Higher Incomes Have Not Trickled Down

ECONOMICS

While incomes for the average American family rose between 1970 and 1986, they fell during the same period for young families and low-income families with children, according to a new report by the Congressional Budget Office (CBO). And profamily advocates say they are deeply concerned.

Gains And Losses

The study found that the median income of the American family has risen 20 percent since 1970. However, in families with children where the parent or guardian is under 25 years of age, the median income was 43 percent lower than for similar families in 1970. Low-income families with children were 12 percent lower in 1986 than in 1970.

Other findings in the report, Trends in Family Income: 1970–1986, included:

• In 1986, more than 20 percent of young families (parent or guardian under 25) with children lived on incomes below half of the poverty line, as did one-fifth of all families headed by a single, female parent. (Half of the poverty line for a family of three was $4,369 in 1986.)

• Low-income families with children where the family head was aged 25–34 in 1986 also had lower incomes, with the median income falling 18 percent for the two-fifths with the lowest incomes.

• The median income for elderly families rose more than 50 percent from 1970 to 1986.

• The poorest family group is young families with children headed by a single female. In 1986, nearly one-fifth of these families had incomes below one-quarter of the poverty line ($2,184 for a family of three), and about two-fifths fell below half the poverty line.

A Widening Gap

The report also found the “income gap widened between the wealthy and those who are less affluent.” The median income for the wealthiest two-fifths of American families with children rose 27 percent during the period, while it fell 12 percent for the poorest two-fifths of families with children. Many families were “markedly better off in 1986,” the report concludes. However, “at the same time the group of families with children that is at the bottom of the income distribution is markedly worse off now than the corresponding group was 16 years earlier.”

According to the report, the main reason for income gains in the average family was not higher earnings by the typical family worker, but more workers per family. “In many families, both parents now must work to maintain the standard of living, which results in increased costs as well as increased income, such as child care and commuting,” Miller said.

Unlike other income studies, the CBO study adjusted the actual income levels to reflect reductions in average family size since 1970. The office also used an inflation index that rose more slowly than the Consumer Price Index (CPI), saying that the CPI “overstated inflation before 1983.”

Concerns

Rep. Dan Coats (R-Ind.), Republican leader of the Children, Youth, and Family Committee, described the report as “disturbing.” And the Family Research Council (frc) in Washington, D.C., agreed, FRC Director of Public Policy William R. Mattox, Jr., said, “We are very discouraged by the statistics because they show that some families with children, particularly young families and those with only one wage earner, are not gaining ground but losing ground.”

Mattox said he was particularly troubled that family-income gains were largely due to a second spouse working rather than increased wages. “Whether you consider having a second spouse in the work force good news or bad news, you’ve got to recognize that there are limitations to that as a solution because … there are only so many hours a man and his wife can work to maintain a standard of living.”

According to Mattox, several social factors have played into the deteriorating situation for families with children. First, Mattox said, such families have become victims of “vicious cycles.” Said Mattox, “The recent influx of baby boomers and the influx of more women into the work force created a glut of workers, which then depressed wages, which then made the need for a second spouse working, which then depressed the wages that much further.”

Second, Mattox said U.S. tax policy over the last 15 years has been a major problem for families. “Families with children have been forced to shoulder an increasing tax burden while the tax liability of childless couples and singles and the elderly has by and large remained constant,” he said, adding that the FRC would like to see the federal government offer families with children even more tax relief than the recent Tax Reform Act provided.

Representative Coats is calling for more congressional examination of the situation. “This evidence of a declining commitment to children in an economic sense raises questions about how government policies may have aggravated trends that impact the family,” he said.

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