[PEN-L:4778] U.S. income inequality

[D Shniad <shniad@xxxxxx>]

U.S. INCOME INEQUALITY HIGHEST AMONG INDUSTRIAL
NATIONS

WASHINGTON -- New studies on the growing
concentration of U.S. wealth and income challenge a
cherished part of the country's self-image: They
show that rather than being an egalitarian society,
the U.S. 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 per
cent of U.S. households -- with net worth of at
least $2.3 million each -- owns nearly 40 per cent
of the nation's wealth.  By contrast, the
wealthiest 1 per cent of the British population
owns about 18 per cent of the wealth  there -- down
from 59 per cent in the early 1920s.
  Further down the scale, the top 20 per cent of
Americans -- households worth $180,000 or more --
have more than 80 per cent 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 per
cent of Americans earn only 5.7 per cent 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 per cent receive 10.8 per cent of
such income.
  The top 20 per cent of American households in
terms of income -- $55,000 or more -- have 55 per
cent 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."
  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."
  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 and relatively low minimum
wages.

                  -- New York Times Service
                      Globe and Mail, April 17, 1995

Sid Shniad