An Unchanging Gap

Partly to narrow the gap between affluence and poverty in the U.S., the nation has long had a progressive income tax and public programs to help lift those on the bottom of the economic ladder. Yet in its annual report last week the Council of Economic Advisers came to a surprising conclusion: the income differences between affluent and poor Americans yawned as wide in 1972 as they did in 1947.

In 1972 families making more than $17,760, those who constitute the most affluent fifth of the economic hierarchy, earned 41.4% of the nation's aggregate income. Meanwhile, those in the bottom fifth, making less than $5,612 annually, took in 5.4% of the total income. Those percentages have been little changed for a quarter-century. Nor was there any appreciable difference over the same period in the income shares of families in the middle brackets.

Why is the spread between the upper-and lower-income groups so difficult to shrink? One reason, the CEA notes, is that the graduated income tax does not significantly redistribute wealth. That is partly because taxpayers in the highest brackets have much greater opportunity to use legal write-offs than those with very low incomes. Moreover, the 5.85% Social Security payroll tax takes a much bigger proportional bite out of the salary of a worker earning $5,000 than from one earning more than $17,000. Ever larger sales taxes are also more burdensome for the poor.

Less Promising. Government programs aimed largely at helping low-income groups--Social Security, welfare, Medicare, food stamps--have grown enormously, and in fiscal 1973 cost a total of $76 billion. But many Government benefits go to affluent people too. In 1970, according to one federal study, 38% of all American families were receiving some type of payment from some level of government; 22% of the families with incomes of more than $25,000 received benefits.

Moreover, inflation has punished the poor more than other Americans. Low-income families must spend an average of 71% of their earnings for food and shelter, but these fast-inflating items take only 50% of the earnings of upper-income families. Runaway food prices last year lifted farmers' incomes to record highs, at the expense of other Americans, including the urban poor. A congressional Joint Economic Committee staff study concludes that "in 1973 low-income persons suffered about one-third more inflation than did middle-and upper-income consumers."

Prospects for low-income groups are even less promising as the nation drifts into an economic downturn and possibly a recession. The CEA notes that in a recession, low-paid workers with minimal skills are usually laid off first--or work fewer hours per week. Even though those at the bottom of the income ladder have not gained on those at the top, they are better off. In 1972 a total of 12% of the population were classified as living in poverty, v. 22% in 1959.

This file is automatically generated by a robot program, so viewer discretion is required.