Seeker Blog

Imagine a line composed of every household with children in the United States, arranged from lowest to highest income. Now, divide the line into five equal parts. Which of the groups do you think enjoyed big increases in income since 1991? If you read the papers, you probably would assume that the bottom fifth did the worst. After all, income inequality in America is increasing, right?

Wrong. According to a Congressional Budget Office (CBO) study released this month, the bottom fifth of families with children, whose average income in 2005 was $16,800, enjoyed a larger percentage increase in income from 1991 to 2005 than all other groups except the top fifth. Despite the recession of 2001, the bottom fifth had a 35 percent increase in income (adjusted for inflation), compared with around 20 percent for the second, third and fourth fifths. (The top fifth had about a 50 percent increase.)

The following is from the Brookings Institution experts bio page: “Ron Haskins co-directs the Brookings Center on Children and Families. An expert on preschool, foster care, and poverty—he was instrumental in the 1996 overhaul of national welfare policy.” Haskins is also a fellow at The Urban Institute — his recent publications listing.

I introduced this piece with the Haskins’ credentials because there is so much emotion invested in myths related to welfare reform, poverty and income equality. The CBO study to which Haskins refers is Changes in the Economic Resources of Low-Income Households with Children. Click on the thumbnails at left for the key income and earnings charts from the CBO study.

Hopefully the reader will read to the end of this Washington Post short essay for Haskins’ recommendations:

…This increase in earnings and total income by low-income families is the biggest success in American social policy of recent decades. So why not broaden it? Two policy innovations, bipartisan in conception and implementation, should be pursued.

First, the type of work requirements that characterized the 1996 welfare reforms should become routine in all large-scale welfare programs, notably food stamps and housing. Rather than allowing able-bodied adults to receive benefits without making a reciprocal commitment to increase personal responsibility, federal and state policy should require serious effort to work. Both housing and food stamps now have only modest work requirements.

Second, Congress should continue the trend in federal policy to improve programs that help low-income workers such as child care and health care. The experience of the 1990s shows that the majority of poor and low-income workers are able to land jobs that pay only about $8 per hour. Most are high school dropouts, and very few have education beyond high school. Especially in the absence of a return to married-couple families, millions of young adults with children will probably not be able to earn enough to support themselves and their families without taxpayer help.

It is better for them, for their children and for society if these adults continue to work and have their poverty-level earnings supplemented by the EITC and other programs. Indeed, it would be better for everyone if Congress ended earmarks, agriculture subsidies and ineffective programs such as Title I of the No Child Left Behind Act and used the money saved to increase support for low-income working families by expanding the EITC (especially for poor men who work full time), as well as child care and health-care coverage. Without increasing the deficit, Congress could augment the progress being made by low-income families, help them increase their standards of living and income mobility, and further strengthen the politics of personal responsibility. This should be an agenda on which Republicans and Democrats can unite.

More on the myth of “growing income inequality”.

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