The Poor Get Richer... faster than everyone else

[Overpaid Slacker]

CQ:

A study by the CBO of a fifteen-year period shows that the poorest 20% of American families received the most benefit from economic growth. Earnings increased for this economic stratum by 78%, more than three times the increase of the next three quintiles:

It's been a rough week for John Edwards, and now comes more bad news for his "two Americas" campaign theme. A new study by the Congressional Budget Office says the poor have been getting less poor. On average, CBO found that low-wage households with children had incomes after inflation that were more than one-third higher in 2005 than in 1991.

The CBO results don't fit the prevailing media stereotype of the U.S. economy as a richer take all affair -- which may explain why you haven't read about them. Among all families with children, the poorest fifth had the fastest overall earnings growth over the 15 years measured. (See the nearby chart.) The poorest even had higher earnings growth than the richest 20%. The earnings of these poor households are about 80% higher today than in the early 1990s.

What happened? CBO says the main causes of this low-income earnings surge have been a combination of welfare reform, expansion of the earned income tax credit and wage gains from a tight labor market, especially in the late stages of the 1990s expansion. Though cash welfare fell as a share of overall income (which includes government benefits), earnings from work climbed sharply as the 1996 welfare reform pushed at least one family breadwinner into the job market.

Earnings growth tapered off as the economy slowed in the early part of this decade, but earnings for low-income families have still nearly doubled in the years since welfare reform became law. Some two million welfare mothers have left the dole for jobs since the mid-1990s. Far from being a disaster for the poor, as most on the left claimed when it was debated, welfare reform has proven to be a boon. Via Memeorandum.

In fact, solid gains can be found among all levels of American economic strata. The worst performance over this period was an 18% gain in earnings by the middle 20%, which equates to an $8,500 increase in purchasing power -- after inflation. The top quartile showed a 54% increase, with the rich getting richer, but the rising tide lifted all boats -- and the smallest most of all.

How did this happen? Welfare reform and low unemployment returned people back to the workforce. Both acted to pressure employers to raise wages as the economy greatly expanded the number of jobs. The efficiencies of the American production model finally started delivering the better-scale jobs, and everyone moved up, especially the low-wage workers.

The findings by the CBO are rather remarkable. Female-headed households saw earnings double over this period as the number of them earning primarily through employment went up a third. The EITC helped, and it also kept pressure on qualifying households to earn through jobs rather than welfare. It demonstrates that the best welfare program is a paycheck.

This shows that a lightly managed capital market, a restriction on the crippling effects of government handouts, and a reduction in the tax burden creates more opportunities for all wage earners, including and especially those at the bottom. We have the data to show that we are on the right track, and that expansive and expensive government programs do not work.


Another liberal meme bites the dust. But if a liberal meme dies horrifically in the wilderness and the press doesn't report it widely, does it actually happen? Has the self-proclaimed Newspaper of Record mentioned this yet? I mean, it's news, isn't it?

The MSM is not terribly successful in telling people what to think, but it's almost universally successful in telling people what to think about. And, strangely, they don't want you thinking about this... Hmmmm...

"CBO is a bunch of neo-conned(snicker,teeheehee,snort) Bushist goose-steppers" in 3.... 2.... 1....

JP

[Tim Hancock]

Supe will have a coronary when he reads this. Please delete this post, you don't want blood on your hands.

[Moneyguy1]

What is not included are the "starting points" re: the cost of living and the "end points".

Just as a theoritical example.....An individual making $200 a week ten years ago now makes $300; a 50% increase. A CEO making $1,000,000 a year ten years ago now makes $1,250,000. A 25% increase. Hardly fair. And, any population included will give different results depending on whether one uses the mean, the median or the mode.

I do not know the answer but there are so many variables that have to be taken into account before one can make a rational conclusion. The economy is far too complex to be described in one article or even a series of articles.

[Overpaid Slacker]

Originally posted by Tim Hancock
Supe will have a coronary when he reads this. Please delete this post, you don't want blood on your hands.

LOL. Well, not his blood anyway.

JP

[Tim Hancock]

Originally posted by Moneyguy1
What is not included are the "starting points" re: the cost of living and the "end points".

Just as a theoritical example.....An individual making $200 a week ten years ago now makes $300; a 50% increase. A CEO making $1,000,000 a year ten years ago now makes $1,250,000. A 25% increase. Hardly fair.

I agree, the CEO is not advancing equally.

[Overpaid Slacker]

bob -
"Fair", as far as I can tell, is not about having the person making $200/wk make $1MM. They don't have the skill set to do so, evidently. The poor are not "getting poorer", they're improving their situation better and faster than the rest of us.

They're still the 'poor' and boohoo and all that, but there will always be 'poor'; at least they're better off now.

BTW, why did you use weekly income for the 'poor' and annual income for the 'rich'?

Just curious. I'm going to let the fur fly on this one for a while. I'm doing a little unofficial poll on reactions: meh; denial; righteous indignation about poor (a/k/a OT); CBO attacks, etc.)

JP

[tabs]

The word Poor is such a realitive term. If 90% of the people in the US had income of $1M a year and U only made $250,000.00 you would be considered to be poor.

