The poor are not getting poorer

That is the title of an editorial by Steven G. Horwitz.

Click here to read it

Horwitz is Chair of the Department of Economics at St. Lawrence University.

Here is an excerpt:

"If we really want to know what happened to the poor of 1979, we need to be able to track specific households through time. Fortunately, we can. According to researchers at the University of Michigan, households in the bottom fifth in 1975 earned an average of almost $28,000 more per year by 1991, adjusted for inflation. According to U.S. Treasury data, a whopping 86 percent of households in the bottom fifth in 1979 had climbed out of poverty by 1988.

The problem with the data in "The State of Working America" is that it does not account for the fact that individual households move up and out of poverty and are then "replaced" by different households. Most of the households in the bottom fifth are made up of people who have recently entered the labor market and are on the first rung of the income ladder, such as recent high school graduates and new immigrants. The vast majority of American households do move up, and over the last 30 years most Americans have gotten significantly richer in absolute terms.

Granted, even if everyone is better off, it's still possible that the rich-poor income gap has widened. But simply measuring income and wealth tells us very little about the lifestyle of typical Americans. For example, poor Americans today are more likely to own basic household goods - such as washing machines, dishwashers, televisions, refrigerators, and toasters - than average Americans were in 1973.

The gap in personal conveniences has clearly narrowed over time. Consider that both Bill Gates and more than 80 percent of poor American households own cars - though likely differing in quality. Fifty or 100 years ago, the difference would not have been in the quality of car, but in owning a car at all.

Yes, there are more Americans in poverty during a recession - some in deep poverty - as the institute's data shows. But it also shows that since about 1980, the share of the population in extreme poverty has hovered between 5 and 6 percent. In other words, there's no long-term upward trend in the percentage of households living in extreme poverty."