[Congressional Record Volume 140, Number 97 (Friday, July 22, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: July 22, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
               RESEARCH SAYS THAT POOR DID NOT GET POORER

                                 ______


                        HON. GERALD B.H. SOLOMON

                              of new york

                    in the house of representatives

                         Friday, July 22, 1994

  Mr. SOLOMON. Mr. Speaker, it is a common misconception that during 
the 1980's the lower classes increasingly grew poorer. The media and 
the President have pushed the idea that during the Reagan-Bush years, 
income inequality increased dramatically.
  The July 25, 1994 issue of U.S. News & World Report contained an 
article entitled, ``The Poor aren't poorer'' which detailed the results 
of a study on income inequality during the 1980's conducted by 
sociologists Christopher Jencks of Northwestern University and Susan 
Mayer of the University of Chicago.
  This article points out that the assertions made by the media and 
President Clinton are untrue. The author writes that the tax changes 
and domestic-program cuts of Ronald Reagan and George Bush did not 
increase inequality; in fact, income inequality and poverty levels are 
significantly lower today than earlier in the century.
  The author reports that in 1988-89, the poorest 10th of all 
households with children reported a mean income of $5,558. Jenck's and 
Mayer's analysis of government data, however, shows that the same 
households acknowledged spending an average of $13,558--more than twice 
their reported income. By 1990, households in the lowest 10th were more 
likely to have a complete bathroom, air conditioning, central heat, 
telephone service, a dishwasher and a clothes dryer.
  As the author states, ``The good news is that there is a substantial 
mobility out of the bottom of the income distribution, and the poor, on 
the whole, have tended to get richer over time.'' In other words, 
Reaganomics worked. This is only a brief summary of the valuable 
information in the article. I strongly urge my colleagues to read this 
article, and I have inserted it for your perusal.

             [From U.S. News & World Report, July 25, 1994]

                         The Poor Aren't Poorer

                           (By David Whitman)

       America, land of opportunity, is fast becoming America, 
     land of inequality--at least according to the conventional 
     wisdom now enshrined in news stories, government reports and 
     campaign speeches. Bill Clinton has said that ``I believe 
     with all my heart that I was elected on a commitment to bring 
     an end to . . . an economic policy that makes the rich richer 
     [and] the poor poorer.'' In the past five years, reporters 
     cited the fear that the rich are getting richer while the 
     poor grow poorer in more than 600 stories, and a poll in 
     December confirmed 81 percent of adults share that belief.
       As is often the case with the conventional wisdom, it is 
     half right. Over the past two decades, the rich generally 
     have prospered and the annual incomes reported by Americans 
     have become more unequal. But research by a number of 
     prominent scholars--most notably sociologist Christopher 
     Jencks of Northwestern University--suggests that much of the 
     accepted wisdom about the poorest households is wrong. The 
     revisionists, many of whom share Jencks's liberal leanings, 
     contend that the tax changes and domestic-program cuts of 
     Ronald Reagan and George Bush did little to increase 
     inequality; in fact, income inequality and poverty levels are 
     significantly lower today than earlier in the century. In a 
     series of forthcoming studies, Jencks and his colleague from 
     the University of Chicago, Susan Mayer, show that in many 
     respects the material lot of poor families actually improved 
     during the past two decades. ``Rich families with children do 
     seem to have grown richer,'' says Jencks. ``But poor families 
     with children did not necessarily grow poorer.''


