wages.
The increasing number of women with careers also has widened the gap. Well-educated women are often married to well-educated men, creating today's super-earner couples.
Working against earnings at the other end has been the decline in the nuclear family centered around a married couple.
``Our disintegrating family structure gives us more families with just a mom with kids or a dad with kids and no helpmate,'' Burtless said. ``They face a formidable problem earning a good living.''
The political debate tends to revolve around taxes and tax credits as a way of redistributing income. Democrats generally favor increasing the capital gains tax, which affects the rich, and adding tax credits which would help poor families.
Republicans traditionally oppose increasing the capital gains tax, and some would like to do away with it. Their argument is that if the wealthy keep more of their money, it would be invested into the economy.
Robert Reich, President Clinton's labor secretary, has criticized the Republican economic agenda.
``There's an Alice-in-Wonderland quality to their logic,'' he said recently. ``Liberate the economy with deregulation and tax breaks for companies and the rich, they say, and all Americans will prosper. But the economy is already liberated enough to sprint merrily away from a majority of Americans. The problem is that wages are stagnant while profits surge - so how can higher profits be the whole solution?
``Closing the gap between paychecks and profits is our great remaining challenge. . . . The widening gulf between the rich and the rest threatens the stability and prosperity of our nation.''
Reich wants to spend more federal dollars on education, apprenticeships and worker training. 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.
Some wonder if there are forces moving in the American economy much larger than Republican or Democratic politics can grasp.
``Something is going on here that's beyond politics,'' said Bruce Bartlett, a Senior Fellow with the National Center for Policy Analysis, a conservative public policy research organization. ``A lot of people have tended to draw the conclusion that we cut taxes in the 1980s, and the rich got richer. Here we've increased taxes in the 1990s, and they still got richer.''
However, the brief success this year of presidential candidate Patrick Buchanan, who raged against corporate excesses, pushed Republicans toward more of an acknowledgment of the problem. Bob Dole, the probable GOP nominee, addressed the issue in speeches in New Hampshire.
``Corporate profits are setting records and so are corporate layoffs,'' Dole declared. ``The bond market finished a spectacular year. But the real average hourly wage is 5 percent lower than it was a decade ago.''
One of the trends driving that shift is the restlessness and anxiety of middle-class workers and especially those without college educations, who tend to lose out the most in this economy. Surveys have shown those voters are more likely to be interested in candidates like Ross Perot and Buchanan. ILLUSTRATION: Graphic
THOSE WHO MAKE MORE PAY MORE
SOURCE: Internal Revenue Service
[For complete graphic, please see microfilm]
KEYWORDS: PUBLIC JOURNALISM by CNB