Income Gap Is Growing, Study Reports

The gap between rich and poor in California has been steadily widening in the last three decades, as the rich got a little richer and the poor got a lot poorer, according to a study released today by a new California think tank.

Though California’s gap has generally mirrored the national income gap, “it has exceeded the nation in the last seven years--which is not something to be proud of,” said Deborah Reed, principal author of “The Distribution of Income in California.”

“This particular gap is bad because it represents a decline in the income of the poor,” said Reed, a labor economist and research fellow at the Public Policy Institute of California.

The six-month study was commissioned by the San Francisco-based research center, which was created to take a nonpartisan look at economic, social and political issues.

The study, which covers the years from 1967 to 1994, does not follow specific people, so it does not conclude that people who were poor in 1967 are necessarily poorer today.

Instead, the study contends that those who are poor today are further behind the rich, and that today “there’s a higher percentage of poor people and the people who were poor in the past are poorer,” Reed said.

The study examined 26 indicators of income, including household income (which includes all sources of money coming into the home, not just wages) and wages earned by men.

In 1967, it says, annual household income for a family of four at the 10th percentile--meaning households that rank below 90% of households in the state--was $14,782, expressed in 1994 dollars. In 1994, a household at the 10th percentile had an income of $11,205--a decline of 24%.

On the other end, at the 90th percentile, household income was $81,308 in 1967 and $110,106 in 1994--a rise of 35%.

More dramatic is the difference in earnings by men.

A male wage earner at the 10th percentile in 1967 earned $9,291. In 1994, he earned $6,000--a drop of 35%.

Men at the 90th percentile in 1967 earned $54,903. In 1994, they earned $65,000. That’s an increase of 18%.

The institute also contrasted incomes at the 20th and 80th percentiles, which the analysts said represents more of “a pulling apart of the middle,” as Reed put it.

In 1967, household income at the 20th percentile was $22,310. In 1994, it was $18,002--a fall of 19%. At the 80th percentile, 1967 household income was $62,944, and in 1994 it was $82,618--an increase of 31%.

The study does not identify why the gap has increased but suggests that the recession, defense cutbacks, immigration and the effect of technology on workers are factors.

“We’re going to have to change our anti-poverty programs,” Reed said. “There’s a higher percentage of poor people. We have to either run programs more efficiently, spend more on them or cut the levels of benefits. That’s the most practical policy implication of this.”