                           misleading numbers

       At first glance, census statistics on poverty appear to 
     refute him. In 1969, 13.8 percent of American children lived 
     below the official poverty line; that figure rose to 21.9 
     percent in 1992. Moreover, families with children at the 
     bottom of the U.S. income distribution experienced a 22 
     percent decline in inflation-adjusted income from 1973 to 
     1987. Yet as Jencks points out, such oft cited numbers are 
     at best incomplete--and at worst misleading--since they 
     are based on annual incomes reported by the poor.
       One reason the numbers lie is that the poor often receive 
     in-kind aid (particularly food stamps) that is not counted as 
     income in official poverty statistics. On average, food 
     stamps provided about 16 percent of the total family income 
     of poor children in 1989. And as most consumers know, two 
     families with the same reported income one year may live 
     quite differently over time because their extended families--
     and their borrowing, saving and taxes--differ.
       Above all, annual income is a misleading measure of well-
     being because of a nettlesome little secret: Many poor 
     families substantially underreport their incomes. Often, the 
     poorest families conceal money they earn at odd jobs or 
     receive from friends and family to ensure that they remain 
     eligible for welfare benefits and to reduce tax liability. In 
     fact, Jencks and Mayer's research documents that for more 
     than a quarter of a century, America's poorest households 
     have spent far more each year than the total income they have 
     reported receiving, and the gap between consumption and 
     reported income has grown in recent decades. In 1988-89, the 
     poorest 10th of all households with children reported a mean 
     income of $5,588, but Jencks and Mayer's analysis of 
     government data shows that the same group of households 
     acknowledged spending an average of $13,558--more than twice 
     their reported income.
       By looking beyond the official poverty statistics, Jencks 
     and other scholars present a fuller picture of the poor. 
     Their research answers a number of fundamental questions:
       Has the material well-being of poor families with children 
     deteriorated in the past two decades? No--on the whole. 
     Consumption and income among low-income households went in 
     opposite directions during the 1980s. The mean income of the 
     poorest 10th of households with children fell 4 percent in 
     real terms, from $4,935 in 1979 to $4,745 in 1989. But the 
     mean amount consumed by these households during the Reagan-
     Bush years rose 13 percent, from $12,022 in 1980 to $13,558 
     in 1988-89.
       The disparity is especially important, says Jencks, because 
     consumption and living conditions of low-income Americans 
     provide a more realistic assessment of the material well-
     being of the poor than does income. The Jencks-Mayer research 
     shows that consumption among the poorest 10th of households 
     with children has edged upward a hair since the early 1970s; 
     their living conditions and access to medical care also 
     mostly improved. By 1990, households in the lowest decile 
     were more likely to have at least one room per person, a 
     complete bathroom, air conditioning, central heat, 
     telephone service, a dishwasher and a clothes dryer 
     (table). And members of low-income households actually saw 
     doctors more often than did middle-class individuals 
     throughout the 1980s. In 1989, members of households 
     making less than $10,000 a year averaged 6.8 doctor 
     visits; those making more than $35,000 a year averaged 
     5.4. However, most such improvements in material well-
     being took place from 1969 to 1979.
       Is there less upward mobility among the poor today than two 
     decades ago? No. During the past two decades, the rate of 
     upward mobility has essentially remained constant. The good 
     news is that there is substantial mobility out of the income 
     distribution, and the poor, on the whole, have tended to get 
     richer over time. One analyst, Isabel Sawhill, who now works 
     in the Clinton administration, co-authored a study that found 
     individuals who started in the lowest fifth in 1977 increased 
     their average family income 77 percent by 1986; those who 
     started in the top fifth increased average family income by 5 
     percent. She concluded it was ``simply not true'' that ``the 
     poor were literally getting poorer over the last decade or 
     two [or] that the incomes of the rich were skyrocketing.''
       But there is also bad news. First, the rate of upward 
     mobility has not improved; second, very low income households 
     tend not to move very far out of poverty. Research by Thomas 
     Hungerford of the General Accounting Office shows that after 
     averaging incomes, 60 percent of those in the bottom 10th in 
     1979 were still in the lowest decile in 1986; 9 in 10 had 
     climbed no higher than the 30th percentile. ``Rags-to-riches 
     success stories,'' he concludes, ``are fairly rare, as [are] 
     riches-to-rags sob stories.''
       Other studies, such as those by Greg Duncan at the 
     University of Michigan, have failed to find any net change in 
     persistent poverty among black or white children from 1967-72 
     to 1981-86. More recent research by Duncan and two analyses 
     in the May American Economic Review indicate there may have 
