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Jewish World Review July 16, 1999 /3 Av, 5759

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The vanishing poor

http://www.jewishworldreview.com --
THE RICH ARE GETTING RICHER, and the poor are getting poorer. That's a refrain taken as gospel. It's also the melody that's used in calls for more government spending.

But the truth of the matter is the richer are getting richer and the poor are getting richer faster. That's the conclusion reached by W. Michael Cox, vice president of the Federal Reserve Bank in Dallas and Richard Alm, a Dallas Morning News reporter, in their new book aptly titled "Myths of Rich and Poor: Why We're Better Off Than We Think."

Each year, the Bureau of Census publishes America's poverty rate, which has hovered around 14 percent for several decades. The impression given is that poverty for about 20 percent of Americans is hopelessly permanent. That's a conclusion easily reached when given a static portrait of our income distribution. Cox and Alm report on a dynamic portrait that comes from a University of Michigan Survey consisting of detailed data from a sample of 50,000 Americans collected since 1968.

Collecting income over time gives a startlingly different picture of income distribution than that given by Bureau of Census statistics. The University of Michigan study shows that only 5 percent of those in the bottom fifth of the income distribution in 1975 were still there in 1991. What happened to them? They moved up to the top three-fifths of the income distribution -- middle class or higher.

Even more amazing is that three out of 10 of the lowest income earners in 1975 moved up into the top fifth of income earners by 1991. Those who were poor in 1975 had an inflation-adjusted gain of $27,745 in average income by 1991. Workers who were in the top fifth of income earners in 1975 were better off in 1991 by an average of only $4,354.

Poverty is largely a transitory experience for people who are willing to work, as Labor Department data confirms. In the early '90s, the median duration of poverty was 4.2 months. Only a third of the 36 million Americans the Bureau of Census classifies as poor had been below the poverty line for 24 or more months. This boils down to a long-term poverty rate of 4 percent, compared to the overall official rate of 13.3 percent in 1997.

You say, "OK, Williams, but what about black and Hispanics?" Blacks still earn less than whites, but black income rose as well. Adjusting for inflation, the proportion of black families earning more than $75,000 tripled since 1970 to 9 percent. In 1998, the overall poverty rate for blacks fell to 26.5 percent, the lowest it has ever been. The number of black-owned businesses stood at 620,912 in 1992, up 281 percent since 1967, with sales of $36 billion.

Cox and Alm give a mixed story for Hispanics. On the positive side, the number of Hispanic businesses rose from 100,000 in 1967 to 862,605 in 1992, with sales of $86 billion. Although many Hispanic families are making it up the economic ladder, the group's overall income hasn't kept pace with blacks or whites. One possible explanation is the continuing immigration waves of low-skilled, low-wage workers who are overwhelming the statistical gains of longer-term residential Hispanics who've improved their education and skills.

The income mobility that Cox and Alm point to is possibly one of the greatest features about our country: Just because you know where a person ended up in life is no guarantee that you can predict where he started. And knowing where a person starts out in life does not control where he ends up.


Up

07/09/99: State sovereignty
07/02/99: America's theater of the absurd
06/25/99: Corruption of language
06/18/99: Asian excellence, American mediocrity
06/11/99: Reining in the EPA
06/07/99: Minimum wage, maximum folly
05/27/99: An armed citizenry and liberty
05/19/99: Blaming the past
05/14/99: General principles
05/06/99: Confronting unpleasantries
04/29/99: Permissiveness costs
04/23/99: South Africa: after apartheid
04/19/99: A time for truth
04/12/99: Population and poverty
03/31/99: Moral hazards
03/24/99: Right to be left alone?
03/17/99: Why Congress can't be trusted
03/10/99: Racial profiling
03/03/99: Equality before the law
02/24/99: Population control nonsense
02/17/99: Congressional contempt
02/11/99:Blooming fur tyrants
02/05/99:More money, better education?
01/27/99:Absurdity, brazenness and hypocrisy reigns
01/20/99:Economics 101
01/13/99:A wrongful celebration
01/06/99: Economics of predation
12/30/98: Things I wonder about
12/23/98: Unseen crime costs
12/21/98: How to become rich
12/09/98: Advancing national decadence
12/02/98: The Civil War wasn't about slavery
11/24/98:What's happened to us?
11/20/98:Tragedy in black neighborhoods
11/11/98:Family debasement
I11/04/98: Is it them or us?
10/28/98: Where are the poor?
10/21/98: The budget surplus hoax
10/15/98: Where union power lies
10/08/98: Race and sex in the military
9/29/98: Can Clinton run the economy?
9/25/98: Liberals and the constitution
9/17/98: Clinton and future presidents
9/11/98: Donate or sell organs
9/03/98: Common Sense vs. Experts
8/26/98: Mother Nature's unfairness
8/24/98: The pretense of superiority
8/13/98: Yours or mine?
8/05/98: I do my job well, so that means I can....
7/29/98: Education production


©1999, Creators Syndicate