The poor in the US compared to the poor in other nations, would be considered to be rich.

So lets get off our little soap boxes.

[legion]

WHAT!?

I thought we were supposed to throw money indiscriminately at the poor, so that they don't rise up and overthrow us. We are supposed to keep them leashed to the lowest rung of the economic ladder with an overly-comfortable existence so that they do not resent us. Nevermind that the middle and top rungs of the ladder are increasingly being robbed to support this caste system--people with the real motivation to rise up.

No, it turns out that real opportunity is more meaningful (and more effective) than good intentions. The risk of failing miserably is exhilarating when the payoff is huge.

[Superman]

I wish you guys were right.

[The Gaijin]

George Will had some interesting things to say about the poor in today's paper:

"Under current immigration policies, America is importing another underclass, one ''with the potential to expand indefinitely,'' according to Heather Mac Donald of the Manhattan Institute. To sentimentalists who cling to ''the myth of the redeeming power of Hispanic family values, the Hispanic work ethic, and Hispanic virtue,'' she says: From 1990 to 2004, Hispanics accounted for 92 percent of the increase in poor people. Only 53 percent of Hispanics earn high school diplomas, the lowest among American ethnic groups. Half of all children born to Hispanic-Americans in 2005 were born out of wedlock -- a predictor of social pathologies.

Some Democrats argue that liberalism's achievement, the welfare state, requires liberal immigration policies. The argument: Today there are 3.3 workers for every retiree. In January, the first of 77 million baby boomers begin to retire. By the time they have retired, in 2030, there will be 2.2 workers for every retiree -- but only if the work force is replenished by 900,000 immigrants a year.

On Monday, Robert Rector of the Heritage Foundation stunned some senators who heard his argument that continuing, under family-based immigration, to import a low-skilled population will cost the welfare state far more than the immigrants' contributions to the economy and government. He argued that low-skilled immigrants are costly to the welfare state at every point in their life cycle, and are very costly when elderly. Just the 9 million to 10 million illegal adults already here will, if given amnesty, cost an average of $300,000 -- cumulatively, more than $2.5 trillion -- in various entitlements over 30 years."

http://www.suntimes.com/news/will/399321,CST-EDT-GEO24.article

Not to change the debate - but it is all intertwined.

[Superman]

Liberalism's achievement is "the welfare state?" I'd hate liberals too, if I believed this schit.

[the]

Originally posted by tabs
The word Poor is such a realitive term.

I recently learned in another thread here that the "poor," in California, are those making anything less than $100K per year.

[Turbo_pro]

The following are facts about persons defined as "poor" by the Census Bureau, taken from various government reports:

* Forty-six percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
* Seventy-six percent of poor households have air conditioning. By contrast, 30 years ago, only 36 percent of the entire U.S. population enjoyed air conditioning.
* Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.
* The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
* Nearly three-quarters of poor households own a car; 30 percent own two or more cars.
* Ninety-seven percent of poor households have a color television; over half own two or more color televisions.
* Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.
* Seventy-three percent own microwave ovens, more than half have a stereo, and a third have an automatic dishwasher.

[Superman]

This is true, Wayne, but perhaps affects us more than actual poor people. Poor people might buy an electronic gadget occasionally, but those are not survival goods and are only purchased with disposable income. This assumes that stuff like housing, fuel and transportation are secure. Those are not among the items enjoying price deflation.

[Burnin' oil]

meh

[Superman]

?

[Moneyguy1]

Wayne:

As the changeover continues and more technical jobs go abroad, the "service" jobs here that take their place do not pay as well as those lost. Good or bad I do not judge, but the cheaper goods are met by lower wages, maintaining some kind of parity!!

[Burnin' oil]

Originally posted by Superman
?

Excellent question. Just utilizing one of the options offered by the author:

"I'm doing a little unofficial poll on reactions: meh; denial; righteous indignation about poor (a/k/a OT); CBO attacks, etc.)"

[nostatic]

your controls are probably better than his...

feh

[M.D. Holloway]

Originally posted by Superman
This is true, Wayne, but perhaps affects us more than actual poor people. Poor people might buy an electronic gadget occasionally, but those are not survival goods and are only purchased with disposable income. This assumes that stuff like housing, fuel and transportation are secure. Those are not among the items enjoying price deflation.

Wayne makes an interesting point - lets take it a step further though. His example of the RC car is a great example of achieving lifes comforts. Sure toys are a comfort as is transportation,food, medicine, entertanment & communication devices, personal hygene and education and municipal and federal defense. As those items/devices/services become more available to more people, the overall quality of life improves. The society becomes 'richer'. The USA is the richest overall nation on Earth - maybe ever. It is very possible that it will continue for sometime.

One other thing to consider is that even though the US may not produce the volume of gadgets that Asia does, the USA produces money services. Consider companies that actaully make and companies that are agents of a produced item - which would you rather do?

Look at Wayne's world - talk about agency! His business is money trading and intel - pure American business. Last I knew, Pelican Parts doesn't have a factory anywhere.
(Heck, even G9Girl Shaun is having Asians make is wears. He just is an agent trading money.)