     been a slight uptick in long-term dependence on welfare in 
     the late '80s, notably among black children and young women. 
     But for poor families, the big picture is that the big 
     picture didn't change. In the '80s, dependence, persistent 
     childhood poverty and upward mobility were nearly the same as 
     in the '70s.
       Did most of the growth in income inequality in the 1980s 
     stem from tax breaks for the rich and cuts in social 
     programs? No--although Reagan's tax-and-spending policies 
     made matters somewhat worse. The rise in income inequality 
     started in the mid-1970s and took place Canada in and some 
     European nations, too. Most of it was due to ``increased 
     inequality in pretax earnings, and it is hard to blame that 
     increase on any deliberate government policy,'' says 
     economist Paul Krugman in his new book, ``Peddling 
     Prosperity.'' Krugman, a U.S. News contributing editor, 
     claims that Reagan and Bush should be blamed ``only a little 
     bit'' for the rise in inequality.
       The truth is that no one has a really compelling 
     explanation for why wages have become more unequal since the 
     energy crisis of 1973. Most economists cite trends such as 
     the spread of technology and the globalization of world trade 
     as factors that placed a premium on well-educated workers. 
     Still, if the Republicans' policies had little impact on 
     wage inequality, an important corollary is that Clinton-
     administration fiscal policies--including last year's tax 
     increase on the wealthy--may do little to narrow the gap.
       Are inequality and poverty at unprecedented levels? No, far 
     from it. A recent study by Eugene Smolensky and Robert 
     Plotnick for the Institute for Research on Poverty at the 
     University of Wisconsin suggests that income inequality 
     peaked around 1932. They conclude that ``inequality was 
     greater in the first three or four decades [of the century] 
     than any period since.'' Yet the public has a tendency, as 
     Jencks puts it, to mistakenly believe `'that the rise in 
     inequality is an inexorable trend line, with everything 
     ultimately leading up to us.''
       One illustration: In 1992, 14.5 percent of the U.S. 
     population lived below the official poverty line. Yet 
     Smolensky and Plotnick found that at the turn of the century, 
     70 to 80 percent of all Americans lived in poverty, and half 
     did so by the end of the 1920s. Only after the economic boom 
     of World War II did the poverty rate fall below 30 percent. 
     Those numbers are so high that the authors confess they seem 
     ``unreasonable''; Americans today, they assert, have greater 
     expectations than their forefathers about standards of 
     living. Even so, they conclude, the standard of living among 
     the poor plainly rose in the long term.
       Does underreporting of income by the poor mean that the 
     extent of poverty in America is grossly exaggerated? Not 
     necessarily. Jencks and Mayer's results pertain only to 
     households with children, so they say nothing about what has 
     happened to the poorest of the poor--the homeless--or about 
     changes in the lives of one especially troubled group, 
     impoverished single males. As it turns out, even among 
     households with children, homeownership in the bottom decile 
     has plummeted; 37.8 percent of families owned their homes in 
     1970, but 23.9 percent did in 1990. The Jencks-Mayer data 
     also capture only part of children's living environments; 
     they do not quantify how today's poor child differs from his 
     predecessor in terms of what he learns from his parents, 
     television and music, or in his prospects for encountering 
     street crime and growing up without a father at home.
       Jencks himself explains his findings by saying that ``poor 
     households may have more income than we thought, but the 
     poverty line ought to be substantially higher, too. In 1989, 
     he says, the bottom 10th of households with children reported 
     they had a mean per capita income of $4.11 a day to cover 
     expenses.
       It's important to remember, too, that not all income is 
     created equal. In the case of poor children, more and more 
     family income comes in the form of a welfare check and less 
     in the form of mom's or dad's paycheck. A study last year by 
     Leif Jensen and his colleagues at Pennsylvania State 
     University found that in 1969, poor children lived in 
     families that drew 63 percent of their mean income from 
     earnings and only 18 percent from public assistance. By 1989, 
     the proportion of family income derived from earnings had 
     fallen to 46 percent and the proportion derived from welfare 
     had doubled. As more poor children become dependent on 
     welfare, more may also run the risk of being isolated from 
     middle-class communities and mores.
       The truth is that voters have often shown a fatalism about 
     the nation's economic system. While 81 percent of American 
     adults currently believe that the rich are getting richer as 
     the poor get poorer, an almost identical proportion (76 
     percent) held the same conviction in 1980--before Ronald 
     Reagan took office and the so-called decade of greed began. 
     For better and worse, the fairness and inequality of the 
     American economy are still gauged partly through the eye of 
     the beholder.

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