Income Gap Widened in 2 Decades, Study Shows

A study of U.S. economic trends over a 25-year span provides additional evidence that the rich are getting richer and the poor are getting poorer, while the middle class continues to shrink.

The study, conducted by economist Lynn A. Karoly of RAND in Santa Monica, concludes that during the last two decades, the inequality in income has grown however it is measured, whether by families or by individual workers, with minorities feeling the biggest pinch.

For example, the study to be released today found that from 1979 to 1987, the income of the poorest 10% of American families fell 6% after being adjusted for inflation, while real income for families in the 90th percentile grew 14%.

Women’s wages grew 10% in real terms between 1973 and 1989, while men’s wages fell 10% during the same period.

By 1987, the median income of families in the top 10% of earnings was almost nine times greater than that of a family in the lowest 10%, the study said.

The study challenges the notion that the standard of living for Americans has improved steadily since World War II.

In an interview, Karoly called it “striking and ominous” that the economic expansion of the 1980s failed to reduce the gap between rich and poor.

“A rising tide is supposed to float all boats, but it appears that this time some of them capsized,” she said. “I would like to be more optimistic about the future, but it seems probable that the gap will continue to widen through the current recession.”

Unlike other reports that have focused on the 1980s, Karoly’s analysis uses Census Bureau data from 1963 to 1989 to show how changes in income distribution have affected various groups.

The RAND economist concludes that the income gap widened dramatically in the mid-1970s, while the relative gains of the rich were primarily a product of the boom years of the 1980s.

Black and Latino families in the lower half of the income distribution saw their real incomes decline in absolute terms beginning in 1973, while black and Latino families above the median experienced absolute gains. In contrast, Anglo families below the median still realized modest income gains.

“The bottom line is, those high up on the ladder gained the most, and those on the bottom rung lost the most,” said Karoly.