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Family income in America: are the rich getting richer?

Family incomes are being heavily impacted by slow economic growth and increasing competition from the international labor market. A family's ability to sustain itself economically will affect that family's ability to carry out its functions successfully and sustain the community in which it lives.

However, statistics tell of a growing disparity in incomes of America's families. A review of documented research and detailed studies reveals clear economic patterns beneath other discussions of American family life: the rich have gotten richer and the poor have gotten poorer.

The Census report, "Poverty in the United States: 1991" shows that the poverty rate for families in 1991 was 11.5 percent - up from 10.7 percent in 1990.

According to data from the Economic Policy Institute presented by the Council on Competitiveness, family income growth has been declining since the period 1947-67. During the one-year period 1989-1990, family income dropped to -2.0 percent resulting in a $738 loss in annual income. While there has been some increase in average family income - from $33,400 in 1983 to $35,700 in 1989 - the major benefactors of these gains were those families in the uppor portion of the income distribution.

How Has Income Distribution

Affected Families with Children?

The inequality of income distribution has had significant ramifications for all of America's families. Health care, housing, family care, nutrition, child care - all of the ingredients that contribute to a family's well being have been adversely affected.

It has become difficult for young families to obtain home ownership as a result of the decline in earnings. Fewer young families with children were home-owners in 1991 than in 1980. According to Marion Wright Edelman of the Children's Defense Fund, "Young renter families increasingly are paying astronomical shares of their incomes for rent. More and more are doubling up or becoming homeless - in some surveys, three-fourths of the homeless parents in this country are under age thirty."

How Do Families With Children


Several detailed reports and studies indicate that overall distribution of income has become more unequal over the past decade; however, the gap widens among families with small children.

Patricia Ruggles, a Senior Researcher at the Urban Institute, Washington, D.C., presented testimony on policy implications of changing income trends before the U.S. House of Representatives' Subcommittee on Census and Population, Committee on Post Office and Civil Service. Ruggles testified that in 1989, the average income for all families in the bottom 20 percent of the distribution was $5,856, while the average for a family with children was $7,714. For all families in the bottom category, this average represented a decline of $128 between 1979 and 1989.

For families with children, the 1989 average was $1,655 lower than the 1979 average for the bottom 20 percent of such families - a decline of almost 18 percent.

"The 1990 poverty line for a family of three was $10,419. Therefore, if a family's annual income was as little as $10,420, that family was not considered poor and was unable to qualify for many government-funded assistance programs," Ruggles stated in her testimony. Also according to Ruggles, more than 20 percent of American children - one in five - lived in a family with an income below the poverty line in 1990. By contrast, in 1970, just over 15 percent of American children were poor.

"Vanishing Dreams of America's Young Families," a report by the Children's Defense Fund, shows that "adjusted for inflation, the median income of young families with children plunged by one-third between 1973 and 1990. This median income includes income from all sources, and the drop occurred despite the fact that many families sent a second earner into the workforce. As a result, poverty among these young families more than doubled, and by 1990 a shocking 40 percent or four in ten children in young families were poor."

Huge income losses have affected virtually every group of young families with children: white, black, latino; married-couple and single-parent families; and those headed by high school graduates as well as dropouts. Only young families with children headed by college graduates experienced slight income gains between 1973 and 1990.

Reports indicate that incomes of older families with children have experienced less decline since 1973, and families without children have experienced income gains. Edelman said, "By far the greatest share of the nation's economic pain has been focused on the weakest and most vulnerable among us - young families with children."

Does Education Play A Key Role in

Income Distribution?

A survey by the Federal Reserve shows families headed by persons with some college or a college degree saw their average incomes rise between 1983 and 1989. However, median incomes for the 23 percent of all families headed by a college graduate declined from $42,000 to $40,000, while average incomes rose from $57,900 to $59,800 which would indicate that even among college graduates income became less equally distributed.

For the 31 percent of families headed by a high school graduate, both average and median incomes fell. In that case, average income fell from $28,600 to $27,800 and median income from $24,700 to $22,000. With the average falling less that the median, the income distribution for this group also became less equal.

A recurrent theme in studies of income patterns is that income inequality is the result of changes in realtive wages. Today's younger workers, and most certainly those with a high school education or less, are receiving real wages that are significantly lower than similar workers 10 to 20 years ago. The decline in wages and the decreasing supply of well-paying jobs for lower-skilled workers reflects the competition of the international labor market.

How Are Families Dealing with

Income Disparities?

Research indicates that families are finding it harder and harder to get by without other income sources. Families have turned to extended work hours and additional part- and/or full-time jobs as a means of supplementing family income.

In her report, Edelman said, "Many young married-couple families have tried to compensate for lower wages by sending a second worker into the workforce. These second earners have softened (but not eliminated) the economic blow."

"But the growing number of young parents working longer hours or coping with twojobs," she continued, "has placed young families with children under tremendous stress and generated new offsetting costs, especially for child care. Many families, moreover, have two jobs that together provide less security and less support and less access to health care than one good job did a generation ago. This two-earner strategy is totally unavailable, moreover, to the growing number of single-parent families."

According to the U.S. House of Representatives, Committee on Ways and Means, there were over two million families with children where someone worked nearly full-time, full-year and yet remained poor in 1990.
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Title Annotation:Futures Forum
Author:Cheek, Dorothy
Publication:Nation's Cities Weekly
Date:Oct 26, 1992
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